Title 208 WAC — Financial Institutions, Department of (See also Titles 50, 419, and 460)

Chapter 208-04 General provisions.

Wash. Admin. Code § 208-04-010 Definitions.

For the purposes of this chapter:

(1) "Department" means the department of financial institutions.

(2) "Director" means director of the department.

(3) "Financial institution" means any bank, consumer loan company, credit union, foreign bank branch, savings bank, savings and loan association, trust company or department, securities broker-dealer, investment advisor, or similar lending institution under the department's direct jurisdiction.

History

Statutory Authority: RCW 43.19.080. WSR 94-09-010, § 208-04-010, filed 4/11/94, effective 5/12/94.

Wash. Admin. Code § 208-04-020 Purpose; effective date.

The purpose of this chapter is to implement RCW 43.19.080, which regulates the manner by which the director and employees of the department may lawfully borrow money from financial institutions under the jurisdiction of the department. This chapter applies to loans and material changes to loans made on or after October 1, 1993.

History

Statutory Authority: RCW 43.19.080. WSR 94-09-010, § 208-04-020, filed 4/11/94, effective 5/12/94.

Wash. Admin. Code § 208-04-030 Requirements for loans to department employees and the director.

The following procedures and requirements govern loans from financial institutions to employees and the director:

(1) Requirements for all employees. No employee of the department may borrow money from a financial institution under the jurisdiction of the department unless the loan is consistent with RCW 43.19.080. The director shall inform employees of the requirements for loans from financial institutions that are specified in these rules and in RCW 43.19.080.

(2) Loan notification and determination of conformance requirements for employees with administrative or regulatory duties and the director.

(a) Any employee of the department who the director determines has administrative authority or carries out functions of a regulatory or discretionary nature that could affect a financial institution or its officers or employees shall provide notice to the director of a proposed loan by the financial institution to the employee. Upon receipt of the notice, the director or the director's designee shall promptly review the loan and notify the employee in writing whether or not the loan conforms with RCW 43.19.080. In cases where the loan does not conform, the director or the director's designee shall notify the employee in writing of the reason why it fails to conform and demand that the terms of the loan be modified to conform with the law. If the loan is not modified, the director shall commence appropriate action.

(b) In making a loan conformance determination required by (a) of this subsection, the director or the director's designee may consider:

(i) A written and sworn declaration by the applicant's loan officer or broker that the terms offered and underwriting procedures used are not less stringent than those prevailing at the time for comparable transactions with other persons not employed by either the department or the financial institution;

(ii) Rates and terms readily available in a newspaper of general circulation quoting rates and terms contemporaneous with the applicant's loan; and

(iii) Other relevant information necessary to make a knowledgeable determination that the loan conforms with RCW 43.19.080.

(c) The employee shall provide notice of loans covered by (a) of this subsection on forms prepared by the department. Forms must include all material terms, including but not limited to, the type of loan, the name of the financial institution, the interest rate, the term, the amount financed, the loan fees, and all collateral requirements. Forms must also include the sworn declaration described in (b)(i) of this subsection.

(d) The director shall provide notice to the governor of a proposed loan by a financial institution to the director that is subject to RCW 43.19.080. The governor or the governor's designee shall make a written determination of conformance of the loan in accordance with the same procedures and requirements and using the same forms as are required for other employees of the department, as specified in this section.

(3) Special loan transactions and circumstances. The following requirements govern special loan transactions and circumstances:

(a) A material change in terms of outstanding loans or obligations on a loan from a financial institution is subject to the requirements of this section. Material changes include, but are not limited to, changes in amount disbursed on term loans, changes in interest rate, changes in loan fees, and changes in collateral requirements.

(b) All lines of credit, including credit cards, extended to employees and the director from a financial institution are subject to the requirements of this section at the time the line of credit is approved. Subsequent draws on the line of credit are not subject to these requirements unless the terms of the line of credit are materially changed. An increase in the amount of the line of credit is not considered a material change in terms.

(c) An employee whose loan is held by an institution that subsequently comes under the jurisdiction of the department through merger, conversion, or other business transaction is not subject to the requirements this section. However, a material change in terms of such an outstanding loan or obligation is subject to the requirements.

(d) A loan made to an employee from an institution not under the jurisdiction of the department that is subsequently sold to an institution under the department's jurisdiction, in whole or in part, is not subject to the requirements of this section. However, a material change in terms in such a loan is subject to the requirements.

(e) The director shall adopt conflict of interest standards and procedures, consistent with the purposes of this chapter and RCW 43.19.080, that govern loans made by financial institutions to persons or entities other than the employee when the proceeds of the loan provide a clear financial benefit to the employee. These loans include, but are not limited to, loans to businesses or other enterprises in which the employee has a substantial financial interest, and loans to spouses and other immediate family members of the employee.

(4) Violation of rules. A violation of this section may subject the employee to appropriate discipline.

History

Statutory Authority: RCW 43.19.080. WSR 94-09-010, § 208-04-030, filed 4/11/94, effective 5/12/94.

Chapter 208-08 Adjudicative procedures.

Wash. Admin. Code § 208-08-010 Application of this chapter.

This chapter applies to all adjudicative proceedings under the jurisdiction of the department of financial institutions or the director of the department of financial institutions. This chapter does not apply to investigations conducted under the authority granted by the acts administered by the department.

History

Statutory Authority: RCW 43.320.040 and 34.05.250. WSR 96-11-035, § 208-08-010, filed 5/6/96, effective 6/6/96.

Wash. Admin. Code § 208-08-020 Adoption of rules of procedure.

(1) Model rules. The department adopts the model rules of procedure as set forth in WAC 10-08-035 through 10-08-230, as amended. If there is a conflict between the model rules and this chapter, the rules in this chapter govern. Wherever the term "agency" appears in the model rules it means the department of financial institutions.

(2) Brief adjudicative proceedings. The department specifically adopts the criteria and procedures for brief adjudicative proceedings contained in RCW 34.05.482 through 34.05.494.

(3) Securities division rules. If there is a conflict between Title 460 WAC and these rules, Title 460 WAC governs.

History

Statutory Authority: RCW 34.05.250. WSR 17-16-056, § 208-08-020, filed 7/25/17, effective 10/1/17. Statutory Authority: RCW 43.320.040 and 34.05.250. WSR 96-11-035, § 208-08-020, filed 5/6/96, effective 6/6/96.

Wash. Admin. Code § 208-08-025 Electronic service.

(1) Any party may elect to be served by electronic transmission (fax or email) upon waiver of service by other lawful means.

(2) As used in this chapter, "fax" means electronic telefacsimile transmission.

(3) The waiver must be in writing, filed with all parties and the presiding officer, and provide the fax number or email address to be used for service. The waiver does not preclude any party from effecting service by other lawful means, and can be revoked upon written notice to all parties and the presiding officer. A party agreeing to accept service by email must utilize an email program that generates a delivery receipt for proof of service.

(4) The waiver permits the other parties and the presiding officer to serve via electronic transmission as described in this section in lieu of the means of service set forth in WAC 10-08-110 (2)(b).

(5) Service by fax is complete upon production by the fax machine of confirmation of transmission. Proof of service by fax is the successful "confirmation of transmission" or similar document showing successful transmission to the fax number provided with the waiver.

(6) Service by email is complete upon transmission to the email address provided with the waiver. Proof of service by email is successful upon the sender receiving a delivery receipt or similar document showing successful transmission to the email address provided with the waiver.

(7) Should the transmitting party receive notification within twenty-four hours that a fax or email was not delivered, the waiver is void, service is not perfected, and must be made pursuant to WAC 10-08-110 (2)(b).

History

Statutory Authority: RCW 34.05.250. WSR 17-16-056, § 208-08-025, filed 7/25/17, effective 10/1/17.

Wash. Admin. Code § 208-08-030 Appearance and practice before the department.

(1) Only the following persons may appear in a representative capacity before the department or presiding officer:

(a) Attorneys entitled to practice before the supreme court of the state of Washington.

(b) Attorneys entitled to practice before the highest court of record of another state, United States territory, or the District of Columbia, if attorneys are permitted to appear in a representative capacity before administrative agencies of that state, United States territory, or the District of Columbia, and if not otherwise prohibited by the laws of this state.

(c) A bona fide officer, partner, or full-time employee of an individual firm, association, partnership, or corporation who appears for such individual firm, association, partnership, or corporation.

(2) The presiding officer may allow other forms of representation if he or she deems the representation satisfactory.

(3) All attorneys appearing in proceedings before the department or its presiding officer, whether on their own behalf or in a representative capacity, must comply with the Washington rules of professional conduct.

(4) Department employees who are entitled to practice law in any court of record including, but not limited to, financial legal examiners and financial legal examiner supervisors, do not appear in proceedings before the department or presiding officer as legal representatives and are not "attorneys" for the purpose of this chapter. Department employees may appear as lay representatives of the department upon approval of the attorney general.

(5) The presiding officer may disqualify an attorney appearing in a representative capacity to prevent a violation of the Washington rules of professional conduct.

History

Statutory Authority: RCW 34.05.250. WSR 17-16-056, § 208-08-030, filed 7/25/17, effective 10/1/17. Statutory Authority: RCW 43.320.040 and 34.05.250. WSR 96-11-035, § 208-08-030, filed 5/6/96, effective 6/6/96.

Wash. Admin. Code § 208-08-040 Notice of appearance or withdrawal.

(1) Appearance. Each attorney or other representative must file a written notice of appearance with the department and the presiding officer and must serve a notice of appearance on all attorneys and representatives then of record and on all unrepresented parties. The notice must contain the name, address and telephone number of the attorney or representative and the name, address, and telephone number of each party represented.

(2) Withdrawal. Any attorney or representative who withdraws from representing a party must file a written notice of withdrawal with the department and the presiding officer and must serve the notice of withdrawal on all attorneys and representatives then of record and on all unrepresented parties. The notice must contain the effective date of the withdrawal, the current name, address, and telephone number of each party who will no longer be represented, and, if known, the name of the person who will represent the party from that time forward. Withdrawal of a party's attorney or representative after the service of a notice of hearing is not grounds for the continuance of the hearing unless good cause is shown.

History

Statutory Authority: RCW 34.05.250. WSR 17-16-056, § 208-08-040, filed 7/25/17, effective 10/1/17. Statutory Authority: RCW 43.320.040 and 34.05.250. WSR 96-11-035, § 208-08-040, filed 5/6/96, effective 6/6/96.

Wash. Admin. Code § 208-08-050 Requests for adjudicative hearing.

(1) Where filed—Form. All requests for an adjudicative hearing must be filed with the department on the form provided by the department or on a form that is substantially similar.

(2) Time limits for request. The department must receive the request for an adjudicative hearing no later than twenty calendar days after the department serves the respondent with a written notice of an opportunity to request a hearing on the department's action or contemplated action. Service upon the respondent is completed when made in accordance with WAC 10-08-110 (2) and (3), 208-08-025, or as provided by the statute under which the department initiated the action. If the statute under which the department initiated the action specifically provides for a different time limit, the time limit in that statute governs unless it has been superseded by the Administrative Procedure Act, chapter 34.05 RCW, but in no case can the time limit for requesting an adjudicative hearing be less than twenty calendar days.

(3) Failure to request hearing. Failure of a respondent to file an application for an adjudicative hearing within the time limit set forth in subsection (2) of this section constitutes a default and results in the loss of the respondent's right to an adjudicative hearing. When a respondent defaults, the department may proceed to resolve the case pursuant to RCW 34.05.440(1).

History

Statutory Authority: RCW 34.05.250. WSR 17-16-056, § 208-08-050, filed 7/25/17, effective 10/1/17. Statutory Authority: RCW 43.320.040 and 34.05.250. WSR 96-11-035, § 208-08-050, filed 5/6/96, effective 6/6/96.

Wash. Admin. Code § 208-08-053 Submission of answer to department.

(1) Answer to statement of charges. Each respondent must file an answer to the department's statement of charges. The answer must be filed with the department no later than thirty days after the respondent's request for an adjudicative hearing unless the parties agree in writing to a longer time period.

(2) Contents of answer. The answer must state whether each of the factual allegations in the statement of charges is admitted, denied, or not contested, and must include a summary of the party's position on each factual allegation denied.

(3) Effect of admission or no contest. When a factual allegation is admitted or not contested, it is deemed to be conclusive for all further proceedings between the department and the respondent in regard to the statement of charges.

(4) Failure to file answer. Failure by the respondent to file an answer within the time limit constitutes a default and, upon motion by the department, results in the loss of the respondent's right to an adjudicative hearing on the statement of charges.

(5) Curing the default. A respondent may cure the default by filing and serving an answer prior to the hearing on the motion for default. Notice of the motion for default must be served on respondent at least seven days prior to the hearing on the motion. When a respondent defaults, the department may proceed to resolve the case as to that respondent pursuant to RCW 34.05.440(2).

History

Statutory Authority: RCW 34.05.250. WSR 17-16-056, § 208-08-053, filed 7/25/17, effective 10/1/17.

Wash. Admin. Code § 208-08-055 Authority of administrative law judge.

(1) In addition to the authority provided under chapter 10-08 WAC, the administrative law judge has the following authority:

(a) To make negative inferences based upon discovery violations;

(b) To schedule hearings on temporary orders to cease and desist within fourteen days of receipt of such request by the department;

(c) To determine whether the applicable statutes or rules authorize the imposition of punitive or remedial sanctions by the director; and

(d) To determine whether the applicable statutes or rules authorize the imposition of fines, costs, fees, or any combination thereof, by the director.

(2) The administrative law judge does not have the authority to:

(a) Modify punitive or remedial sanctions intended to be ordered by the director in accordance with and authorized by statute or rule;

(b) Modify fines, costs, fees, or any combination thereof, intended to be ordered by the director in accordance with and authorized by statute or rule; and

(c) Schedule hearings on motions for summary judgment to be heard within thirty days of the hearing on the merits of the department's action.

History

Statutory Authority: RCW 34.05.250. WSR 17-16-056, § 208-08-055, filed 7/25/17, effective 10/1/17.

Wash. Admin. Code § 208-08-060 Discovery.

(1) Application of superior court civil rules.

(a) When applicable and not in conflict with this section, civil rules 26 through 34 and rule 36 of the Washington state superior court civil rules apply.

(b) Civil rule 45 may be applied to the extent set forth in civil rules 30 and 31.

(c) Civil rules not set forth in this subsection do not apply unless they are referred to by one of the civil rules enumerated in this subsection.

(2) Presiding officer. For purposes of discovery, the presiding officer is the administrative law judge assigned by the office of administrative hearings.

(3) Motion required.

(a) Any motion for discovery served upon any party prior to the assignment of an administrative law judge is stayed until an administrative law judge is assigned and the motion for discovery can be heard at the prehearing conference set forth in WAC 208-08-110.

(b) Unless discovery is included in the prehearing order as provided in WAC 208-08-110, a party wishing to make discovery must file a motion for discovery with the presiding officer. The party must also serve the discovery motion on all other parties to the proceeding. Any party opposing or otherwise responding to the motion must file a response with the presiding officer and the response must be served on all parties within ten calendar days after service of the motion.

(4) Limitation on discovery. In addition to limitations on discovery set forth in any other applicable law, regulation, or rule, discovery does not include:

(a) Information or documents from the personnel file of any department employee;

(b) Information or documents relating to any investigation conducted by the department against unrelated parties;

(d) Information or documents relating to any examination conducted by the department of unrelated parties;

(e) Information or documents relating to any license applications or determinations made by the department of unrelated parties; or

(f) Depositions of the agency director or assistant directors.

(5) Hearing on discovery motion. Any party may request a hearing on a discovery motion. If the presiding officer determines that a hearing on the motion is warranted, he or she shall give all parties notice of the time and place for the hearing.

(6) Decision on motion. The presiding officer may determine the extent and conditions of discovery in any adjudicative proceeding, considering the criteria set forth in RCW 34.05.446(3) and WAC 208-08-070 and 208-08-080. The presiding officer must rule upon the motion only after all parties have responded or the time for response has passed.

(7) Spoliation. When, upon proof by a preponderance of the evidence, and without a motion to the presiding officer, a party alters, destroys, suppresses, or withholds records or information subject to discovery, the presiding officer may presume the evidence would have been unfavorable to that party's position.

(8) Failure to comply with discovery. Failure to comply with a lawful discovery request is grounds for default under RCW 34.05.440(2).

(9) Appeal of discovery decision. All decisions regarding discovery are subject to the process set forth in WAC 208-08-160 in the event of an interlocutory appeal as set forth in that section.

History

Statutory Authority: RCW 34.05.250. WSR 17-16-056, § 208-08-060, filed 7/25/17, effective 10/1/17. Statutory Authority: RCW 43.320.040 and 34.05.250. WSR 96-11-035, § 208-08-060, filed 5/6/96, effective 6/6/96.

Wash. Admin. Code § 208-08-070 Production of documents to parties.

(1) Place of production. When production of documents is allowed, they will be produced for inspection and copying at the department's headquarters, at such other place as the parties may agree in writing, or as the presiding officer orders.

(2) Removal from the department's headquarters by agreement. In the case of documents produced by the department, a party may not remove the documents from the department's offices other than by written agreement of the department. This agreement must specify the document subject to the agreement, the date for return of the document, and any other terms or conditions as are appropriate to provide for the safe keeping of the documents.

(3) Copying procedures and charges. The party requesting production may photocopy any documents produced. The requesting party is responsible for the cost of photocopying. The documents produced by the department may be copied at the department's offices or such other places as the parties may agree. Charges for copies made by the department for a requesting party will be at a rate agreed upon by the parties, or as ordered by the presiding officer.

History

Statutory Authority: RCW 34.05.250. WSR 17-16-056, § 208-08-070, filed 7/25/17, effective 10/1/17. Statutory Authority: RCW 43.320.040 and 34.05.250. WSR 96-11-035, § 208-08-070, filed 5/6/96, effective 6/6/96.

Wash. Admin. Code § 208-08-080 Depositions upon oral examination.

(1) Recording, signing, and filing of transcripts. If a deposition is allowed, it shall be recorded, including all questions and objections. If one of the parties orders a transcript, the testimony must be transcribed verbatim under the direction of the court reporter, who must certify the transcript. The witness must sign the transcript or waive signature. If a deposition is transcribed, the court reporter must file the original transcript and any exhibits to it with the presiding officer. The witness and any party may purchase a copy of the transcript from the court reporter.

(2) Cost. The party requesting the deposition must pay the cost of the deposition, including any sitting or facility fee. A party ordering a copy of a transcript must make appropriate arrangements to pay the court reporter.

(3) Videotaping of depositions. If a videotaped deposition is allowed, Superior Court Civil Rule 30 (b)(8) applies.

History

Statutory Authority: RCW 34.05.250. WSR 17-16-056, § 208-08-080, filed 7/25/17, effective 10/1/17. Statutory Authority: RCW 43.320.040 and 34.05.250. WSR 96-11-035, § 208-08-080, filed 5/6/96, effective 6/6/96.

Wash. Admin. Code § 208-08-083 Authentication of evidence.

(1) Production of documents – Self-authenticating. A party's production of a document in response to written discovery or other legal process authenticates the document for use against that party in any prehearing proceeding or at hearing unless, within ten days after the producing party has actual notice that the document may be used, the party objects to the authenticity of the document, or any part of it, stating the specific basis for objection.

(2) Objection. An objection must be either on the record or in writing and must have a good faith factual and legal basis. An objection made to the authenticity of only part of a document does not affect the authenticity of the remainder. If objection is made, the party attempting to use the document must be given a reasonable opportunity to establish its authenticity.

History

Statutory Authority: RCW 34.05.250. WSR 17-16-056, § 208-08-083, filed 7/25/17, effective 10/1/17.

Wash. Admin. Code § 208-08-085 Validity of unsworn declaration.

(1) If a law of this state requires or permits use of a sworn declaration, an unsworn declaration meeting the requirements of this section has the same effect as a sworn declaration if it:

(a) Recites that it is certified or declared by the person to be true under penalty of perjury;

(b) Is subscribed by the person;

(d) States that it is so certified or declared under the laws of the state of Washington.

(2) The certification or declaration may be in substantially the following form:

| "I certify (or declare) under penalty of perjury under the laws of the State of Washington that the foregoing is true and correct": | | | --- | --- | | . . . . | . . . . | | (Date and Place) | (Signature) |

(3) This section does not apply to:

(a) A deposition;

(b) An oath of office;

(d) A declaration to be recorded pursuant to Titles 64 or 65 RCW; or

(e) An oath required by RCW 11.20.020.

(4) As used in this section:

(a) "Sworn declaration" means a declaration in a signed record given under oath. The term includes a sworn statement, verification, certificate, or affidavit; and

(b) "Unsworn declaration" means a declaration in a signed record that is not given under oath, but is given under penalty of perjury.

History

Statutory Authority: RCW 34.05.250. WSR 17-16-056, § 208-08-085, filed 7/25/17, effective 10/1/17.

Wash. Admin. Code § 208-08-090 Submission on stipulated facts.

(1) Department's agreement. With the agreement of the department, a party may waive a hearing and submit its case upon stipulated facts and briefs.

(2) Sufficiency of evidence required. Submission of a case without a hearing does not relieve the parties from the necessity of proving the facts supporting their allegations or defenses.

(3) Review by presiding officer. The presiding officer will review the submissions of the parties and must enter a proposed order, including findings of fact and conclusions of law.

(4) Submission to director or designee. If the parties agree, they may submit the stipulated facts to the director or designee for a final order, bypassing the presiding officer.

History

Statutory Authority: RCW 34.05.250. WSR 17-16-056, § 208-08-090, filed 7/25/17, effective 10/1/17. Statutory Authority: RCW 43.320.040 and 34.05.250. WSR 96-11-035, § 208-08-090, filed 5/6/96, effective 6/6/96.

Wash. Admin. Code § 208-08-100 Consolidation of proceedings.

If there are multiple adjudicative proceedings involving common issues, the department or a party may notify the presiding officer of the common issues and request consolidation of the actions. If no other party objects, the presiding officer shall consolidate the proceedings. If another party objects, the presiding officer, in his or her discretion, may consolidate the proceedings.

History

Statutory Authority: RCW 43.320.040 and 34.05.250. WSR 96-11-035, § 208-08-100, filed 5/6/96, effective 6/6/96.

Wash. Admin. Code § 208-08-110 Prehearing conferences.

The department encourages the use of prehearing conferences. If a party requests a prehearing conference, the presiding officer will grant the request unless good cause is shown for not holding a prehearing conference. WAC 10-08-130 governs the conduct of prehearing conferences.

History

Statutory Authority: RCW 34.05.250. WSR 17-16-056, § 208-08-110, filed 7/25/17, effective 10/1/17. Statutory Authority: RCW 43.320.040 and 34.05.250. WSR 96-11-035, § 208-08-110, filed 5/6/96, effective 6/6/96.

Wash. Admin. Code § 208-08-120 Informal settlements.

The department encourages informal settlement of matters before the agency. Any party who believes their interest in an adjudicative proceeding may be settled informally may contact the department's designated representative and communicate their settlement proposal to the designated representative. The department specifically adopts WAC 10-08-230 setting forth procedures for informal settlements.

History

Statutory Authority: RCW 34.05.250. WSR 17-16-056, § 208-08-120, filed 7/25/17, effective 10/1/17. Statutory Authority: RCW 43.320.040 and 34.05.250. WSR 96-11-035, § 208-08-120, filed 5/6/96, effective 6/6/96.

Wash. Admin. Code § 208-08-130 Prehearing and posthearing memoranda.

The presiding officer shall grant all timely requests to submit prehearing and posthearing memoranda and shall set a reasonable time for the submission of the memoranda. If a party files a posthearing memorandum, the opposing party has the right to file a response.

History

Statutory Authority: RCW 43.320.040 and 34.05.250. WSR 96-11-035, § 208-08-130, filed 5/6/96, effective 6/6/96.

Wash. Admin. Code § 208-08-140 Transcript of proceedings.

(1) Recording and transcripts. Testimony and argument at the hearing shall be recorded either electronically or stenographically. Any party, upon motion, may order the court reporter to transcribe the proceedings at the party's expense. A party who orders a transcript of the proceedings shall provide the original transcript to the presiding officer at that party's expense, and upon such other terms as the presiding officer shall order.

(2) Correction of transcript. Corrections in the official transcript may be made only to make it conform to the evidence presented at the hearing. The presiding officer may call for the submission of proposed corrections and may dispose of them at appropriate times during the proceeding. If the parties agree and the presiding officer approves, transcript corrections may be incorporated into the record at any time during the hearing or after the close of evidence. All corrections must be made within ten calendar days after receipt of the transcript unless the presiding officer allows a different period.

History

Statutory Authority: RCW 43.320.040 and 34.05.250. WSR 96-11-035, § 208-08-140, filed 5/6/96, effective 6/6/96.

Wash. Admin. Code § 208-08-150 Amending initiating document.

(1) Prior to the assignment of a presiding officer the initiating document may be amended at any time.

(2) After the assignment of a presiding officer the initiating document may be amended upon motion filed by the department and service to all parties. The motion will be granted unless the presiding officer finds a party will be unduly prejudiced or burdened.

(3) When the initiating document is a statement of charges, a party must submit an answer within thirty days.

(4) The presiding officer may delay all or part of the hearing if necessary to afford a party the opportunity to respond or prepare.

History

Statutory Authority: RCW 34.05.250. WSR 17-16-056, § 208-08-150, filed 7/25/17, effective 10/1/17.

Wash. Admin. Code § 208-08-160 Interlocutory decision—Discretionary review.

(1) Definitions. Unless the context indicates otherwise, as used in this chapter, the following terms mean:

(a) "Interlocutory decision" means any initial decision or order of the presiding officer that does not terminate or fully resolve the matter before the presiding officer.

(b) "Motion for discretionary review" means a motion to the director for discretionary review of an interlocutory decision by the presiding officer and does not mean a petition for review under RCW 34.05.464.

(c) "Petition for reconsideration" means a petition before the presiding officer for reconsideration of an interlocutory decision and does not mean a petition for review under RCW 34.05.464 or a petition for reconsideration under RCW 34.05.470.

(2) Actions reviewed. A party may seek discretionary review by the director of any interlocutory decision, including procedural or substantive decisions or orders.

(3) Exhaustion of administrative remedies.

(a) Filing a petition for reconsideration. Prior to filing a motion for discretionary review, the party must file a petition for reconsideration with the presiding officer within ten days of service of the interlocutory decision.

(b) Service. Copies of the petition for reconsideration must be served on all other parties or their representatives at the time the petition is filed.

(c) Party hearing the petition for reconsideration. The petition for reconsideration is considered and disposed of by the presiding officer who entered the interlocutory decision, if reasonably available.

(d) Requirement of a written order. The disposition is in the form of a written order pursuant to WAC 10-08-210.

(e) An order denying reconsideration is not subject to judicial review prior to final order by the director in relation to a respondent as to all matters in a case.

(4) Motion for discretionary review.

(a) Party filing. Any party to an adjudicative proceeding may file a motion for discretionary review of a written order disposing of a petition for reconsideration.

(b) How to file. The motion for discretionary review must be filed with the director within ten days of the date of service of the written order disposing of the petition for reconsideration. The motion must state the specific grounds upon which relief is requested.

(c) Service. Copies of the motion for discretionary review must be served upon all other parties or their representatives at the time the motion for discretionary review is filed. Filing of the motion for discretionary review with the director is delivery of a copy of the motion for discretionary review to the office of the director at the principal office of the department. For purposes of this section, service upon the attorney of record of any agency or party of record constitutes service upon the agency or party of record.

(d) Contents of motion. The motion for discretionary review must specify the portions of the interlocutory decision to which exception is taken and must refer to the evidence of record which is relied upon to support the motion for discretionary review.

(e) Reply to motion. Any party may file a reply to a motion for discretionary review. The reply must be served in the same manner as the motion for discretionary review within ten days of the date of service of the motion for discretionary review, and copies of the reply must be served upon all other parties or their representatives at the time the reply is filed.

(f) Considerations governing acceptance of discretionary review. Discretionary review of an interlocutory decision by the presiding officer will be accepted by the director only:

(i) If the presiding officer has committed an obvious error which would render further proceedings useless; or

(ii) If the presiding officer has committed probable error and the decision substantially alters the status quo or substantially limits the freedom of a party to act; or

(iii) If the presiding officer has so far departed from the accepted and usual course of administrative proceedings as to call for the exercise of review jurisdiction by the director.

(g) Scope of review. Unless the motion for discretionary review is deemed denied under (h) of this subsection, the motion for discretionary review is considered and disposed of by the director. The disposition is in the form of a written order. The director will review only the issues raised in the motion for discretionary review.

(h) No oral argument; exception. In the manner of a petition for review under RCW 34.05.464 or a petition for reconsideration under RCW 34.05.470, the director will not hear oral argument on a motion for discretionary review of an interlocutory decision unless (i) the issue before the director on motion for discretionary review is procedural in nature; and (ii) the director notifies the parties in writing of the date, time, and manner for hearing oral argument, which may include a scheduled teleconference. If the director elects to have oral argument on the motion for discretionary review, the director may designate a neutral officer of the department to hear such oral argument and confer with the director prior to the director issuing an order on the motion.

(i) Suspension of proceeding. Neither a motion for discretionary review nor any disposition of such motion suspends or stays the proceeding or effectiveness of the interlocutory order unless otherwise ordered by the director.

(j) Denial. The director is deemed to have denied the motion for discretionary review, if within twenty days from the date the motion for discretionary review is filed, the director does not either dispose of the motion or serve the parties with a written notice specifying the date by which the director will act on the motion. Denial of the motion does not affect the rights of a party to obtain later review of the presiding officer's decision or the issues included in that decision.

(k) Judicial review. Judicial review of the director's decision on motion for discretionary review occurs only after final order by the director in relation to a respondent as to all matters in a case.

History

Statutory Authority: RCW 34.05.250. WSR 17-16-056, § 208-08-160, filed 7/25/17, effective 10/1/17.

Wash. Admin. Code § 208-08-170 Administrative hearings—Divisions of banks and credit unions with enforcement jurisdiction.

(1) Administrative hearings when the division of banks or division of credit unions is the charging authority. An administrative hearing involving a notice of charges against a Washington state-chartered commercial bank under Title 30A RCW, savings bank under Title 32 RCW, savings association under Title 33 RCW, trust company under Title 30B RCW, credit union under chapter 31.12 RCW, the holding company of such commercial bank, savings bank, or savings association, a present or former director, officer, or employee of such commercial bank, savings bank, savings association, or credit union, or any other person subject to the jurisdiction of chapter 31.12 RCW, Titles 30A, 30B, 32, or 33 RCW, may be held at a place designated by the director and conducted by the department of financial institutions in accordance with chapter 34.05 RCW, the model rules of procedures and this chapter but without referral to the office of administrative hearings. To the extent the requirements of chapter 31.12 RCW, Titles 30A, 30B, 32, or 33 RCW, as applicable, are inconsistent with chapters 34.05 and 31.12 RCW, Titles 30A, 30B, 32, or 33 RCW, as applicable, will govern.

(2) Administrative hearings involving miscellaneous nondepositary entities when the division of banks is the charging authority. In the case of an administrative hearing involving a notice of charges against a Washington state-chartered or state–licensed business development company under chapter 31.24 RCW, agricultural lender under chapter 31.35 RCW, or federally guaranteed small business lender under chapter 31.40 RCW, the requirements of chapters 31.24, 31.35 and 31.40 RCW, respectively, governs to the extent of any inconsistency with chapter 34.05 RCW.

(3) Director's appointment of independent hearing officer. If the department elects to conduct an administrative hearing as permitted by this section, the director must appoint a hearing officer from outside the division of the department bringing the notice of charges, who may be either an employee from another division or an independent contractor. The director may elect to either retain review jurisdiction or delegate authority for issuance of a final order to the appointed hearing officer.

History

Statutory Authority: RCW 34.05.250. WSR 17-16-056, § 208-08-170, filed 7/25/17, effective 10/1/17.

Chapter 208-12 Public records.

Wash. Admin. Code § 208-12-010 Purpose—Scope—Conflict with other regulations.

(1) The purpose of this chapter is to ensure compliance with RCW 42.56.040; with the applicable provisions of the Public Records Act, chapter 42.56 RCW; and to provide notice to the public of the organization and procedure of the department as required by the Administrative Procedure Act, chapter 34.05 RCW.

(2) This chapter establishes general rules regarding public records in the custody or control of the department.

(3) Department divisions may adopt additional rules to supplement this chapter.

(4) If specific rules adopted by a division conflict with this chapter, the specific rules control in those situations.

History

Statutory Authority: RCW 43.320.040, 42.56.040, 42.56.100, and 42.56.120. WSR 18-13-104, § 208-12-010, filed 6/19/18, effective 8/1/18. Statutory Authority: RCW 43.320.040 and 42.17.250. WSR 96-14-082, § 208-12-010, filed 7/1/96, effective 8/1/96.

Wash. Admin. Code § 208-12-020 Definitions.

As used in this chapter, unless the language clearly indicates otherwise:

"Department" means the Washington state department of financial institutions.

"Director" means the director of the department, who is a cabinet-level appointee of the governor of the state of Washington.

"Division" means an organizational division of the department as the director, pursuant to his or her authority under chapter 43.320 RCW, has or may hereafter designate and empower including, without limitation, the division of administration, division of banks, division of consumer services, division of credit unions, and division of securities.

"Person" means any individual, partnership, joint venture, public or private corporation, limited liability company, association, federal, state or local government entity or agency however constituted, or any other organization or group of persons, however organized.

History

Statutory Authority: RCW 43.320.040, 42.56.040, 42.56.100, and 42.56.120. WSR 18-13-104, § 208-12-020, filed 6/19/18, effective 8/1/18. Statutory Authority: RCW 43.320.040 and 42.17.250. WSR 96-14-082, § 208-12-020, filed 7/1/96, effective 8/1/96.

Wash. Admin. Code § 208-12-030 Description of organization of department.

(1) The department is an administrative, supervisory, licensing, regulatory, public outreach, educational, and chartering agency.

(2) The department is organized pursuant to chapter 43.320 RCW under a director, appointed by the governor, and assistant directors (also known as "division directors"), appointed by the director.

(3) The director has delegated authority to each assistant director to act in a specific functional area. The functional areas are the: Division of administration; division of banks; division of consumer services; division of credit unions; and division of securities.

(4) Four of these divisions regulate various programs including, but not limited to:

(a) The chartering, licensing, and regulation of state banks; nonbank trust companies and trust departments of banks; state savings banks; holding companies of state banks and state savings banks; bureaus and other offices; and agricultural credit corporations, federally guaranteed small business loan companies, and business development companies, by and through the division of banks;

(b) The licensing and regulation of consumer loan companies, check cashers and sellers, small loan licensees, mortgage brokers, mortgage loan officers, mortgage loan facilitators, mortgage loan servicers, escrow agents, money transmitters, currency exchangers, and other money services businesses, and tax refund anticipation lenders, by and through the division of consumer services;

(c) The chartering and regulation of state credit unions and credit union service organizations, which are administered by and through the division of credit unions;

(d) The registering and regulation of securities offerings and broker-dealers, commodities offerings and broker-dealers, franchises and franchise brokers, business opportunities, and investment advisers, by and through the division of securities; and

(e) The licensing and regulation of other similar or incidental financial businesses or areas of financial regulation by one or more of the divisions enumerated in this section.

(5) The division of administration acts as support for the other divisions by providing administrative, fiscal, human resources, information technology, and other services. Included within the division of administration are also executive-level personnel, who report directly to the director of the department, and who provide:

(a) Public policy, regulatory, and other advice to the director and to the assistant directors of each of the divisions; and

(b) Public and media relations and communications services to the department and financial education outreach to the general public.

(6) The mission of the department is to regulate financial services to protect and educate the public and promote economic vitality.

(7) The department is charged with protecting the public interest, protecting the safety and soundness of depository institutions and entities under the jurisdiction of the department, ensuring access to the regulatory process for all concerned parties, and protecting the interests of investors.

(8) The governor appoints the director, with the consent of the senate. The director holds office at the pleasure of the governor.

(a) The director has complete charge of the department. The director may deputize one of the assistant directors to exercise the powers and duties of the director in the event of his or her absence. The director may delegate duties to assistant directors in accordance with RCW 43.320.060.

(b) By specific powers of legislation, including the power to delegate, the director has the responsibility and authority to act and direct in the following areas:

(i) Administer the laws pertaining to chartering, licensing, registration, education, and regulation of the financial institutions and businesses and areas of financial regulation set forth in subsection (4) of this section; and

(ii) Adopt and enforce rules consistent with and necessary to carry out the provisions of existing laws.

(9) Chapter 34.05 RCW, the Administrative Procedure Act, and department-related statutes and rules govern the formal and informal proceedings conducted by the department.

History

Statutory Authority: RCW 43.320.040, 42.56.040, 42.56.100, and 42.56.120. WSR 18-13-104, § 208-12-030, filed 6/19/18, effective 8/1/18. Statutory Authority: RCW 43.320.040 and 42.17.250. WSR 96-14-082, § 208-12-030, filed 7/1/96, effective 8/1/96.

Wash. Admin. Code § 208-12-040 Location and address of administrative office—Public records officer contact information.

(1) The administrative office of the department, including each of its divisions, are located at 150 Israel Road S.W., Tumwater, Washington 98501.

(2) The mailing address of the department and each of its divisions is P.O. Box 41200, Olympia, WA 98504-1200.

(3) The public records officer may be reached at:

Public Records Officer

Department of Financial Institutions

P.O. Box 41200

Olympia, WA 98504-1200

Email: dfipublicrecords@dfi.wa.gov

History

Statutory Authority: RCW 43.320.040, 42.56.040, 42.56.100, and 42.56.120. WSR 18-13-104, § 208-12-040, filed 6/19/18, effective 8/1/18. Statutory Authority: RCW 43.320.040 and 42.17.250. WSR 96-14-082, § 208-12-040, filed 7/1/96, effective 8/1/96.

Wash. Admin. Code § 208-12-050 Office hours.

(1) Public records are available for inspection and copying during customary office hours, consistent with chapter 42.56 RCW, the Public Records Act.

(2) For the purposes of this chapter, the customary office hours of the administrative office are from 8:00 a.m. to noon and from 1:00 p.m. to 4:00 p.m., Monday through Friday, excluding legal holidays.

History

Statutory Authority: RCW 43.320.040, 42.56.040, 42.56.100, and 42.56.120. WSR 18-13-104, § 208-12-050, filed 6/19/18, effective 8/1/18. Statutory Authority: RCW 43.320.040 and 42.17.250. WSR 96-14-082, § 208-12-050, filed 7/1/96, effective 8/1/96.

Wash. Admin. Code § 208-12-070 Procedure to request public records.

(1) Many public records are available for inspection on the department's website, www.dfi.wa.gov/public-records-index, at no cost. Requestors are encouraged to view the records available on the website prior to submitting a records request.

(2) Any person seeking to inspect or copy public records of the department should make the request in writing on the department's request form, available at www.dfi.wa.gov/public-records-index, by letter, fax, email addressed to the public records officer at dfipublicrecords@dfi.wa.gov, or by submitting the request in person at the department's administrative office. The request should include the following information:

(a) The name of the requestor;

(b) Contact information such as address, telephone number, email address, or other preferred contact information;

(c) The address where copies of records are to be mailed or emailed, or notification that the requestor wants to examine the records at the department's administrative office;

(d) An identification or description of the public records adequate for the public records officer or designee to locate the record or, if the record requested is referenced within the department's public records index, a reference to the requested record as it is described in the index; and

(e) The date and time of the request.

(3) The department may inquire about the reason for a request for a list of individuals to determine whether the list will be used for commercial purposes.

(4) The department's public records officer or his or her designee may accept, by telephone or in person, requests for public records that contain the above information. If the public records officer or designee accepts such a request, he or she will confirm the receipt and substance of the request in writing.

History

Statutory Authority: RCW 43.320.040, 42.56.040, 42.56.100, and 42.56.120. WSR 18-13-104, § 208-12-070, filed 6/19/18, effective 8/1/18. Statutory Authority: RCW 43.320.040 and 42.17.250. WSR 96-14-082, § 208-12-070, filed 7/1/96, effective 8/1/96.

Wash. Admin. Code § 208-12-075 Processing public records requests.

(1) Order of processing requests. The department will process requests in the order that allows requests to be fulfilled in the most efficient manner feasible.

(2) Acknowledging receipt of a request. The department will acknowledge a request for public records within five business days after the department receives the request, by:

(a) Making the requested records available for inspection or copying or by providing copies of the records, including:

(i) If records are available on the department's website, by providing an internet address and link on the website to specific records requested;

(ii) If copies are requested and all applicable costs and deposits, if any, are paid by the requestor or other terms of payment are agreed upon, sending the copies to the requestor;

(b) Acknowledging receipt of the request and providing a reasonable estimate of when records or an installment of records will be available (the public records officer or designee may revise the estimate of when records will be available); or

(c) Acknowledging receipt of the request and asking the requestor to provide clarification for a request that is unclear, and providing, to the greatest extent possible, a reasonable estimate of time the department will require to respond to the request if it is not clarified;

(i) Such clarification may be requested and provided by telephone, and memorialized in writing;

(ii) If the requestor fails to respond to a request for clarification and the entire request is unclear, the department need not respond to the request; or

(d) Providing a written statement of denial of the request.

(3) If no response is received. If the requestor does not receive an acknowledgment of the records request within five business days, the requestor should contact the public records officer to confirm that the department received the request.

(4) Records exempt from disclosure. If a record or portion of a record is exempt from disclosure pursuant to chapter 42.56 RCW or as otherwise provided by law, the department may withhold or redact such record. If records are withheld or redacted, the department will, in writing, state the specific exemption and provide a brief explanation of why the record or portion of the record is being withheld or redacted.

(5) Providing copies of records. Copies may be provided in either hard copy or electronic format, as requested. The cost for copies is set forth in WAC 208-12-090, and costs must be paid to the department prior to delivery of copies. Copies may be emailed or mailed to the requestor, may be made available to the requestor for pickup at the department's administrative office, or may be made available via a file sharing service.

(6) Records may be provided in installments. When a requestor seeks a large volume of records or collection and review of the records will be resource intensive, the public records officer or designee may provide copies or access for inspection of records in installments. Costs for each installment must be paid prior to delivery of the installment.

(7) Closing withdrawn or abandoned requests. The public records officer or designee may close a request when: The request is withdrawn by the requestor; the requestor fails to remit fees or a deposit when due, pursuant to WAC 208-12-090(8); the requestor fails to inspect records or retrieve copies of records within thirty days of notice that the records are available for inspection or retrieval; or the requestor fails to provide requested clarification within thirty days and the entirety of the request is unclear. The requestor will be notified in writing that the request has been closed. If a requestor seeks to reopen a closed request, the request may be opened as a new request.

(8) Bot requests. The department may deny a "bot" request, which is one of multiple requests from a requestor to the department within a twenty-four-hour period, if the request causes excessive interference with other essential department functions. RCW 42.56.080(3). A "bot" request means a records request that the department reasonably believes was automatically generated by a computer program or script.

(9) Protecting the rights of others. If the requested records contain information that may affect the rights of others, and which may be exempt from disclosure, the public records officer or designee may, prior to providing the records, give notice to such others whose rights may be affected by the disclosure.

History

Statutory Authority: RCW 43.320.040, 42.56.040, 42.56.100, and 42.56.120. WSR 18-13-104, § 208-12-075, filed 6/19/18, effective 8/1/18.

Wash. Admin. Code § 208-12-080 Inspection of public records.

(1) It is the department's responsibility to protect public records from destruction, damage or disorganization, and prevent excessive interference with essential functions of the department.

(2) Before a person may inspect original records, that person must agree to the following conditions:

(a) The records may not be removed from the area designated for review;

(b) The records may not be destroyed;

(d) The records may not be defaced in any way, including marking upon, folding or folding anew if in folded form, tracing or fastening with clips or other fasteners except those that already exist in the file;

(e) The records may not be cut, torn or mutilated in any way;

(f) The records must be kept in the order in which received; and

(g) The records will be returned to the department's public records officer or his or her designee when no longer required by the requestor, but no later than the end of customary business hours.

(3) If the requestor wishes to receive copies of particular records, they should so indicate to the public records officer or designee. Copies will be provided once payment arrangements are made, pursuant to WAC 208-12-090.

(4) The requestor must review assembled records within thirty days of the department's notification that the records are available for inspection. If the requestor fails to inspect assembled records or make other arrangements within thirty days, the department may close the request.

History

Statutory Authority: RCW 43.320.040, 42.56.040, 42.56.100, and 42.56.120. WSR 18-13-104, § 208-12-080, filed 6/19/18, effective 8/1/18. Statutory Authority: RCW 43.320.040 and 42.17.250. WSR 96-14-082, § 208-12-080, filed 7/1/96, effective 8/1/96.

Wash. Admin. Code § 208-12-090 Fees—Payments.

(1) Copy fees and payment procedures apply to requests to the department under chapter 42.56 RCW received by the department on or after the effective date of these rules.

(2) The department finds that it would be unduly burdensome to calculate the actual costs of providing public records to requestors for the following reasons:

(a) The scope of requests and staff time required to provide records varies widely depending on numerous factors;

(b) The department does not have the resources to conduct a study to determine its actual copying costs;

(d) Through the 2017 legislative process, the public and requestors have commented on, and been informed of, authorized fees and costs, including for electronic records, provided in RCW 42.56.120 (2)(b) and (c), (3), and (4).

(3) In order to timely implement a fee schedule consistent with the Public Records Act, it is more cost efficient, expeditious, and in the public interest for the department to adopt the state legislature's approved fees and costs for the department's records, as authorized in RCW 42.56.120 and as published in the agency's fee schedule.

(4) The department will charge for copies of records pursuant to the default fees in RCW 42.56.120 (2)(b) and (c). The department will charge for customized services pursuant to RCW 42.56.120(3). Under RCW 42.56.130, the department may charge other copy fees authorized by statutes outside of chapter 42.56 RCW. The department may enter into an alternative fee agreement with a requestor under RCW 42.56.120(4). The charges for copying methods used by the department are summarized in the following fee schedule. Charges may be combined to the extent that more than one type of charge applies to copies produced in response to a particular request.

| Public Records Fee Schedule | | | --- | --- | | Charge: | Record Type: | | 15 cents/page | Photocopies, printed copies of electronic records when requested by the requestor, or for the use of agency equipment to photocopy public records. | | 10 cents/page | Records scanned into an electronic format or for the use of agency equipment to scan the records. | | 5 cents for each 4 electronic files or attachments | Records uploaded to email, cloud-based data storage service, or other means of electronic delivery. | | 10 cents/gigabyte | Records transmitted in an electronic format or for the use of agency equipment to send the records electronically. | | Actual cost | Digital storage media or device; any container or envelope used to mail copies; and postage or delivery charges. | | Actual cost | A customized service charge, in addition to the charges set forth above, if the department estimates that the request would require the use of information technology expertise to prepare data compilations, or provide customized electronic access services when such compilations and customized access services are not used by the agency for other agency purposes. | | Alternative Fee | | | Up to $2 flat fee | As an alternative to the charges set forth above, the department may charge a flat fee of up to $2 when the department estimates that the costs are clearly equal to more than $2. |

(5) Fee waivers are an exception and are available for some small requests under the following conditions:

(a) It is within the discretion of the public records officer to waive copying fees when:

(i) All of the records responsive to an entire request are paper copies only and are twenty-five or fewer pages; or

(ii) All of the records responsive to an entire request are electronic and can be provided in a single email with attachments of a size totaling no more than the equivalent of one hundred printed pages. If that email for any reason is not deliverable, records will be provided through another means of delivery, and the requestor will be charged in accordance with this rule.

(b) Fee waivers are not applicable to records provided in installments unless approved by the director.

(6) The department may require an advance deposit of ten percent of the estimated fees when the copying fees for an installment or an entire request, or customized service charge, exceeds twenty-five dollars.

(7) All required fees and deposits must be paid in advance of release of copies or an installment of copies. Payment will be due within thirty days of notice of the amount due. The department will notify the requestor of when payment is due.

(8) Payment should be delivered to the department by check or money order payable to the Washington state treasurer. The department prefers not to receive cash. For cash payments, it is within the public records officer's discretion to determine the denomination of bills and coins that will be accepted. The department may provide a system that accepts certain forms of electronic payment.

(9) The department will close a request when a requestor fails by the payment date to pay in the manner prescribed by this section.

(10) Upon request, the department will provide a summary of applicable charges before any copies are made. The requestor may revise the request to reduce the number of copies to be made to reduce the charges.

History

Statutory Authority: RCW 43.320.040, 42.56.040, 42.56.100, and 42.56.120. WSR 18-13-104, § 208-12-090, filed 6/19/18, effective 8/1/18. Statutory Authority: RCW 43.320.040 and 42.17.250. WSR 96-14-082, § 208-12-090, filed 7/1/96, effective 8/1/96.

Wash. Admin. Code § 208-12-100 Exemptions from public records.

(1) All public records of the department are available for public inspection and copying pursuant to this chapter, unless the department determines that a requested public record or portion of a public record is exempt under the provisions of chapter 42.56 RCW or other statute.

(2) Various statutes exempt certain records from disclosure including, but not limited to:

(a) Division of banks - Examination reports and information obtained by the department in relation to:

(i) Washington state commercial banks and their holding companies, RCW 30A.04.075;

(ii) Washington state savings banks and their holding companies, RCW 32.04.220;

(iii) Nondepositary trust companies, RCW 30B.04.060;

(iv) Agricultural lenders, chapter 31.35 RCW;

(v) Federally guaranteed small business loan companies, chapter 31.40 RCW; and

(vi) Business development companies, RCW 31.24.120.

(b) Division of consumer services - Information obtained by the department in relation to:

(i) The personal residence address and telephone number of applicants for a check casher's and seller's license, RCW 31.45.030(3);

(ii) A trade secret as defined under RCW 19.108.010 regarding an applicant for or holder of a check casher's and seller's license, RCW 31.45.030(3);

(iii) Information or reports obtained by the department or prepared by, on behalf of, or for the use of the department regarding money transmitters, currency exchangers, and other money service businesses subject to licensure by the department, RCW 19.230.190.

(c) Division of credit unions - Examination reports and information obtained by the department in relation to Washington state-chartered credit unions and credit union service organizations, RCW 31.12.565; and

(d) Division of securities - Information obtained by the department in relation to:

(i) Investigation of securities offerors, broker-dealers, and investment advisers, RCW 21.20.480, 20.20.510, 21.20.700, and, especially, 21.20.855;

(ii) Investigation of commodities offerors or broker-dealers, RCW 21.30.170;

(iii) Investigation of franchisors and franchise brokers, RCW 19.100.242; and

(iv) Investigation of business opportunities offerors, RCW 19.110.140.

(3) Other statutory exemptions may cover records received by the department from another regulatory agency or under interagency agreement.

(4) Federal statutes and rules, including regulations of the federal reserve board of governors, federal deposit insurance corporation, national credit union administration, consumer financial protection bureau, securities and exchange commission, and other federal financial regulators implementing the Freedom of Information Act, at subsection (b)(8) of Title 5, United States Code, Section 552 (5 U.S.C. Sec. 552(b)(8)), which:

(a) Exempts from public disclosure examination and investigation information involving financial institutions that are also subject to regulation by the department; and

(b) May be more expansive than or supersede or preempt Washington state law with respect to public disclosure of such information.

(5) Pursuant to RCW 42.56.050, 42.56.070, 42.56.210, 42.56.230, and 42.56.240, the department reserves its authority to delete identifying details when it makes available or publishes any public record, if there is reason to believe that disclosure of such details would be an invasion of personal privacy. All deletions will be justified in writing.

History

Statutory Authority: RCW 43.320.040, 42.56.040, 42.56.100, and 42.56.120. WSR 18-13-104, § 208-12-100, filed 6/19/18, effective 8/1/18. Statutory Authority: RCW 43.320.040 and 42.17.250. WSR 96-14-082, § 208-12-100, filed 7/1/96, effective 8/1/96.

Wash. Admin. Code § 208-12-110 Denials of public records requests—Review.

(1) Any person who objects to the initial denial or partial denial of a records request may petition, in writing (including by email), to the public records officer for a review of that denial. The petition shall include a copy of, or reasonably identify, the written statement by the public records officer or designee denying the request.

(2) The director or director's designee will consider the petition and affirm, reverse, or modify the denial within two business days following the department's receipt of the petition, or within such other time as the department and the requestor mutually agree. The original denial becomes final if the director does not respond within two business days.

(3) Administrative remedies are not exhausted until the denial becomes final.

(4) Pursuant to RCW 42.56.530, if the department denies a requestor access to public records because it claims the record is exempt in whole or in part from disclosure, the requestor may request the attorney general's office to review the matter. The attorney general has adopted rules on such requests in WAC 44-06-160.

History

Statutory Authority: RCW 43.320.040, 42.56.040, 42.56.100, and 42.56.120. WSR 18-13-104, § 208-12-110, filed 6/19/18, effective 8/1/18. Statutory Authority: RCW 43.320.040 and 42.17.250. WSR 96-14-082, § 208-12-110, filed 7/1/96, effective 8/1/96.

Wash. Admin. Code § 208-12-120 Records index.

The department maintains an index of its records available to the public on its website, at www.dfi.wa.gov/public-records-index.

History

Statutory Authority: RCW 43.320.040, 42.56.040, 42.56.100, and 42.56.120. WSR 18-13-104, § 208-12-120, filed 6/19/18, effective 8/1/18. Statutory Authority: RCW 43.320.040 and 42.17.250. WSR 96-14-082, § 208-12-120, filed 7/1/96, effective 8/1/96.

Chapter 208-400 Credit union corporate governance.

Wash. Admin. Code § 208-400-010 Reasonable compensation.

(1) Authority to compensate directors and supervisory committee members. Subject to the provisions of this section, a credit union may pay compensation to its directors and supervisory committee members for their service as directors and supervisory committee members that is reasonable in accordance with subsection (4) of this section.

(2) "Compensation."

(a) As used in this section, "compensation" means anything of value that is both:

(i) Given to a director or supervisory committee member in exchange for services performed as a director or supervisory committee member; and

(ii) Required to be reported to the Internal Revenue Service as income.

(b) For purposes of this section, the term "compensation" excludes:

(i) Any advancement to or reimbursement to a director or supervisory committee member, or direct disbursement to a third party of reasonable expenses associated with credit union business-related travel of a director or supervisory committee member;

(ii) Payment of reasonable expenses associated with credit union business-related travel for one guest per director or supervisory committee member;

(iii) Payment for insurance coverage of a director or supervisory committee member, available to employees generally;

(iv) Payment of indemnification to a director or supervisory committee member and liability insurance coverage for directors and supervisory committee members; and

(v) Gifts to a director or supervisory committee member of minimal value.

(3) Controls review. A credit union shall implement and maintain appropriate controls to ensure that compensation is reasonable and that such compensation does not lead to material financial loss to the credit union. Such controls shall include, without limitation, the following:

(a) Prior to its initial determination to pay compensation to directors or supervisory committee members, or to increase any such payments, a credit union's board of directors shall in good faith review all policies related to compensation, and shall review the amount of compensation provided to the directors and supervisory committee members.

(b) The review set forth in (a) of this subsection must:

(i) Contain a written determination that compensation paid to the directors and supervisory committee members is reasonable, including a discussion of the factors considered in making such determination; and

(ii) Be included as part of the minutes of the meeting at which matters relating to compensation were deliberated and voted upon by the credit union's board of directors.

(4) When compensation is reasonable. Compensation is reasonable if it meets all of the following criteria:

(a) It is proportional to the services provided by the director or supervisory committee member;

(b) It is reasonable considering the financial condition of the credit union; and

(c) It is comparable to compensation paid by comparable organizations of a similar size, location, and operational complexity.

(5) Disclosure to credit union membership.

(a) A credit union shall annually disclose to credit union members prior to its annual membership meeting the compensation provided to directors and supervisory committee members in the prior calendar year and as scheduled for the current calendar year.

(b) The disclosure to a credit union's members:

(i) Shall be in writing and conspicuously set apart from other information provided to members;

(ii) Shall include the names of all the directors and supervisory committee members receiving compensation and the amount of compensation paid to each in the prior calendar year;

(iii) Shall include the schedule for compensation to be paid to directors and supervisory committee members in the current calendar year; and

(iv) Shall be included in the notice of the annual meeting of the members, a separate mailing to members, a periodic statement of account to members, a periodic publication of the credit union to members, posted electronically on a credit union's website, or through some other email publication to members.

(6) Notice to director.

(a) A credit union shall provide written notice to the director of credit unions of its intent to adopt a policy to compensate directors or supervisory committee members at least sixty days before adopting such policy.

(b) In providing notice to the director of credit unions, a credit union shall provide any additional information as required by the director of credit unions.

(7) Enforcement authority of director, prohibition.

(a) The director may prohibit or otherwise limit or restrict the payment of compensation to directors or supervisory committee members if, in the opinion of the director, the payment of compensation has or is likely to have a materially adverse effect on the credit union.

(b) The director may also prohibit or limit compensation if a credit union fails to comply with this rule.

History

Statutory Authority: RCW 31.12.365 and 2013 c 34. WSR 14-03-132, § 208-400-010, filed 1/22/14, effective 2/22/14.

Wash. Admin. Code § 208-400-020 Definitions.

Unless the context clearly requires otherwise, as used in this chapter:

"Board" has the same meaning as ascribed in RCW 31.12.005(1).

"Board chair" means the serving chairperson of the board of directors of a credit union, who has been duly appointed by the board of directors to serve as its chair.

"CAMEL" means the rating system used to measure the safety and soundness of credit unions that are insured by the National Credit Union Share Insurance Fund (as defined in 12 U.S.C. Sec. 1783) and which scores a credit union's capital adequacy, asset quality, management, earnings, and asset/liability management (liquidity), both individually and on a composite basis.

"Credit union" has the same meaning as ascribed in RCW 31.12.005(5).

"Director" has the same meaning as ascribed to that term in RCW 31.12.005(8).

"Manager" means the duly appointed and serving chief executive officer of a credit union.

"Troubled condition" has the same meaning ascribed to that term in the rules of the National Credit Union Administration, at 12 C.F.R. Sec. 701.14 (b)(3).

"Unsafe or unsound practice" has the same definition as ascribed to that term in RCW 31.12.005(26).

History

Statutory Authority: RCW 31.12.225 and 2013 c 34. WSR 14-09-024, § 208-400-020, filed 4/9/14, effective 5/10/14.

Wash. Admin. Code § 208-400-030 Frequency of board meetings.

(1) Authority to determine the frequency of board of directors meetings. Subject to the provisions of this section, a board may determine the frequency of its meetings and must specify such frequency in its bylaws.

(2) Minimum meeting requirement. A board of directors must meet a minimum of six times in each calendar year and at least once per calendar quarter.

(3) Director's authority to require more frequent meetings. The director may require that a board meet more frequently if he or she finds that it is necessary for the board to meet more frequently to address examination matters, including without limitation, evidence of any of the following:

(a) The credit union's current composite CAMEL rating issued by the director is a 3, 4, or 5;

(b) The credit union's current management component CAMEL rating issued by the director is a 3, 4, or 5;

(d) The credit union is currently in a troubled condition;

(e) In the judgment of the director, the credit union has committed an unsafe or unsound practice that has not been corrected to the satisfaction of the director and that continues to be a concern to the director, or the credit union is about to commit an unsafe or unsound practice; or

(f) The credit union has been notified in writing by the director of a significant supervisory or financial concern.

(4) Notification to the board. If the director determines as set forth in subsection (3) of this section, that a board of directors must meet more frequently than as set forth in subsection (2) of this section, the director will send written notice to the board chair, with a copy to the credit union's manager, setting forth the director's findings underlying the determination and the required frequency of the board of directors' meetings. This notice will remain in effect until rescinded in writing by the director.

History

Statutory Authority: RCW 31.12.225 and 2013 c 34. WSR 14-09-024, § 208-400-030, filed 4/9/14, effective 5/10/14.

Wash. Admin. Code § 208-400-040 Parity requests.

Procedures for requesting powers and authorities authorized in other states.

(1) A credit union must send written notice to the director, by United States mail or by electronic delivery, of its intent to exercise a power or authority that it would have if it were an out-of-state credit union.

(2) The written request must provide the following information in order to be considered complete:

(a) A description of the specific proposed powers or authorities and how the power or authority will serve the convenience and advantage of the credit union's members;

(b) The state law citations upon which the powers or authorities are based;

(c) A description of the policies, procedures, or other documents the credit union will use in implementing the powers or authorities;

(d) A description of how the powers or authorities will impact the credit union's safety and soundness, including net worth and earnings; and

(e) Any actions planned to mitigate the safety and soundness risks created by the requested powers and authorities.

(3) The director shall grant a parity request if the director finds:

(a) The request is in accordance with the requirements of RCW 31.12.404;

(b) The power or authority is in the interests of the members of the credit union and maintains the fairness of competition and parity between state-chartered credit unions and out-of-state credit unions; and

(4) The director may ask the credit union to waive or extend the thirty day response time set forth in RCW 31.12.404(4).

(5) Absent a waiver or extension, if the director takes no action on the request within thirty days of delivery of the notice, the right to exercise the power is deemed granted.

(6) The director may attach restrictions or limitations on a credit union's new powers or authorities.

History

Statutory Authority: RCW 31.12.516. WSR 19-23-045, § 208-400-040, filed 11/13/19, effective 12/14/19.

Chapter 208-418 Fees charged to credit unions and other persons.

Wash. Admin. Code § 208-418-010 Definitions.

Unless the context clearly requires otherwise, as used in this chapter:

(1) "Credit union" includes a Washington credit union, an out-of-state credit union and a foreign credit union.

(2) "Foreign credit union" means a credit union organized and operating under the laws of another country or other foreign jurisdiction, that is operating a branch in Washington in accordance with RCW 31.12.471.

(3) "Hourly fee" means a fee of $64.35 per hour per examiner or other staff person of the division.

(4) "Out-of-state credit union" means a credit union organized and operating under the laws of another state or U.S. territory or possession, that is operating a branch in Washington in accordance with RCW 31.12.471.

(5)(a) "Total assets" of a Washington credit union includes all assets of the credit union as reported on the credit union's most recent form 5300 or similar financial report.

(b) "Total assets" of an out-of-state or foreign credit union is derived from the following fraction:

| | Total assets x in-state shares and deposits | | | --- | --- | --- | | | Total shares and deposits | |

"Total assets" and "shares and deposits" include respectively all assets and shares and deposits as reported on the credit union's most recent form 5300 or similar financial report.

(6) "Washington credit union" means a credit union organized and operating under chapter 31.12 RCW.

History

Statutory Authority: Chapter 43.135 RCW, RCW 43.320.040, 31.12.516(6), and 2008 c 285. WSR 08-24-057, § 208-418-010, filed 11/26/08, effective 12/31/08. Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-12-004, § 208-418-010, filed 5/23/01, effective 6/23/01.

Wash. Admin. Code § 208-418-020 Collection of fees.

Chapter 31.12 RCW authorizes the director to charge fees to credit unions and certain other persons in order to cover the costs of the operation of the division of credit unions and to establish a reasonable reserve for the division. As set forth in more detail in this chapter, the fees for this purpose shall consist of:

(1) Semiannual asset assessments charged to credit unions;

(2) Charges to a credit union for costs incurred by the division for certain types of attorney general or special counsel assistance in regard to the credit union; and

(3) Certain other fees charged by the director.

The director may waive all or any portion of any fee payable by a credit union or other person.

History

Statutory Authority: RCW 31.12.516 and 43.320.040. WSR 15-24-081, § 208-418-020, filed 11/30/15, effective 12/31/15. Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-12-004, § 208-418-020, filed 5/23/01, effective 6/23/01. Statutory Authority: 1996 c 274. WSR 96-12-058, § 208-418-020, filed 5/31/96, effective 7/1/96. WSR 96-06-011, recodified as § 208-418-020, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.535 and 31.12.545. WSR 95-06-066, § 419-18-020, filed 2/28/95, effective 3/31/95. Statutory Authority: RCW 31.12.320. WSR 83-20-027 (Order 83-4), § 419-18-020, filed 9/26/83
WSR 82-13-016 (Order 82-5), § 419-18-020, filed 6/7/82.

Wash. Admin. Code § 208-418-040 Semiannual asset assessments.

(1) The director will charge each credit union a semiannual asset assessment at the rate set forth in subsection (2) of this section. Asset assessments will be due on January 1st and July 1st. Asset assessments must be paid no later than thirty days after their due date. The assessments will be computed on total assets as of the prior June 30th for the January 1st assessments, and as of the prior December 31st for the July 1st assessments.

(2)

| Credit Union's Total Assets | Semiannual Asset Assessment | | --- | --- | | over $500M | $42,326 + (.00003458 x total assets over $500M) | | over $100M up to $500M | $11,766 + (.00007638 x total assets over $100M) | | over $25M up to $100M | .00011766 x total assets | | over $10M up to $25M | $2,592 | | over $2M up to $10M | $1,726 | | over $500K up to $2M | $1,150 | | up to $500K | $0 | | M = Million K = Thousand | |

(3) Semiannual asset assessments are charged for the semiannual period that begins on the due date of the assessment. No rebates will be made to credit unions that cease to be state-chartered during the assessment period. A credit union converting to state charter will pay a prorated semiannual asset assessment for the six months during which the conversion is completed.

(4) From time to time, the director may determine that asset assessments on an out-of-state credit union or foreign credit union are inappropriate relative to the level of examination and supervision of that credit union by the division. In that event, the director may charge the credit union hourly fees for examination and supervision of the credit union, including, but not limited to, off-site monitoring, in lieu of asset assessments. Such fees are due upon receipt of billing from the division.

History

Statutory Authority: RCW 31.12.516 and 43.320.040. WSR 15-24-081, § 208-418-040, filed 11/30/15, effective 12/31/15. Statutory Authority: RCW 31.12.516, 43.320.040, and chapter 43.135 RCW. WSR 10-06-050, § 208-418-040, filed 2/24/10, effective 3/27/10. Statutory Authority: Chapter 43.135 RCW, RCW 43.320.040, 31.12.516(6), and 2008 c 285. WSR 08-24-057, § 208-418-040, filed 11/26/08, effective 12/31/08. Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-12-004, § 208-418-040, filed 5/23/01, effective 6/23/01. Statutory Authority: 1996 c 274. WSR 96-12-058, § 208-418-040, filed 5/31/96, effective 7/1/96. WSR 96-06-011, recodified as § 208-418-040, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.535 and 31.12.545. WSR 95-06-066, § 419-18-040, filed 2/28/95, effective 3/31/95
WSR 91-06-062, § 419-18-040, filed 3/1/91, effective 4/1/91. Statutory Authority: RCW 31.12.545(1). WSR 85-07-008 (Order 85-2), § 419-18-040, filed 3/8/85. Statutory Authority: RCW 31.12.320. WSR 83-20-027 (Order 83-4), § 419-18-040, filed 9/26/83
WSR 82-13-016 (Order 82-5), § 419-18-040, filed 6/7/82.

Wash. Admin. Code § 208-418-050 Pass through of attorney general costs.

(1) The director may charge each credit union the actual cost incurred by the division of credit unions for certain legal assistance rendered by an assistant attorney general or special counsel in regard to that credit union. Legal assistance includes legal assistance rendered in connection with: Supervisory committee meetings and board meetings; receiverships, conservatorships, liquidations and declarations of insolvency; enforcement agreements or actions; collection actions; administrative hearings; declaratory orders; and opinions requested by a credit union or the division of credit unions. Charges are due upon receipt of billing from the division.

(2) The division will notify a credit union before the division incurs expense for legal assistance which may be charged to the credit union under this section.

History

Statutory Authority: Chapter 43.135 RCW, RCW 43.320.040, 31.12.516(6), and 2008 c 285. WSR 08-24-057, § 208-418-050, filed 11/26/08, effective 12/31/08. Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-12-004, § 208-418-050, filed 5/23/01, effective 6/23/01. Statutory Authority: 1996 c 274. WSR 96-12-058, § 208-418-050, filed 5/31/96, effective 7/1/96. WSR 96-06-011, recodified as § 208-418-050, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.535 and 31.12.545. WSR 95-06-066, § 419-18-050, filed 2/28/95, effective 3/31/95
WSR 91-06-062, § 419-18-050, filed 3/1/91, effective 4/1/91. Statutory Authority: RCW 31.12.320. WSR 83-20-027 (Order 83-4), § 419-18-050, filed 9/26/83.

Wash. Admin. Code § 208-418-070 Other fees.

(1) The director will charge hourly fees as follows:

(a) An hourly fee will be charged to a person other than a credit union or a subsidiary of one or more credit unions for each information systems and technology examination of the person by the division of credit unions.

(b) An hourly fee will be charged to a credit union for the examination of the credit union's application to add a community group to its field of membership.

(c) An hourly fee will be charged to a credit union for a fraud investigation or examination of the credit union and/or persons involved with the credit union by the division.

(d) An hourly fee will be charged to an out-of-state or foreign credit union for examination and supervision by the division under WAC 208-418-040(4).

(e) An hourly fee will be charged to an out-of-state or foreign credit union for the examination of the credit union's application to operate a branch in this state.

(f) An hourly fee will be charged to other divisions or agencies for examinations, investigations, or similar undertakings performed on their behalf by the division.

(g) An hourly fee will be charged for investigation or examination of conversion applications.

(h) An hourly fee will be charged for initial and annual examination of alternative share insurers that apply for authorization to do business with Washington state chartered credit unions.

(i) An hourly fee will be charged for examination of credit union service organizations and their subsidiaries.

(2) In addition, the director will charge a credit union or other person for the actual cost incurred by the division for an examination or investigation of the credit union or person performed under personal services contract by third parties.

(3) Charges under this section are due upon receipt of billing from the division.

History

Statutory Authority: Chapter 43.135 RCW, RCW 43.320.040, 31.12.516(6), and 2008 c 285. WSR 08-24-057, § 208-418-070, filed 11/26/08, effective 12/31/08. Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-12-004, § 208-418-070, filed 5/23/01, effective 6/23/01. Statutory Authority: 1996 c 274. WSR 96-12-058, § 208-418-070, filed 5/31/96, effective 7/1/96. WSR 96-06-011, recodified as § 208-418-070, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.535 and 31.12.545. WSR 95-06-066, § 419-18-070, filed 2/28/95, effective 3/31/95
WSR 91-06-062, § 419-18-070, filed 3/1/91, effective 4/1/91. Statutory Authority: RCW 31.12.545(1). WSR 85-07-008 (Order 85-2), § 419-18-070, filed 3/8/85. Statutory Authority: RCW 31.12.320. WSR 83-20-027 (Order 83-4), § 419-18-070, filed 9/26/83.

Wash. Admin. Code § 208-418-100 Waiver of fees.

The director may waive any or all of the fees and assessments imposed under WAC 208-418-040 and 208-418-070, in whole or in part, when the director determines that such course of action would be fiscally prudent.

History

Statutory Authority: Chapter 43.135 RCW, RCW 43.320.040, 31.12.516(6), and 2008 c 285. WSR 08-24-057, § 208-418-100, filed 11/26/08, effective 12/31/08. Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-12-004, § 208-418-100, filed 5/23/01, effective 6/23/01.

Chapter 208-436 Rules governing supervisory approval of credit union investment practices.

Wash. Admin. Code § 208-436-010 Application to make investments not otherwise permitted by law.

If any credit union wishes to deposit or invest its capital, deposits, or surplus funds in a manner not specifically permitted to credit unions by chapter 31.12 RCW, the credit union shall, before engaging in the proposed investment practice, make written application to the director for authority to make the proposed investment. The application shall contain at least the following information:

(a) The name of the credit union;

(b) The proposed source or sources of the funds to be deposited or invested;

(c) A detailed description of the type of deposit or investment the credit union proposes to make, including the names of any natural persons, corporations, financial institutions or government agencies serving as banker, trustee, management agent, broker, guarantor, seller of securities, or purchaser of securities;

(d) References, if known to the applicant, showing that other state chartered credit unions have been permitted to make the same type of investment or deposit;

(e) Copies of statutes, regulations, rulings, official correspondence or other information showing that federally chartered credit unions are permitted to make the type of investment or deposit proposed in the application;

(f) Such other information as the applicant credit union wishes to offer in evidence that the proposed investment or deposit would be a safe and prudent one for the applicant credit union to engage in.

History

Statutory Authority: RCW 42.320.040 [43.320.040] and 31.12.535. WSR 96-17-071, § 208-436-010, filed 8/20/96, effective 9/20/96. WSR 96-06-011, recodified as § 208-436-010, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.260(g). WSR 79-07-002 (Order 79-1), § 419-36-010, filed 6/7/79.

Wash. Admin. Code § 208-436-020 Supplementary application information.

Upon receiving an application from a credit union to engage in an investment or deposit practice pursuant to this chapter, the director may request such additional information as he or she deems necessary for the informed disposition of the application. If supplementary application information is requested by the director, the application will not be deemed complete until the supplementary information is supplied.

History

Statutory Authority: RCW 42.320.040 [43.320.040] and 31.12.535. WSR 96-17-071, § 208-436-020, filed 8/20/96, effective 9/20/96. WSR 96-06-011, recodified as § 208-436-020, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.260(g). WSR 79-07-002 (Order 79-1), § 419-36-020, filed 6/7/79.

Wash. Admin. Code § 208-436-030 Investments previously approved for other state chartered credit unions.

If the director finds that the applicant credit union proposes to make the same type of investment or deposit which one or more other state chartered credit unions have previously received permission to make, the director shall grant the application unless he or she finds that the financial position or the state of management of the applicant credit union is such that the proposed investments or deposits would not be sound or prudent investment practices for the applicant credit union, in which case the director may instead grant the application conditionally, grant it in modified form, or deny the application.

History

Statutory Authority: RCW 42.320.040 [43.320.040] and 31.12.535. WSR 96-17-071, § 208-436-030, filed 8/20/96, effective 9/20/96. WSR 96-06-011, recodified as § 208-436-030, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.260(g). WSR 79-07-002 (Order 79-1), § 419-36-030, filed 6/7/79.

Wash. Admin. Code § 208-436-040 Investment practice permitted to federally chartered credit unions.

If the director finds that the applicant credit union proposes to make the same type of investment or deposit which one or more other federally chartered credit unions have previously received permission to make, the director shall grant the application unless he or she finds that the financial position or the state of management of the applicant credit union is such that the proposed investments or deposits would not be sound or prudent investment practices for the applicant credit union, in which case the director may instead grant the application conditionally, grant it in modified form, or deny the application.

History

Statutory Authority: RCW 42.320.040 [43.320.040] and 31.12.535. WSR 96-17-071, § 208-436-040, filed 8/20/96, effective 9/20/96. WSR 96-06-011, recodified as § 208-436-040, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.260(g). WSR 79-07-002 (Order 79-1), § 419-36-040, filed 6/7/79.

Wash. Admin. Code § 208-436-050 Investment practice not previously permitted to any credit union.

If the director finds that the proposed investment or deposit practice has not previously been permitted to any state chartered or federally chartered credit union, the director shall make inquiry as to whether the proposed investment or deposit practice would be consistent with Washington law and as to whether the proposed investment or deposit practice would be a sound and prudent practice for the applicant credit union. In connection with this inquiry, the director may consider the general nature and functions of credit unions, as well as the specific financial condition and management of the applicant credit union, as revealed in the application, examinations, or such other information as may be at hand. If the director finds that the investment or deposit practice as proposed would be contrary to or inconsistent with the laws of the state of Washington, or would not be a sound investment practice, the director shall deny the application. If the director finds that proposed investment or deposit practice would be a sound and prudent practice for the applicant credit union, the director shall grant the application. Alternatively, the director may, for cause, grant the application conditionally, grant it in modified form, or deny it in whole or in part.

History

Statutory Authority: RCW 42.320.040 [43.320.040] and 31.12.535. WSR 96-17-071, § 208-436-050, filed 8/20/96, effective 9/20/96. WSR 96-06-011, recodified as § 208-436-050, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.260(g). WSR 79-07-002 (Order 79-1), § 419-36-050, filed 6/7/79.

Wash. Admin. Code § 208-436-060 Director action on application.

After receiving an application from a credit union to engage in an investment or deposit practice not otherwise permitted by law, and after having considered it as provided in this chapter, the director shall grant, grant conditionally, grant in modified form, or deny the application, and shall inform the applicant credit union in writing of this action and of the reasons therefor. Any application not acted upon within six months after its receipt by the director shall be deemed denied unless the director, in writing, informs the applicant credit union that the application is being held for further review.

History

Statutory Authority: RCW 42.320.040 [43.320.040] and 31.12.535. WSR 96-17-071, § 208-436-060, filed 8/20/96, effective 9/20/96. WSR 96-06-011, recodified as § 208-436-060, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.260(g). WSR 79-07-002 (Order 79-1), § 419-36-060, filed 6/7/79.

Wash. Admin. Code § 208-436-070 Engagement in unauthorized investment practice prohibited.

No state chartered credit union shall engage in any investment or deposit practice not authorized by a specific provision of Washington state law or by the director in accordance with this chapter. Unless the director, in writing, informs an applicant credit union that it may engage in an investment or deposit practice provisionally while the application is being reviewed, no credit union shall make deposits or investments pursuant to an application made under this chapter until it has received written authority to do so as provided herein. Failure of a credit union to comply with the terms of this chapter shall be deemed an unsound credit union practice and a wilful violation of an order of the director and may be grounds for appropriate supervisory action against the credit union, its directors or officers.

History

Statutory Authority: RCW 42.320.040 [43.320.040] and 31.12.535. WSR 96-17-071, § 208-436-070, filed 8/20/96, effective 9/20/96. WSR 96-06-011, recodified as § 208-436-070, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.260(g). WSR 79-07-002 (Order 79-1), § 419-36-070, filed 6/7/79.

Wash. Admin. Code § 208-436-080 Modification or revocation of investment practices previously authorized.

The director may find that an investment or deposit practice previously authorized is no longer a safe and prudent practice for credit unions generally to engage in, or has become inconsistent with applicable state or federal law, or has ceased to be a safe and prudent practice in one or more particular credit unions in light of their financial condition or management. Upon such a finding, the director may in writing inform the board of directors of any or all of the credit unions engaging in such a practice that the authority to engage in the practice has been revoked or modified. When the director so notifies any credit union, its directors and officers shall forthwith take steps to liquidate the investments in question (if authority to engage in the practice has been revoked) or to make such modifications as the director requires. The director may for cause shown grant a credit union some definite period of time in which to arrange its affairs to comply with the director's orders. Credit unions which continue to engage in investment practices where their authority to do so has been revoked or modified will be treated as if the authority to engage in the practice had never been granted, and their actions may be deemed an unsound credit union practice and a wilful violation of an order of the director and may be grounds for appropriate supervisory action against the credit union, its directors or officers.

History

Statutory Authority: RCW 42.320.040 [43.320.040] and 31.12.535. WSR 96-17-071, § 208-436-080, filed 8/20/96, effective 9/20/96. WSR 96-06-011, recodified as § 208-436-080, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.260(g). WSR 79-07-002 (Order 79-1), § 419-36-080, filed 6/7/79.

Wash. Admin. Code § 208-436-090 Investment limitations—Other requirements.

The director finds that investments in common trust funds under RCW 31.12.425 (1)(f) present potential serious risks to credit unions and that rules establishing specific procedures for those investments are necessary to protect the safety and soundness of credit unions. These rules are not intended to either endorse or encourage credit union investment in common trust funds. Credit unions investing in common trust funds as authorized by RCW 31.12.425 (1)(f) are therefore subject to the following limitations:

(1) Prior to making any investment in a common trust fund, the board of directors shall approve an investment policy detailing the maximum investment the credit union may have in common trust funds and specific investment guidelines. The policy shall also specify who is to authorize such investments.

(2) A credit union shall not invest an aggregate amount of greater than fifteen percent of its total assets in all such common trust funds.

(3) A credit union shall not invest an aggregate amount greater than five percent of its total assets in common trust funds without the director's prior written approval of its investment policy.

(4) A credit union shall not invest an aggregate amount greater than ten percent of its total assets in common trust funds without the director's prior written approval to make such investment.

(5) A credit union whose aggregate investment in common trust funds exceeds ten percent of its total assets shall establish, by transfer from undivided earnings, a special investment valuation reserve in an amount equal to five percent of the aggregate investment in common trust funds exceeding ten percent of total assets. The special reserve shall be adjusted not less than quarterly based on the aggregate investment in common trust funds amount exceeding ten percent of total assets.

(6) Prior to making any investment in a common trust fund, a credit union shall obtain a prospectus for such fund and determine that all investments, investment activities and deposits of such common trust fund would be legal investments if held by the credit union.

(7) Prior to making any investment in a common trust fund, a credit union shall secure from the investment company marketing the fund a written statement, in addition to any prospectus, specifying that the fund is not engaged in and will not engage in any speculative marketing activity including but not limited to adjusted trading, futures contracts, short sales, and standby commitments, defined as follows:

(a) Adjusted trading means any method of transaction used to defer a loss by selling a security at a price above its current market price and simultaneously purchasing or committing to purchase from that same party another security at a price above its current market price, including interest rate swaps.

(b) Futures contract means a contract for the future delivery of commodities, including certain government securities, sold on commodities exchanges.

(d) Standby commitment means a commitment to either buy or sell a security, on or before a future date, at a predetermined price. The seller of the commitment is the party receiving payment for assuming the risk associated with committing either to purchase a security in the future at a predetermined price, or to sell a security in the future at a predetermined price. The seller of the commitment is required to either accept delivery of a security (in the case of a commitment to buy) or make delivery of a security (in the case of a commitment to sell), in either case at the option of the buyer of the commitment.

(8) A credit union's directors, officials, committee members, and employees, and immediate family members of such persons, may not receive consideration in any form in connection with the making of an investment or deposit in a common trust fund by the credit union.

History

Statutory Authority: RCW 42.320.040 [43.320.040] and 31.12.535. WSR 96-17-071, § 208-436-090, filed 8/20/96, effective 9/20/96. WSR 96-06-011, recodified as § 208-436-090, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.545. WSR 86-04-068 (Order 85-7), § 419-36-090, filed 2/5/86.

Chapter 208-440 Credit union participation in commercial arrangements with third parties.

Wash. Admin. Code § 208-440-010 Commercial arrangements with third parties.

(1) Credit unions may enter into arrangements with third parties in order for the third party or credit union to offer the third party's products and services to the credit union's members. These arrangements are referred to in this rule as commercial arrangements.

In connection with commercial arrangements, credit unions may:

(a) Allow third parties to offer products and services to members through the credit union;

(b) Endorse, directly or indirectly, products and services of a third party;

(d) Receive payment from third parties for participation in commercial arrangements; and

(e) Rent, lease or sublease portions of their land and buildings to third parties to offer products and services to members.

This list is not intended to be exhaustive.

As used in this rule, the term "third party" includes, but is not limited to, credit union service organizations.

(2) Before entering into any commercial arrangements, a credit union's board must adopt a written policy regarding such arrangements. At a minimum, the policy should provide for the:

(a) Evaluation of potential risk of liability; and

(b) Approval of each arrangement, whether by the board or management pursuant to established guidelines.

(3) Before entering into or renewing each commercial arrangement, a credit union must:

(a) Ensure that the arrangement is a prudent one and that it does not present safety and soundness risks to the credit union;

(b) Evaluate the potential risk of liability and ensure that the credit union takes appropriate precautions to reduce or offset such risk, including, but not limited to, the use of such devices as disclaimers/disclosures to members and bond or insurance coverage; and

(c) Ensure that the contract evidencing the arrangement includes provision for indemnification of the credit union by the third party.

(4) Credit unions must comply with applicable laws in entering into and carrying out commercial arrangements, including, but not limited to, any applicable federal or state law on privacy of member information.

(5) This section does not apply to situations where a credit union provides its own products or services to members.

History

Statutory Authority: RCW 31.12.516(2), 43.320.040. WSR 00-22-037, § 208-440-010, filed 10/25/00, effective 11/25/00. Statutory Authority: RCW 42.320.040 [43.320.040] and 31.12.535. WSR 96-17-071, § 208-440-010, filed 8/20/96, effective 9/20/96. WSR 96-06-011, recodified as § 208-440-010, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.360. WSR 79-08-047 (Order 79-2), § 419-40-010, filed 7/19/79.

Chapter 208-444 Miscellaneous credit union rules.

Wash. Admin. Code § 208-444-010 State chartered credit unions—Acceptance of audit instead of examination.

(1) RCW 31.12.545 authorizes the acceptance, in the director's discretion, of independent audit reports in lieu of the examination required thereunder. In order to be considered for acceptance in lieu of an examination, an audit must meet the following conditions:

(a) The audit was performed by accountants who have demonstrated to the director extensive knowledge of the examination procedures and techniques utilized by the division of credit unions;

(b) The scope of the audit follow, but is not limited to, the scope of examinations conducted by the division, including a compliance review;

(d) The audit includes a cash reconciliation, including an adequately documented physical cash count, and also includes an affirmative verification of investments and deposits made by the audited credit union;

(e) Verification of the status of funds borrowed by the audited credit union, including promissory notes and certificates;

(f) The audit sets forth such comments as are appropriate in a positive format specifying corrective action recommended and schedule for completing such corrective action;

(g) The audit was performed not less than nine months after and not more than fifteen months after the last examination by the division or an audit which was accepted in lieu thereof.

(h) All working papers as well as the accountant's report, internal control report, and any other documents associated with the audit are made available to the director.

(2) Select portions of an audit may be utilized by division examiners in conducting a particular examination if:

(a) The date of the audit corresponds reasonably with the date of the examination; and

(b) That portion of the audit being utilized is supported by working papers which substantially correspond to examination work papers utilized by the division.

History

Statutory Authority: RCW 42.320.040 [43.320.040] and 31.12.535. WSR 96-17-071, § 208-444-010, filed 8/20/96, effective 9/20/96. WSR 96-06-011, recodified as § 208-444-010, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.320. WSR 83-05-022 (Order 83-1), § 419-44-010, filed 2/9/83.

Wash. Admin. Code § 208-444-020 Prohibited fees.

(1) Except as otherwise provided herein, no official or employee of a credit union, or immediate family member of an official or employee of a credit union, may receive, directly or indirectly, any commission, fee, or other compensation in connection with any loan made by the credit union.

(2) This section does not prohibit:

(a) Payment, by a credit union, of salary to employees;

(b) Payment, by a credit union, of an incentive or bonus to an employee based on the credit union's overall financial performance;

(c) Payment, by a credit union, of an incentive or bonus to an employee, other than a senior management employee, in connection with a loan or loans made by the credit union, provided that the board of directors of the credit union establishes written policies and internal controls in connection with such incentive or bonus and monitors compliance with such policies and controls at least annually.

(d) Receipt of compensation from a person outside a credit union by a volunteer official or nonsenior management employee of the credit union, or an immediate family member of a volunteer official or employee of the credit union, for a service or activity performed outside the credit union, provided that no referral has been made by the credit union or the official, employee, or family member.

(3) For purposes of this section, "official" means any member of the board of directors or a volunteer committee.

History

Statutory Authority: RCW 31.12.535 and 43.320.040. WSR 97-23-071, § 208-444-020, filed 11/19/97, effective 3/19/98 by letter filed as WSR 98-10-072.

Wash. Admin. Code § 208-444-030 Nonpreferential loans.

(1) The rates, terms and conditions on any loan either made to, or endorsed or guaranteed by

(a) An official

(b) An immediate family member of an official, or

(c) Any individual having a common ownership, investment or other pecuniary interest in a business enterprise with an official or with an immediate family member of an official

shall not be more favorable than the rates, terms and conditions for comparable loans to other credit union members.

(2) For purposes of this section, "official" means any member of the board of directors, credit committee or supervisory committee.

History

Statutory Authority: RCW 31.12.535 and 43.320.040. WSR 97-23-071, § 208-444-030, filed 11/19/97, effective 3/19/98 by letter filed as WSR 98-10-072.

Wash. Admin. Code § 208-444-040 Definitions.

Unless the context clearly requires otherwise, as used in this chapter:

(1) "Compensation" includes nonmonetary items, except those of nominal value.

(2) "Immediate family member" means a spouse or other family member living in the same household.

(3) "Loan" includes line of credit.

(4) "Person" means a natural person or an organization.

(5) "Senior management employee" means the credit union's chief executive officer (typically, this individual holds the title of president or treasurer/manager), any assistant chief executive officers (e.g., assistant president, vice president, or assistant treasurer/manager), and the chief financial officer (comptroller).

(6) "Volunteer official" means an official of a credit union who does not receive compensation from the credit union solely for his or her service as an official.

History

Statutory Authority: RCW 31.12.535 and 43.320.040. WSR 97-23-071, § 208-444-040, filed 11/19/97, effective 3/19/98 by letter filed as WSR 98-10-072.

Wash. Admin. Code § 208-444-050 Effective date.

WAC 208-444-020, 208-444-030, and 208-444-040 will take effect on the date that these rules are determined by the Board of the National Credit Union Administration (NCUA) to be substantially equivalent to NCUA rules.

History

Statutory Authority: RCW 31.12.535 and 43.320.040. WSR 97-23-071, § 208-444-050, filed 11/19/97, effective 3/19/98 by letter filed as WSR 98-10-072.

Chapter 208-460 Member business loans.

Wash. Admin. Code § 208-460-010 What is a member business loan?

(1) Definition of MBL. "Member business loan" or "MBL" includes any loan, line of credit, letter of credit, or any unfunded commitment to make a loan, where the borrower intends to use the proceeds for any of the following purposes:

(a) Commercial;

(b) Corporate;

(d) Business venture; or

(e) Agricultural.

(2) Exemptions. The following are not member business loans:

(a) A business purpose loan fully secured by a lien on a one to four family dwelling that is the member's primary residence;

(b) A business purpose loan fully secured by shares or deposits in the credit union making the extension of credit or in other credit unions, or by deposits in other financial institutions;

(c) One or more business purpose loans to a member or any associated member which in the aggregate do not exceed the amount of 49,999 dollars. The entire amount of such a loan that exceeds this figure, or that causes the aggregate to exceed this figure, is a MBL;

(d) A business purpose loan where a federal or state agency (or any political subdivision of a state) fully insures repayment, or fully guarantees repayment, or provides an advance commitment to purchase in full; or

(e) A loan granted by a corporate credit union to another credit union.

(3) Other definitions. Certain other terms used in this chapter are defined in WAC 208-460-170.

History

Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-10-084, § 208-460-010, filed 5/1/01, effective 6/1/01.

Wash. Admin. Code § 208-460-020 What member business loans are prohibited?

(1) Who is ineligible to receive a member business loan? You may not grant a member business loan to the following:

(a) Your chief executive officer (typically this individual holds the title of president or treasurer/manager);

(b) Any assistant chief executive officers (e.g., assistant president, vice president, or assistant treasurer/manager);

(d) Any associated member or immediate family member of anyone listed in (a) through (c) of this subsection.

(2) Equity agreements/joint ventures. You may not grant a member business loan if any additional income received by the credit union or senior management employees is tied to the profit or sale of the business or commercial endeavor for which the loan is made.

(3) Loans to directors. A credit union may not grant a member business loan to a director unless the board of directors approves granting the loan and the director is recused from the decision-making process.

History

Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-10-084, § 208-460-020, filed 5/1/01, effective 6/1/01.

Wash. Admin. Code § 208-460-030 What are the requirements for MBL development and construction lending?

Unless the director grants a waiver, a credit union that makes MBL development or construction loans is subject to the following requirements:

(1) The aggregate of all such loans may not exceed fifteen percent of net worth. To determine the aggregate, you may exclude any portion of a loan that is:

(a) Secured by shares or deposits in the credit union making the extension of credit or in other credit unions, and by deposits in other financial institutions; or

(b) Insured or guaranteed, or subject to an advance commitment to purchase, by any federal or state agency (or any political subdivision of a state);

(2) The borrower on such loans must have a minimum of:

(a) Thirty percent equity interest in the project being financed if the loan is for land development; and

(b) Twenty-five percent equity interest in the project being financed if the loan is for construction or for a combination of development and construction;

(3) The funds for such loans may be released only after on-site inspections, documented in writing, by qualified personnel and according to a preapproved draw schedule and any other conditions as set forth in the loan documentation; and

(4) The credit union may not make such loans unless it utilizes the services of an individual with at least five years direct experience in development and construction lending.

History

Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-10-084, § 208-460-030, filed 5/1/01, effective 6/1/01.

Wash. Admin. Code § 208-460-040 How do you implement a member business loan program?

The board of directors must adopt specific member business loan policies and review them at least annually. The credit union must utilize the services of an individual with at least two years direct experience with the type of lending the credit union will be engaging in, except as required by WAC 208-460-030(4).

Credit unions do not have to hire staff to meet the requirements of this section; however, credit unions must ensure that the expertise is available. A credit union can meet the experience requirement through various approaches. For example, a credit union can use the services of a credit union service organization, an employee of another credit union, an independent contractor, or other third parties. However, the actual decision to grant a loan must reside with the credit union.

History

Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-10-084, § 208-460-040, filed 5/1/01, effective 6/1/01.

Wash. Admin. Code § 208-460-050 What must your member business loan policy address?

At a minimum, your member business loan policy must address the following:

(1) The types of MBL you will make;

(2) Your trade area;

(3) The maximum amount of your assets, in relation to net worth, that you will invest in MBL;

(4) The maximum amount of your assets, in relation to net worth, that you will invest in a given type of MBL;

(5) The maximum amount of your assets, in relation to net worth, that you will loan to a member or associated members, subject to WAC 208-460-070;

(6) The qualifications and experience of personnel (minimum of two years) involved in making and administering the loans;

(7) A requirement for analysis and documentation of the ability of the borrower to repay the loan;

(8) Receipt and periodic updating of financial statements and other documentation, including tax returns;

(9) Documentation sufficient to support each request to extend credit, or increase an existing loan or line of credit, except where the board of directors finds that the required documentation is not generally available for a particular type of loan and states the reasons for those findings in the credit union's written policy. At a minimum, the documentation must include the following:

(a) Balance sheet;

(b) Cash flow analysis;

(d) Tax data;

(e) Analysis of leveraging; and

(f) Comparison with industry average or similar analysis;

(10) Collateral requirements, including:

(a) Loan-to-value ratios;

(b) Determination of value;

(d) Steps to secure various types of collateral; and

(e) How often the credit union will reevaluate the value and marketability of collateral;

(11) The interest rates and maturities of the loans;

(12) General MBL procedures which include:

(a) Loan monitoring;

(b) Servicing and follow-up; and

(13) Identification of those individuals prohibited from receiving member business loans; and

(14) Guidelines for purchase and sale of member business loans and loan participations, if the credit union engages in that activity.

The division recognizes that all of the provisions of the policy may not apply to every MBL.

History

Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-10-084, § 208-460-050, filed 5/1/01, effective 6/1/01.

Wash. Admin. Code § 208-460-060 What are the collateral and security requirements?

Unless the director grants a waiver:

(1) All member business loans must be secured by collateral in accordance with this section, except the following:

(a) A credit card line of credit granted to nonnatural persons that is limited to routine purposes normally made available under such lines of credit; and

(b) A loan made by a credit union where the loan and the credit union meet each of the following criteria:

(i) The amount of the loan does not exceed one hundred thousand dollars;

(ii) The aggregate of unsecured MBL under (b) of this subsection does not exceed ten percent of the credit union's net worth;

(iii) The credit union has a net worth of at least seven percent; and

(iv) The credit union submits reports to the division of credit unions with its NCUA 5300 reports, providing figures and other detail as may be requested by the director to demonstrate compliance with (b) of this subsection;

(2) In the case of a member business loan secured by collateral on which the credit union will have a first lien, you may grant the loan with a LTV ratio in excess of eighty percent only where the value in excess of eighty percent is:

(a) Covered through acquisition of private mortgage or equivalent type insurance provided by an insurer acceptable to the credit union; or

(b) Insured or guaranteed, or subject to advance commitment to purchase, by any federal or state agency (or any political subdivision of a state).

In no case may the LTV ratio exceed ninety-five percent;

(3) In the case of a member business loan secured by collateral on which the credit union will have a second or lesser priority lien, you may not grant the loan with a LTV ratio in excess of eighty percent; and

(4) In the case of member business loans secured by the same collateral:

(a) On which the credit union will have a first lien as well as other lesser priority liens, you may grant the loans with a LTV ratio in excess of eighty percent only if subsection (2)(a) or (b) of this section is satisfied. In no case may the LTV ratio exceed ninety-five percent; and

(b) On which the credit union will have lesser priority liens but no first lien, you may not grant the loans with a LTV ratio in excess of eighty percent.

History

Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-10-084, § 208-460-060, filed 5/1/01, effective 6/1/01.

Wash. Admin. Code § 208-460-070 How much may a member or associated members borrow?

Unless the director grants a waiver for a higher amount, the aggregate amount of member business loans to a member or associated members may not exceed the greater of:

(1) Fifteen percent of the credit union's net worth; or

(2) One hundred thousand dollars.

History

Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-10-084, § 208-460-070, filed 5/1/01, effective 6/1/01.

Wash. Admin. Code § 208-460-080 How do you calculate the aggregate fifteen percent limit?

(1) Step 1. Calculate the numerator by adding together the amount of the member business loans to the member and associated members (if any). From this amount, subtract any portion:

(a) Secured by shares or deposits in the credit union making the extension of credit or in other credit unions, or by deposits in other financial institutions; or

(b) Insured or guaranteed, or subject to an advance commitment to purchase, by any federal or state agency (or any political subdivision of a state).

(2) Step 2. Divide the numerator by net worth.

History

Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-10-084, § 208-460-080, filed 5/1/01, effective 6/1/01.

Wash. Admin. Code § 208-460-090 What waivers are available?

You may seek a waiver for a type of member business loan in the following areas:

(1) Development and construction loan requirements under WAC 208-460-030;

(2) Loan-to-value ratios under WAC 208-460-060;

(3) Maximum loan amount to a member or associated members under WAC 208-460-070; and

(4) Appraisal requirements under Section 722.3 of NCUA rules.

History

Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-10-084, § 208-460-090, filed 5/1/01, effective 6/1/01.

Wash. Admin. Code § 208-460-100 How do you obtain a waiver?

(1) To obtain a waiver under WAC 208-460-090, a credit union must submit its request to the director. The waiver request must contain the following:

(a) A copy of your member business loan policy;

(b) The higher limit sought (if applicable);

(d) Documentation supporting your ability to manage this activity; and

(e) An analysis of the credit union's prior experience making member business loans, including, as a minimum:

(i) The history of loan losses and loan delinquency;

(ii) Volume and cyclical or seasonal patterns;

(iii) Diversification;

(iv) Concentrations of credit to a member and associated members in excess of fifteen percent of net worth;

(v) Underwriting standards and practices;

(vi) Types of loans grouped by purpose and collateral; and

(vii) The qualifications of personnel responsible for underwriting and administering member business loans.

(2) The director will:

(a) Review the information you provided in your request;

(b) Evaluate the level of risk to your credit union;

(d) Notify you whenever your waiver request is deemed complete; and

(e) Notify you of the action taken within forty-five calendar days of receiving a complete request.

(3) In connection with a waiver request under WAC 208-460-090 (1) through (3):

(a) The director will provide a copy of the waiver request to Region VI of the NCUA and will consult and seek to work cooperatively with Region VI in making his or her decision on the request;

(b) The waiver is not effective until the director approves it;

(c) If you do not receive notification within forty-five calendar days after the date the complete request was received by the director, the waiver request is deemed approved by the director; and

(d) The director will promptly notify Region VI of the NCUA of his or her decision on the request.

(4) In connection with a waiver request under WAC 208-460-090(4):

(a) If the director approves the request, the director will promptly forward the request to Region VI of the NCUA for decision under NCUA rules at 12 C.F.R. 723.12;

(b) The waiver is not effective until the regional director of the NCUA approves it in accordance with NCUA rules at 12 C.F.R. 723.12; and

History

Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-10-084, § 208-460-100, filed 5/1/01, effective 6/1/01.

Wash. Admin. Code § 208-460-110 How do I classify member business loans so as to reserve for potential losses?

Nondelinquent member business loans may be classified based on factors such as the adequacy of analysis and supporting documentation. You must classify potential loss loans as either substandard, doubtful, or loss. The criteria for determining the classification of loans are:

(1) Substandard. A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. The loan must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. It is characterized by the distinct possibility that the credit union will sustain some loss if the deficiency is not corrected. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual loans classified substandard;

(2) Doubtful. A loan classified doubtful has all the weaknesses inherent in one classified substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors which may work to the advantage and strengthening of the loan, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include: Proposed merger, acquisition, or liquidation actions; capital injection; perfecting liens on collateral; and refinancing plans; and

(3) Loss. A loan classified loss is considered uncollectible and of such little value that its continuance as a loan is not warranted. This classification does not necessarily mean that the loan has absolutely no recovery or salvage value, but rather, it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may occur in the future.

History

Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-10-084, § 208-460-110, filed 5/1/01, effective 6/1/01.

Wash. Admin. Code § 208-460-120 How much must I reserve for potential losses?

The following schedule sets the minimum amount you must reserve for classified member business loans:

| Classification | Amount Required | | --- | --- | | Substandard | 10% of outstanding balance unless other factors (for example, history of such loans at the credit union) indicate a greater or lesser amount is appropriate. | | Doubtful | 50% of the outstanding balance. | | Loss | 100% of the outstanding balance. |

History

Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-10-084, § 208-460-120, filed 5/1/01, effective 6/1/01.

Wash. Admin. Code § 208-460-130 What is the aggregate member business loan limit?

The aggregate limit on the amount of a credit union's member business loans is the lesser of:

(1) One and three quarters times the credit union's net worth; or

(2) Twelve and one quarter percent of the credit union's total assets.

History

Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-10-084, § 208-460-130, filed 5/1/01, effective 6/1/01.

Wash. Admin. Code § 208-460-140 Are there any exceptions to the aggregate MBL limit?

(1) Credit unions that meet any one of the following four criteria qualify for an exception from the aggregate member business loan limit in WAC 208-460-130:

(a) Credit unions that have a low-income designation;

(b) Credit unions that participate in the Community Development Financial Institutions program;

(c) Credit unions that are chartered for the purpose of making member business loans, as supported by documentary evidence, such as the credit union's charter, bylaws, business plan, field of membership, board minutes and loan portfolio; and

(d) Credit unions that have a recent history of primarily making member business loans, established by the fact that the outstanding balance of member business loans comprises:

(i) At least twenty-five percent of the outstanding balance of the credit union's loans; or

(ii) The largest portion of the outstanding balance of the credit union's loans.

Such facts must be evidenced in an NCUA call report or any equivalent documentation, such as financial statements, for a period within two years before the date of application. For example, a credit union qualifies for the exception under (d)(ii) of this subsection if, based on the outstanding balance of a credit union's loans, the credit union's loan portfolio is comprised of twenty-three percent member business loans, twenty-two percent first mortgage loans, twenty-two percent new automobile loans, twenty percent credit card loans, and thirteen percent total other real estate loans.

(2) Unless the director gives his or her prior consent, a credit union granted an exception from the aggregate MBL limit may not make MBL in excess of the greater of:

(a) Twelve and one quarter percent of the credit union's total assets; or

(b) Three times the credit union's net worth.

History

Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-10-084, § 208-460-140, filed 5/1/01, effective 6/1/01.

Wash. Admin. Code § 208-460-150 How do I obtain an exception?

(1) The exception under WAC 208-460-140 (1)(a) and (b) is effective upon written notice to the director of such designation or participation.

(2) To obtain an exception under WAC 208-460-140 (1)(c) or (d), a credit union must submit its request to the director. An exception is not effective until it is approved by the director. The exception request must include documentation demonstrating that the credit union meets the criteria for one of the exceptions. The exception does not expire unless revoked for safety and soundness reasons by the director.

(3) The director will promptly notify Region VI of the NCUA of his or her decision on the request.

History

Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-10-084, § 208-460-150, filed 5/1/01, effective 6/1/01.

Wash. Admin. Code § 208-460-160 What are the recordkeeping requirements?

You must separately identify member business loans in your records and in the aggregate on your financial reports.

History

Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-10-084, § 208-460-160, filed 5/1/01, effective 6/1/01.

Wash. Admin. Code § 208-460-170 Definitions.

For purposes of this chapter, the following definitions apply:

(1) The "amount" of a MBL includes:

(a) Any unfunded commitment to make the loan;

(b) The outstanding balance of the loan; and

(2) A person is "associated" with another if they have a shared ownership, investment, or other pecuniary interest in a business or commercial endeavor.

(3) A "business purpose" loan means a loan where the borrower intends to use the proceeds for any of the purposes listed in WAC 208-460-010(1).

(4) "Development or construction loan" is a financing arrangement for acquiring real property or rights to real property, including land or structures, with the intent to develop or improve it for:

(a) Residential housing for sale;

(b) Income property;

(d) Industrial use; or

(e) Similar uses.

(3) "Immediate family member" is a spouse or other family member living in the same household.

(4) "Loan-to-value ratio" or "LTV ratio" is derived by dividing:

(a) The amount of all member business loans by the credit union and loans by other lenders secured by an item of collateral, by

(b) The market value of the item of collateral.

(5) "Member business loan" or "MBL" is defined in WAC 208-460-010.

(6) "NCUA" means the National Credit Union Administration.

(7) "Net worth" is retained earnings as defined under Generally Accepted Accounting Principles. Retained earnings normally includes undivided earnings, regular reserves and any other appropriations designated by management or regulatory authorities. Net worth does not include the allowance for loan and lease losses.

History

Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-10-084, § 208-460-170, filed 5/1/01, effective 6/1/01.

Chapter 208-472 Credit union field of membership.

Wash. Admin. Code § 208-472-010 Authority.

A credit union may admit to membership those persons qualified for membership who are within its field of membership as stated in its bylaws. A credit union may amend its field of membership bylaws to add one or more occupational groups, associational groups and communities to its field of membership, as approved by the director pursuant to this chapter. The FOM groups may be located inside or outside the state.

The director may waive any provision of this chapter as the director deems appropriate to facilitate credit union service to low and moderate income persons.

In addition to the field of membership powers or authorities reflected in this chapter, a credit union has the field of membership powers and authorities granted pursuant to RCW 31.12.404.

History

Statutory Authority: RCW 31.12.382, 31.12.516 (2), (4), 43.320.040. WSR 02-04-094, § 208-472-010, filed 2/5/02, effective 3/8/02
WSR 96-06-011, recodified as § 208-472-010, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.045, [31.12].115 and [31.12].535. WSR 95-09-049, § 419-72-010, filed 4/17/95, effective 5/18/95. Statutory Authority: RCW 31.12.045(2), 31.12.115, 31.12.516 and 31.12.535. WSR 89-24-085 (Order 89-3), § 419-72-010, filed 12/6/89, effective 1/6/90.

Wash. Admin. Code § 208-472-015 Definitions.

Unless the context clearly requires otherwise, as used in this chapter:

(1) "Affiliate" of an enterprise or organization means a person that controls, is controlled by, or is under common control with, the enterprise or organization. "Control" means twenty-five percent or greater stock ownership.

(2) "Associational group" is a group with a common bond of association related to membership in an organization, or a portion of such a group. The organization must satisfy each of the following criteria:

(a) The organization's primary purpose must be other than providing eligibility for credit union services;

(b) The organization's membership must be primarily composed of natural persons; and

In regard to an associational group within a credit union's FOM bylaws, the credit union may admit to membership:

(i) Members of the organization;

(ii) Directors, employees, volunteers and retirees of the organization or its subsidiaries or affiliates;

(iii) Natural persons under contract to work for the organization or its subsidiaries or affiliates;

(iv) Family members (as determined by the credit union) of any of the above-described natural persons;

(v) The spouse of any of the above-described natural persons if the person qualified for membership at the time of his or her death;

(vi) The organization and its subsidiaries and affiliates;

(vii) Organizations and enterprises more than half of whose owners, members or employees are eligible to be members of the credit union; and

(viii) Other persons approved by the director.

Students of a school, college or university are deemed to be members of an organization that constitutes an associational group. In regard to such an associational group within a credit union's FOM bylaws, the credit union may admit to membership the students of the school, college or university as well as the family members (as determined by the credit union) of the students.

(3) "CAMEL" means the CAMEL rating system used by the division, or a successor rating system used by the division.

(4) "Community" is a well-defined geographic area that is recognized by those who live or work there as a neighborhood, community, or rural district, or a portion of such an area.

In regard to a community within a credit union's FOM bylaws, the credit union may admit to membership:

(a) Natural persons who live, work, worship or go to school in the community;

(b) Enterprises and organizations that have offices within the community, and natural persons under contract to work for the enterprises or organizations;

(d) Family members (as determined by the credit union) of any of the above-described natural persons;

(e) The spouse of any of the above-described natural persons if the person qualified for membership at the time of his or her death;

(f) Enterprises and organizations more than half of whose owners, members or employees are eligible to be members of the credit union; and

(g) Other persons approved by the director.

(5) "Credit union" means a credit union organized (or chartered) and operating under chapter 31.12 RCW, and an out-of-state or foreign credit union operating in this state in accordance with RCW 31.12.471.

(6) "Director" means the director of financial institutions.

(7) "Division" means the division of credit unions of the Washington state department of financial institutions.

(8) "FOM" means field of membership.

(9) "FOM groups" includes occupational groups, associational groups and communities.

(10) "Occupational group" is a group with a common bond of occupation related to employment by, or work for, an enterprise, or a portion of such a group. The group must be primarily composed of natural persons.

In regard to an occupational group within a credit union's FOM bylaws, the credit union may admit to membership:

(a) Employees of the enterprise;

(b) Directors, employees, volunteers and retirees of the enterprise or its subsidiaries or affiliates;

(d) Family members (as determined by the credit union) of any of the above-described natural persons;

(e) The spouse of any of the above-described natural persons if the person qualified for membership at the time of his or her death;

(f) The enterprise and its subsidiaries and affiliates;

(g) Enterprises and organizations more than half of whose owners, members or employees are eligible to be members of the credit union; and

(h) Other persons approved by the director.

(11) "Primarily" or "primary" means more than one-half.

(12) "Qualified associational group" means an associational group located wholly or partly in the state. However, if the members of the organization in Washington exceed 6,299, the group will not be considered qualified unless the group is within the FOM bylaws of another credit union or federal credit union.

An associational group that does not satisfy this definition is considered to be a nonqualified associational group.

(13) "Qualified community" means a community in the state that constitutes a:

(a) School district;

(b) City; or

A community that does not satisfy this definition is considered to be a nonqualified community.

(14) "Qualified occupational group" means an occupational group located wholly or partly in the state. However, if the members of the enterprise in Washington exceed 6,299, the group will not be considered qualified unless it is within the FOM bylaws of another credit union or federal credit union.

An occupational group that does not satisfy this definition is considered to be a nonqualified occupational group.

(15) "SOG" means a small occupational group added pursuant to a SOG enabling amendment approved by the director prior to . . . . . . . . (the effective date of the 2002 revisions to this chapter).

History

Statutory Authority: RCW 31.12.382, 31.12.516 (2), (4), 43.320.040. WSR 02-04-094, § 208-472-015, filed 2/5/02, effective 3/8/02. Statutory Authority: RCW 31.12.045(1) and [31.12].535. WSR 96-17-070, § 208-472-015, filed 8/20/96, effective 9/20/96. WSR 96-06-011, recodified as § 208-472-015, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.045, [31.12].115 and [31.12].535. WSR 95-09-049, § 419-72-015, filed 4/17/95, effective 5/18/95. Statutory Authority: RCW 31.12.045(2), 31.12.115, 31.12.516 and 31.12.535. WSR 89-24-085 (Order 89-3), § 419-72-015, filed 12/6/89, effective 1/6/90.

Wash. Admin. Code § 208-472-020 FOM bylaws; addition of FOM groups.

(1) General. Each credit union must keep its FOM bylaws substantially in the form of the model FOM bylaws prescribed by the division. Credit unions that have not converted to the model FOM bylaws prior to . . . . . . . . (the effective date of the 2002 revisions to this chapter) must do so by December 31, 2002. Each credit union must maintain accurate, complete and up-to-date FOM bylaws.

(2) CAMEL 1s and 2s.

A credit union rated a composite CAMEL 1 or 2 by the division:

(a) May add qualified occupational groups, qualified associational groups and qualified communities to its field of membership bylaws if the credit union satisfies each of the following:

(i) If the FOM group has more than 500 employees, members or residents, as applicable, in Washington, the credit union has, before its board of directors approves the amendment, mailed or otherwise provided notice of the addition to each credit union and federal credit union headquartered in the county(ies) in Washington in which the FOM group is primarily located; and

(ii) The credit union's board has approved the amendment, which names the underlying enterprise, organization or community, as applicable, and indicates the date that the board approved the amendment.

Additions made in accordance with this subsection (2)(a) are deemed approved by the director; and

(b) May not add nonqualified occupational and associational groups and nonqualified communities to its field of membership bylaws without the prior approval of its board of directors and the prior written approval of the director under WAC 208-472-025.

(3) CAMEL 3s, 4s and 5s. A credit union rated a composite CAMEL 3, 4 or 5 by the division may not add the following FOM groups to its field of membership bylaws without the prior approval of its board of directors and the prior written approval of the director under WAC 208-472-025:

(a) Occupational groups, except for SOGs;

(b) Associational groups; and

In general, the director will not approve:

(i) The addition of a community to a credit union's bylaws if the credit union is rated a composite CAMEL 3 by the division; or

(ii) The addition of an occupational or associational group or a community to a credit union's bylaws if the credit union is rated a composite CAMEL 4 or 5 by the division.

(4) Other changes. A credit union may, upon approval of its board of directors, amend its FOM bylaws to:

(a) Delete exclusionary clauses;

(b) Delete FOM groups that no longer exist;

(d) Revise its SOG enabling amendment to delete the SOG requirements other than the limitation on the number of employees, which is 500 per SOG;

(e) Aggregate communities into a larger community. For example, if a credit union has added each of the school districts within a county as communities, it may amend its FOM bylaws to designate the county as a community rather than listing each of the school districts as a community; and

(f) Make nonsubstantive changes.

The board may delegate the authority to delete FOM groups that no longer exist.

In amending its FOM bylaws under this subsection (4), other than deletions, the credit union must indicate in its bylaws the date that the board approved the amendment.

(5) A person that is a member of a credit union may continue to be a member even though the person is no longer within the field of membership bylaws of the credit union, subject to the credit union's right to terminate the person's membership. The family members (as determined by the credit union) of a credit union member continue to be eligible to join the credit union, even though the credit union member is no longer within the FOM bylaws of the credit union.

History

Statutory Authority: RCW 31.12.382, 31.12.516 (2), (4), 43.320.040. WSR 02-04-094, § 208-472-020, filed 2/5/02, effective 3/8/02. Statutory Authority: RCW 42.320.040 [43.320.040] and 31.12.535. WSR 96-17-071, § 208-472-020, filed 8/20/96, effective 9/20/96. WSR 96-06-011, recodified as § 208-472-020, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.045, [31.12].115 and [31.12].535. WSR 95-09-049, § 419-72-020, filed 4/17/95, effective 5/18/95. Statutory Authority: RCW 31.12.045(2), 31.12.115, 31.12.516 and 31.12.535. WSR 89-24-085 (Order 89-3), § 419-72-020, filed 12/6/89, effective 1/6/90.

Wash. Admin. Code § 208-472-025 Application for addition of FOM groups—Approval of director.

(1) In order to request the approval of the director to add an FOM group to its bylaws under WAC 208-472-020 (2)(b) or (3), a credit union must submit a written application in duplicate to the director. The application must include the following items, and any other information and materials requested by the director:

(a) The name of the FOM group that the applicant desires to add to its bylaws;

(b) A copy of the resolution of its board of directors approving the bylaws amendment, certified by the board chairperson or secretary;

(c) A detailed description of the FOM group, including, but not limited to, location and number of employees, members or residents, as applicable, with supporting documentation;

(d) An explanation how the FOM group satisfies the definition of such a group in WAC 208-472-015;

(e) If the applicant is applying to add an associational group, an explanation of the qualifications for membership in the organization, and a copy of the organization's organizational documents;

(f) An explanation how the addition of the FOM group will affect the financial condition of the applicant. In addition, if the applicant is applying for a community, three year pro forma income statements and balance sheets and key ratios (including, but not limited to, return on average assets, net worth, asset growth and share growth);

(g) If the applicant is applying to add a nonqualified occupational or associational group in excess of 6,299 employees or members, as applicable, a reasoned justification why the group does not have sufficient size or resources, including individual and sponsor support, and financial, physical and human resources, to support a viable credit union of its own; and

(h) If the group has more then 500 employees, members, or residents, as applicable, a statement that the applicant has mailed or otherwise provided notice of the application to each credit union and federal credit union headquartered in the county(ies) in Washington in which the FOM group is primarily located.

The director may waive any of the items in this subsection as the director deems appropriate, such as in the case of the addition of FOM groups located wholly out-of-state.

(2) An application filed pursuant to subsection (1) of this section is deemed complete when the director has received all of the information required by subsection (1) of this section. If an incomplete application is received, the director will give written notice to the applicant no more than thirty days from the date the original application was received that additional information is necessary. The applicant will be allowed thirty days after receipt of the notice to provide the requested information. If the applicant fails to do so, the director will return the application and it will be deemed withdrawn.

(3) The director will give the applicant written notice of approval or denial within thirty days after the application is deemed complete. The director's determination whether to approve an application will be based on consideration of the safety and soundness of the applicant and the applicant's compliance with this chapter.

(4) To add a separate FOM group located wholly out-of-state to its field of membership bylaws, a credit union should first contact the director to determine how to proceed with the application to the director and whether the credit union is required to file an application or notice with the credit union supervisory authority in the other state.

History

Statutory Authority: RCW 31.12.382, 31.12.516 (2), (4), 43.320.040. WSR 02-04-094, § 208-472-025, filed 2/5/02, effective 3/8/02. Statutory Authority: RCW 42.320.040 [43.320.040] and 31.12.535. WSR 96-17-071, § 208-472-025, filed 8/20/96, effective 9/20/96. WSR 96-06-011, recodified as § 208-472-025, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.045, [31.12].115 and [31.12].535. WSR 95-09-049, § 419-72-025, filed 4/17/95, effective 5/18/95. Statutory Authority: RCW 31.12.045(2), 31.12.115, 31.12.516 and 31.12.535. WSR 89-24-085 (Order 89-3), § 419-72-025, filed 12/6/89, effective 1/6/90.

Wash. Admin. Code § 208-472-030 Direct marketing restriction.

A credit union may not conduct direct marketing targeted primarily at the persons in an occupational or associational group unless:

(1) The group was included in the FOM bylaws of the credit union prior to . . . . . . . . (the effective date of the 2002 revisions to this chapter). An occupational or associational group is "included" in the FOM bylaws of a credit union if the underlying enterprise or organization, as applicable, is named or within an industry described in the credit union's FOM bylaws. A group that does not satisfy the prior sentence, but that is within a community in a credit union's FOM bylaws, is not considered "included" in the FOM bylaws of the credit union; or

(2) A management official of the underlying enterprise or organization has provided the credit union with a written statement, signed by the official, that the group desires service by the credit union.

History

Statutory Authority: RCW 31.12.382, 31.12.516 (2), (4), 43.320.040. WSR 02-04-094, § 208-472-030, filed 2/5/02, effective 3/8/02.

Wash. Admin. Code § 208-472-035 Application.

(1) This chapter also applies to the conversion of an out-of-state, foreign or federal credit union to a credit union chartered and operating under chapter 31.12 RCW.

(2) This chapter does not apply to mergers where the continuing credit union is organized (or chartered) and operating under chapter 31.12 RCW. The continuing credit union may amend its FOM bylaws to add the FOM groups of the merging credit union.

(3) This chapter does not restrict FOM groups added to a credit union's bylaws prior to . . . . . . . . (the effective date of the 2002 revisions to this chapter).

History

Statutory Authority: RCW 31.12.382, 31.12.516 (2), (4), 43.320.040. WSR 02-04-094, § 208-472-035, filed 2/5/02, effective 3/8/02.

Chapter 208-476 Credit union—Other real estate owned.

Wash. Admin. Code § 208-476-010 Reason for rule.

Why do credit unions need a rule on the handling of "other real estate owned" (OREO), property legally owned by the credit union as the result of foreclosure, or acquired as the result of default on a loan collateralized by real property? Although most financial institutions that do real estate lending have experienced an occasional foreclosure, the volume and asset value of foreclosed property has significantly increased recently. Due to the economic downturn that began in the fourth quarter of 2007, credit unions are now experiencing a greater number of foreclosures and acquiring portfolios of OREO. Because this type of economic effect is cyclic, it is useful for credit unions to be prepared to handle OREO property in a safe and sound manner. Some credit unions may find their number of OREO properties is becoming more difficult to manage. Some credit unions may be dealing with OREO properties for the first time.

The department of financial institutions (DFI), division of credit unions, is responsible for regulating to protect the integrity of credit unions as cooperative institutions, and to ensure that they remain viable and competitive. RCW 31.12.015. It is important to provide regulatory standards for safe and sound management of OREO. RCW 31.12.005(24).

History

Statutory Authority: RCW 31.12.404, 31.12.426, 31.12.428, 31.12.436, and 31.12.516. WSR 09-24-050, § 208-476-010, filed 11/24/09, effective 12/31/09.

Wash. Admin. Code § 208-476-020 Rule-making authority.

What is DFI's rule-making authority for these OREO rules? The division of credit unions is delegated rule-making authority by the director of DFI. The director's rule-making authority is based upon the Washington Credit Union Act (WCUA), RCW 31.12.516(2), which allows the director to adopt rules that are reasonable and necessary to carry out the purposes of the WCUA. The director has the power and broad administrative discretion to administer and interpret the provisions of the WCUA. RCW 31.12.516(4). In addition, the director has specific rule-making authority regarding secured or unsecured loans to members. RCW 31.12.426(1).

History

Statutory Authority: RCW 31.12.404, 31.12.426, 31.12.428, 31.12.436, and 31.12.516. WSR 09-24-050, § 208-476-020, filed 11/24/09, effective 12/31/09.

Wash. Admin. Code § 208-476-030 Authority of director to require reports.

What legal authority does DFI have to require special reports from credit unions, accounting for OREO? The director has the statutory authority to require a credit union to file any financial or statistical report the director may require. The director, therefore, has the authority to require special reports on OREO properties held by Washington state chartered credit unions. RCW 31.12.567.

History

Statutory Authority: RCW 31.12.404, 31.12.426, 31.12.428, 31.12.436, and 31.12.516. WSR 09-24-050, § 208-476-030, filed 11/24/09, effective 12/31/09.

Wash. Admin. Code § 208-476-040 Authority for credit unions to hold real estate.

What is the legal authority for a credit union to acquire, hold and dispose of OREO? A Washington state chartered credit union is permitted to own foreclosed and other OREO property, based on its statutory power to make secured and unsecured loans to its members. RCW 31.12.426(1). If the borrower defaults on a loan secured by real property, the credit union has the authority to obtain title to the property as a power incidental to its normal course of business.

History

Statutory Authority: RCW 31.12.404, 31.12.426, 31.12.428, 31.12.436, and 31.12.516. WSR 09-24-050, § 208-476-040, filed 11/24/09, effective 12/31/09.

Wash. Admin. Code § 208-476-050 Definitions.

For purposes of these rules, the following definitions apply:

"Appraisal" means a written report by a certified or licensed appraiser containing sufficient information to support the credit union's evaluation of OREO, taking into consideration market value, analyzing appropriate deductions or discounts, and conforming to generally accepted appraisal standards, unless principles of safe and sound credit union practices require stricter standards.

"DCU" means the division of credit unions of the Washington state department of financial institutions.

"DFI" means the Washington state department of financial institutions.

"Director" means the director of the department of financial institutions, or the director's designee, typically the assistant director of the division of credit unions. RCW 43.320.050.

"Fair value" and "fair market value" mean the cash price that might reasonably be anticipated in a current sale under all conditions requisite to a fair sale, in which the buyer and the seller are each acting prudently, knowledgeably and under no necessity to buy or sell. An appraisal at "fair value" primarily relies upon an estimate of the cash price that might be received upon exposure to the open market for a reasonable time, considering the property type and local market conditions. This is known as the "market data approach." However, an appraisal at "fair value" may, in appropriate circumstances, be based upon the "cost approach" with regard to real estate improvements, including current replacement cost.

"Foreclosure" means:

(a) The involuntary termination of all rights of a trustor/grantor or mortgagor in the property covered by a deed of trust or mortgage, by means of statutory power of sale or judicial foreclosure; or by

(b) A deed in lieu of foreclosure, the voluntary transfer (usually by quitclaim) of a trustor/grantor's or mortgagor's interest in real estate to the beneficiary of a deed of trust or mortgagee, in lieu of the beneficiary or mortgagee exercising the statutory power of sale or obtaining a judicial decree of foreclosure.

"GAAP" means "generally accepted accounting principles," as codified in the financial accounting standards board accounting standards codification (FASB ASC).

"Other real estate owned" (OREO) means real estate acquired by a credit union in whole or partial satisfaction of a debt owed to a credit union, by means of:

(a) Foreclosure or deed in lieu of foreclosure of the credit union's deed of trust or mortgage; or

(b) Acquisition by the credit union and subsequent foreclosure, or deed in lieu of foreclosure of a superior lien interest.

OREO is then held in inventory until sold.

"OREO" does not mean real property held for the credit union's own business use or expansion under RCW 31.12.438.

History

Statutory Authority: RCW 31.12.404, 31.12.426, 31.12.428, 31.12.436, and 31.12.516. WSR 09-24-050, § 208-476-050, filed 11/24/09, effective 12/31/09.

Wash. Admin. Code § 208-476-100 Limitations on holding of OREO.

How long is a credit union allowed to hold OREO? OREO must be disposed of as soon as prudent business judgment dictates, and in no case longer than five years, absent special circumstances and discretionary approval by the director. The longer real estate is held, the more speculative an investment it becomes.

When does the holding period begin? The holding period begins on the date that the credit union takes title to the OREO property.

What if the OREO is not sold within the initial holding period? An application to hold other real estate owned beyond the five year initial holding period must be filed no less than six months prior to the end of the initial five years, on a form provided by DFI. In addition to the form, the director may require justifying information, data and reports. The granting of an additional holding period of up to five years is at the regulatory discretion of the director.

History

Statutory Authority: RCW 31.12.404, 31.12.426, 31.12.428, 31.12.436, and 31.12.516. WSR 09-24-050, § 208-476-100, filed 11/24/09, effective 12/31/09.

Wash. Admin. Code § 208-476-200 Accounting for OREO.

What accounting and reporting procedures are credit unions required to follow when accounting for OREO? Accounting and reporting for OREO must comply with GAAP. GAAP applies to accounting and reporting for OREO, regardless of materiality.

Where can GAAP be accessed and researched? The definitive text of U.S. GAAP, as codified, may be found at http://asc.fasb.org or as a link from fasb.org.

Can the DCU require charge offs or special reserves for OREO property? Yes, the DCU has authority to require a credit union to charge off or set a special reserve for OREO property. RCW 31.12.545 (2)(c).

History

Statutory Authority: RCW 31.12.404, 31.12.426, 31.12.428, 31.12.436, and 31.12.516. WSR 09-24-050, § 208-476-200, filed 11/24/09, effective 12/31/09.

Wash. Admin. Code § 208-476-300 Minimal standards for safe and sound OREO management.

(1) What basic standards are used to determine the initial and ongoing regulatory acceptability of holding OREO? Holding requirements include, at a minimum, compliance with the following:

(a) Accurate accounting for OREO. Refer to the accounting section of this rule at WAC 208-476-200;

(b) Obtaining independent written appraisals, or determinations of fair value, depending upon the nature of the loan, and updated periodically, to reflect changed market conditions;

(c) Diligent marketing efforts, including a written marketing plan, updated periodically to reflect changed market conditions;

(d) Compliance with any determination, order or directive issued by the director regarding the acquisition, holding, management or disposition of OREO.

(2) Are there requirements for credit union management of OREO? Yes. A credit union that is managing OREO property must have a board-approved policy that assures that the board is regularly informed of the nature and extent of the credit union's OREO holdings. In most cases, this requirement may necessitate the creation of a special assets committee, or some combination of executive staff, to oversee OREO management and report to the board, no less than quarterly.

(3) Are credit unions required to have a written OREO policy? Yes, if a credit union has OREO, the credit union must have a written OREO policy.

(4) What should be included in a credit union OREO policy? At a minimum, the following elements should be covered in a credit union's written OREO policy:

(a) The credit union's staffing requirements for qualified management of OREO;

(b) The credit union's plan to obtain legal advice from an attorney regarding the acquisition, holding and disposition of OREO;

(d) The appraisal policy, or fair value methodology, for OREO;

(e) The credit union's authorization to expend funds to improve and protect OREO;

(f) The plan to market and dispose of OREO;

(g) Identification of the person responsible for OREO management;

(h) The OREO property management plan;

(i) OREO internal controls;

(j) Special assets committee (or other OREO reporter) responsibilities, including monitoring and reporting plan, and frequency of review by board and management;

(k) The accounting policy for the acquisition, holding and disposition phases of OREO;

(l) Independent audit policy for OREO;

(m) Responsibility for OREO file maintenance, document organization, storage, retrieval and retention.

DFI recognizes that not all of the elements of the policy will apply to every OREO property.

(5) What should a credit union do if there are questions about the management of OREO? A credit union may call the division of credit unions at 360-902-8701, if questions arise during the life cycle of OREO ownership. Information is also available on the DCU website www.dfi.wa.gov/cu/default.htm and in the DCU "OREO Owner's Manual" guidance book.

History

Statutory Authority: RCW 31.12.404, 31.12.426, 31.12.428, 31.12.436, and 31.12.516. WSR 09-24-050, § 208-476-300, filed 11/24/09, effective 12/31/09.

Chapter 208-490 "Guidance" for credit unions.

Wash. Admin. Code § 208-490-010 Purpose of these rules.

These rules are designed to help Washington state-chartered credit unions establish, reiterate, integrate and maintain their own policies and procedures regarding subprime and nontraditional mortgage lending guidance. These policies and procedures are required by chapter 108, Laws of 2008 (chapter 19.144 RCW).

History

Statutory Authority: RCW 43.320.040, 19.144.040 (2008 c 108). WSR 08-22-072, § 208-490-010, filed 11/4/08, effective 12/5/08.

Wash. Admin. Code § 208-490-020 What is the "guidance"?

In 2007, governor Christine Gregoire convened the Washington state task force for homeowner security. The task force recommended including the federal guidance in state legislation. The 2008 Washington state legislature enacted SHB 2770, requiring the department of financial institutions to apply the two guidance documents to financial institutions in Washington. Starting in 2008, credit unions, banks, mortgage brokers and other Washington state financial institutions must have "policies and procedures" that use the guidance.

History

Statutory Authority: RCW 43.320.040, 19.144.040 (2008 c 108). WSR 08-22-072, § 208-490-020, filed 11/4/08, effective 12/5/08.

Wash. Admin. Code § 208-490-030 What does the guidance require of credit unions?

The stated intent of the guidance is to help borrowers to better understand adjustable rate mortgage (ARM) risks. The guidance requires credit unions and other financial institutions to have "policies and procedures" that focus on the various risks of subprime/nontraditional mortgage lending.

The guidance requires credit unions to be aware of portfolio and risk management practices, to use appropriate underwriting standards and to abide by consumer protection principles. Credit unions also need to maintain strong internal control systems. Many of the recommendations in the guidance are good business practices, and may already be followed by credit unions.

Not all of the elements of the guidance may be applicable to all credit unions. Credit unions must determine which elements are relevant to their operations, and incorporate only those subjects into their policies and procedures.

History

Statutory Authority: RCW 43.320.040, 19.144.040 (2008 c 108). WSR 08-22-072, § 208-490-030, filed 11/4/08, effective 12/5/08.

Wash. Admin. Code § 208-490-040 Is there a list of subjects that credit unions must consider for inclusion in their policies and procedures?

Yes, the guidance requires all financial institutions, including credit unions, to focus on the following subjects and apply the relevant ones to their existing policies and procedures:

• Help borrowers understand ARM risks, including:

– Low initial payment;

– High or unlimited reset rate caps;

– Low or no documentation loans;

– Problems of frequent refinancing;

– Risk layering;

– Simultaneous second lien loans;

– Prepayment penalties;

– NCUA prohibited practices.

• Understand portfolio and risk management practices, including:

– Relationship between subprime lending and predatory lending;

– Risks of loans based on foreclosed or liquidation value;

– Problem of loan "flipping";

– Fraud detection;

– Use of qualifying standards;

– Maintenance of appropriate capital levels;

– Use of appropriate allowance for loan and lease loss levels;

– Risks of stated income loans.

• Underwriting standards.

• Workout arrangements.

• Consumer protection principles, including:

– Use of a summary disclosure form;

– Avoidance of steering borrowers to inappropriate products;

– Explanation of payment shock risk;

– Explanation of prepayment penalty;

– Explanation of balloon payment;

– Explanation of costs of low documentation or stated income loans;

– Compliance with the Truth in Lending Act and other federal requirements;

– Importance of good consumer communications in promotional materials and product descriptions;

– Explanation of borrower responsibility for taxes and insurance.

• Development and maintenance of strong internal controls, including:

– Management of deals with third-party originators;

– Management of secondary market risk;

– Effective management information and reporting;

– Use of stress testing and performance measures;

– Actual practices consistent with policies.

There may also be other subjects contained in the guidance that may be relevant to some credit unions.

History

Statutory Authority: RCW 43.320.040, 19.144.040 (2008 c 108). WSR 08-22-072, § 208-490-040, filed 11/4/08, effective 12/5/08.

Wash. Admin. Code § 208-490-050 Where can I read the guidance documents?

You can find the two federal guidance documents on the internet: http://www.fdic.gov/news/news/press/2006/pr06086b.pdf; and http://www.fdic.gov/news/news/press/2007/pr07055a.html.

You can also click on the links on the DFI website at www.dfi.wa.gov.

If you do not have internet access, you may contact the department of financial institutions, division of credit unions (DCU) for a copy of the documents.

Read these documents carefully to ensure your credit union's application of the law, and to comply with its required integration of the guidance into your policies and procedures. If your credit union needs help incorporating the guidance into your policies and procedures, contact your lawyer.

History

Statutory Authority: RCW 43.320.040, 19.144.040 (2008 c 108). WSR 08-22-072, § 208-490-050, filed 11/4/08, effective 12/5/08.

Wash. Admin. Code § 208-490-060 Why do I need to read the federal guidance documents?

The federal guidance consists of two lengthy documents that are very detailed. Because they are required by state statutory law, they apply in their entirety. DCU cannot merely summarize them or give you a checklist. You must read the documents in order to apply the relevant provisions to your particular credit union, by integrating the guidance into your own policies and procedures.

History

Statutory Authority: RCW 43.320.040, 19.144.040 (2008 c 108). WSR 08-22-072, § 208-490-060, filed 11/4/08, effective 12/5/08.

Wash. Admin. Code § 208-490-070 What will the division of credit unions do about compliance with guidance policies and procedures?

Every state-chartered credit union is different. There is no one-size-fits-all guidance available. DCU will not issue model guidance, because the process of self-analysis that a credit union needs to do, in order to develop its own guidance policies and procedures, is beneficial. The DCU does not provide technical legal advice.

Also, the guidance is complex, and will result in variations in wording or applicability of guidance policies and procedures among credit unions, depending upon the size and complexity of that particular credit union, the characteristics of its membership base, and the type of mortgage lending it does, if any.

For supervision purposes, the division of credit unions will:

(1) Verify that a credit union has integrated the guidance into its policies and procedures, as part of its risk-focused exam. DCU will not mandate the length or exact wording used in the guidance policies and procedures.

(2) Review the guidance policies and procedures with the credit union, if a consumer complaint indicates a problem or issue regarding subprime and nontraditional mortgage lending practices.

(3) Verify that a credit union is following its policies and procedures.

The DCU expects prompt compliance by credit unions with the requirements of this rule.

The law provides DCU with examination, enforcement and investigation authority to take appropriate action against credit unions that are in noncompliance with the guidance policies and procedures requirement.

History

Statutory Authority: RCW 43.320.040, 19.144.040 (2008 c 108). WSR 08-22-072, § 208-490-070, filed 11/4/08, effective 12/5/08.

Chapter 208-512 Banks.

Wash. Admin. Code § 208-512-010 Definitions.

(1) "Bank" means a commercial bank chartered and regulated under Title 30A RCW, a mutual or stock savings bank chartered and regulated under Title 32 RCW, or a savings association chartered under the provisions of Title 33 RCW.

(2) "Community Reinvestment Act" as defined in this chapter shall be identical to the corresponding definitions set forth in the Community Reinvestment Act of 1977, 12 U.S.C. 2901, et seq. and regulations promulgated under the Federal Reserve Board's Regulation BB, 12 C.F.R. Part 228; provided, these definitions are not inconsistent with the context used, or otherwise defined, in this regulation or in chapter 30A.60 RCW.

(3) "Director" means the director of the division of banks of the department of financial institutions.

(4) "Division" means the division of banks of the department of financial institutions.

(5) "Financial subsidiary," in relation to a bank, has the same meaning that it does in relation to a national bank pursuant to the Gramm-Leach-Bliley Act of 1999, 12 U.S.C. 93a, et seq. and regulations promulgated under the Office of the Comptroller of the Currency, 12 C.F.R., Section 5.39 (d)(6).

(6) "Investment grade" means the issuer of a security has an adequate capacity to meet financial commitments under the security for the projected life of the asset or exposure. An issuer has an adequate capacity to meet financial commitments if the risk of default by the obligor is low and the full and timely repayment of principal and interest is expected.

(7) "Investment security" or "investment securities" means a marketable debt obligation that is investment grade and not predominantly speculative in nature. Such obligations may be represented by an indebtedness of any person, copartnership, association, or corporation; an indebtedness of the government of the United States or any agency thereof; an indebtedness of any state, or political subdivision thereof; or an indebtedness of any publicly owned entity that is an instrumentality of a state or municipal corporation in the form of bonds, notes, and/or debentures.

(8) "Marketable" means that the security:

(a) Is registered under the Securities Act of 1933, 15 U.S.C. 77a et seq.;

(b) Is a municipal revenue bond exempt from registration under the Securities Act of 1933, 15 U.S.C. 77c (a)(2);

(c) Is offered and sold pursuant to Securities and Exchange Commission Rule 144A, 17 C.F.R., Sec. 230.144A, and investment grade; or

(d) Can be sold with reasonable promptness at a price that corresponds reasonably to its fair value.

(9) "Qualifying community investment" means any direct or indirect investment or extension of credit made by a bank in projects or programs designed to develop or redevelop areas in which persons with low-incomes or moderate-incomes reside, designed to meet the credit needs of such low-income or moderate-income areas, or that primarily benefits low-income and moderate-income residents of such areas.

(a) This term includes, but is not limited to, any of the following investments within the state of Washington:

(i) Investments in governmentally insured, guaranteed, subsidized, or otherwise sponsored programs for housing, small farms, or businesses that address the needs of the low-income and moderate-income areas.

(ii) Investments in residential mortgage loans, home improvement loans, housing rehabilitation loans, and small business or small farm loans originated in low-income and moderate-income areas, or the purchase of such loans originated in low-income and moderate-income areas.

(iii) Investments for the preservation or revitalization of urban or rural communities in low-income and moderate-income areas.

(b) The term does not include personal installment loans, or loans made for the purchase of, or secured by, an automobile.

(10) "Type I security" means:

(a) Obligations of the United States;

(b) Obligations issued, insured, or guaranteed by a department or agency of the United States, including obligations of such departments or agencies representing an interest in a loan or pool of loans;

(c) General obligations of a state or political subdivision including, but not limited to, obligations of a county, city, town, municipal corporation, or any publicly owned entity that is an instrumentality of a state or municipal corporation;

(d) Obligations of any state or political subdivision of a state if a state or political subdivision of a state having general powers of taxation has unconditionally promised to make sufficient funds available for full repayment of the obligation; and

(e) Revenue bonds issued by public improvement agencies.

(11) "Type II security" means:

(a) Obligations issued by any state or political subdivision, or any agency of a state or political subdivision for housing, university or dormitory purposes.

(b) Obligations issued by any state or a political subdivision for the purpose of financing the construction or improvement of facilities at or used by a university or a degree-granting college-level institution, or financing loans for studies at such institutions; and

(c) Obligations which finance the construction or improvement of facilities used by a hospital, provided that the hospital is a department or a division of a university, or otherwise provides a sufficient nexus with university purposes.

(12) "Type III security" means an investment security that does not qualify as a Type I, II, IV, or V security. Examples of Type III securities include corporate bonds and municipal bonds that do not satisfy the definition of a Type I security or a Type II security.

(13) "Type IV security" means:

(a) A small business-related security as defined in section 3 (a)(53)(A) of the Securities Exchange Act of 1934, 15 U.S.C. 78c (a)(53)(A), that is fully secured by interests in a pool of loans to numerous obligors.

(b) A commercial mortgage-related security that is offered or sold pursuant to Section 4(5) of the Securities Act of 1933, 15 U.S.C. 77d(5), that is investment grade, or a commercial mortgage-related security as described in Section 3 (a)(41) of the Securities Exchange Act of 1934, 15 U.S.C. 78c (a)(41), that represents ownership of a promissory note or certificate of interest or participation that is directly secured by a first lien on one or more parcels of real estate upon which one or more commercial structures are located and that is fully secured by interests in a pool of loans to numerous obligors.

(c) A residential mortgage-related security that is offered and sold pursuant to Section 4(5) of the Securities Act of 1933, 15 U.S.C. 77d(5), that is investment grade, or a residential mortgage-related security as described in Section 3 (a)(41) of the Securities Exchange Act of 1934, 15 U.S.C. 78c (a)(41) that does not otherwise qualify as a Type I security.

(14) "Type V security" means a security that is:

(a) Investment grade;

(b) Marketable;

(d) Fully secured by interests in a pool of loans to numerous obligors and in which a bank could invest directly.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-010, filed 12/1/17, effective 1/1/18.

Wash. Admin. Code § 208-512-070 Nonbankable assets.

(1) In determining whether an asset of a bank is bankable, all of the circumstances of the asset shall be weighed including, but not limited to, the following:

(a) Character of the borrower;

(b) Capacity of the borrower;

(d) Sufficiency of the collateral;

(e) Economic conditions pertaining to the type of business in which the borrower is engaged; and

(f) Conformance to general banking standards as then currently practiced in the banking industry.

(2) If an examiner determines that an asset is nonbankable based on the circumstances weighed in subsection (1)(a) through (f) of this section, the bank must charge-off the asset within thirty days of receipt of the written report of examination, or by the next call report submission date, whichever is longer.

(3) Such charge-off is deemed conclusive, unless it is contested before the expiration of the time period stated in subsection (2) of this section.

(4) A contested charge-off must be in the form of a written statement filed with the director explaining why the asset should not be charged off.

(5) After consideration of such written statement and within forty-five days, the director will notify the bank in writing of his or her decision as to the treatment of the asset. The director's written notification shall be deemed conclusive as to the disposition of the asset.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-070, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-512-070, filed 8/22/00, effective 9/22/00
Order 9, § 50-12-070, filed 5/9/72.

Wash. Admin. Code § 208-512-080 Purchase or sale of investment securities—Resale or repurchase agreement.

The purchase or sale of investment securities under an agreement to resell or repurchase the interest transferred, or a portion thereof, at the end of a stated period, does not constitute an obligation subject to the lending limits under RCW 30A.04.111 and chapter 208-512A WAC and is not considered a pledge or hypothecation of investment securities or assets of the bank to a depositor within the meaning of RCW 30A.04.140.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-080, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-512-080, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.030. WSR 83-03-020 (Order 51), § 50-12-080, filed 1/13/83
Order 28, § 50-12-080, filed 9/10/74.

Wash. Admin. Code § 208-512-090 Purchase or sale of investment securities—For customer or institution accounts allowable.

Subject to the Federal Reserve Board's Regulation R, 12 C.F.R. Part 218, a bank may purchase and sell investment securities upon the order and for the account of its customers and may deal in the underwriting and purchasing of investment securities for the bank's investment account subject to WAC 208-512-110 through 208-512-117, inclusive.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-090, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-512-090, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.030. WSR 83-01-082 (Order 49), § 50-12-090, filed 12/17/82.

Wash. Admin. Code § 208-512-100 Leasing bank premises—Limitations.

(1) A bank may lease part of the premises in which it conducts its day-to-day business to persons engaged in nonbanking business activities subject to the following limitations:

(a) No director, officer, or employee of such bank may have any direct or indirect financial interest exceeding ten percent of the lessee's business activities conducted on the premises leased, unless the transaction is made on substantially the same terms as those prevailing at the same time for comparable transactions by the bank with other persons who are not affiliated with the institution, and the transaction has been approved in advance by a majority of the board of the directors of the institution;

(b) No bank may receive commissions or other revenues from the lessee other than periodic rental payments received under terms that are usual and customary in leasing space used for similar commercial purposes, as determined by the director;

(c) No lessee may have access to secure areas of the bank's premises and a lessee may not conduct business activities on the secure areas of the bank's premises other than during regular banking hours;

(d) No bank may exercise managerial control over the lessee's business activities or assume, guarantee, or otherwise become obligated for the lessee's debts or legal obligations;

(e) No bank may advertise a lessee's business activities conducted on such bank's premises as a service provided by the bank, or otherwise represent that the lessee's business activities are not independently owned and operated;

(f) No bank may use tying arrangements involving the sale of a lessee's goods or services offered on such bank's premises or in any other way require purchase of a lessee's goods or services as a condition for granting credit or performing services.

(2) For purposes of this section, the term "bank" means any person or corporation operating under the provisions of Title 30A, 32, or 33 RCW directly or indirectly affiliated with the lessor.

History

Statutory Authority: WAC is RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-100, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-512-100, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.12.060. WSR 85-19-052 (Order 62), § 50-12-100, filed 9/13/85.

Wash. Admin. Code § 208-512-110 Investment securities—Permissible investments.

(1) Permissible investments include the following investment security types, subject to specific capital limitations:

(a) Type I security, which a bank may deal in, purchase, and sell for its own account without any capital and surplus limitation.

(b) Type II security, which a bank may deal in, purchase and sell for its own account subject to a twenty percent of capital and surplus limitation, in addition to any limitation set forth in WAC 208-512-115(1).

(c) Type III security which a bank may purchase and sell for its own account with a twenty percent of capital and surplus limitation, in addition to any limitation set forth in WAC 208-512-115(1).

(d) Type IV security, which a bank may purchase and sell for its own account without any capital and surplus limitation.

(e) Type V security, which a bank may purchase and sell for its own account with a twenty-five percent of capital and surplus limitation.

(2) Any investment security held by a bank, regardless of investment security type, must be considered investment grade.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-110, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 01-06-024, § 208-512-110, filed 2/27/01, effective 3/30/01
WSR 00-17-141, recodified as § 208-512-110, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.08.140. WSR 87-20-036 (Order 70), § 50-12-110, filed 9/30/87. Statutory Authority: RCW 30.12.060. WSR 85-19-052 (Order 62), § 50-12-110, filed 9/13/85.

Wash. Admin. Code § 208-512-115 Investment securities—Proper management.

(1) If a bank holds at any time Type II or III securities that are not considered investment grade and represent an aggregate par value exceeding five percent of the bank's capital and surplus, the investment securities must be charged down to market value, or a specific reserve must be established within ninety days.

(2) Each bank shall maintain in its files credit information adequate to demonstrate that it has exercised prudence in carrying out the securities-related transactions involving the underwriting, the dealing in, and the purchase and sale of investment securities. This information shall be retained:

(a) When investment securities are purchased for the bank's own portfolio, as long as the investment security remains in the portfolio;

(b) When investment securities are underwritten by the bank, for the maturity or the life of the investment security; and

(c) With regard to dealer activities, for periods set forth in the relevant rules of the municipal securities rule-making board.

(3) When a bank purchases an investment security convertible into stock, or with stock purchase warrants attached, entries must be made by the bank at the time of purchase to write down the cost of such investment security to an amount that represents the investment value of the investment security independent of the conversion feature or attached stock purchase warrants. Purchase of investment securities convertible into stock at the option of the issuer is prohibited.

(4) When an investment security is purchased at a price exceeding par or face value, the bank shall:

(a) Charge off the entire premium at the time of purchase; or

(b) Provide for a program to amortize the premium paid or that portion of premium remaining after the write-down subject to subsection (1) of this section so that such premium or portion thereof shall be entirely extinguished at or before the maturity of the investment security.

(5) Each bank shall take measures to ensure the cumulative investment holdings do not exceed the limitations for a specific investment set forth in Titles 30A, 32, and 33 RCW, as applicable.

(6) The board of directors, a committee thereof, or a duly appointed committee of senior level management shall review at least quarterly the bank's investment portfolio to ensure compliance with the provisions contained in WAC 208-512-110 through 208-512-117, inclusive.

(7) The restrictions and limitations set forth in this section do not apply to securities acquired through foreclosure on collateral, or acquired in good faith by way of compromise of a doubtful claim, or to avoid a loss in connection with a debt previously contracted.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-115, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 01-06-024, § 208-512-115, filed 2/27/01, effective 3/30/01
WSR 00-17-141, recodified as § 208-512-115, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.08.140. WSR 87-20-036 (Order 70), § 50-12-115, filed 9/30/87.

Wash. Admin. Code § 208-512-116 Investment securities—Investment in investment companies.

A bank may invest in shares of an investment company provided that all of the following conditions are met:

(1) The investment company must be registered with Securities and Exchange Commission under the Investment Company Act of 1940 and the Securities Act of 1933 or be a privately offered fund sponsored by an affiliated commercial bank.

(2) The shareholder has a fair and equal proportionate undivided interest in the underlying assets of the investment company calculated pursuant to the Investment Company Act of 1940.

(3) When an investment company's assets consist solely of and are expressly limited to obligations that are eligible for unlimited investment (Type I) as described in WAC 208-512-100, there is no limit on the bank's investment. However, where the investment company's portfolio contains, or is permitted to contain, investment securities subject to the bank's investment or lending limitations, investment by the bank shall be subject to a twenty percent of capital and surplus limitation.

(4) The shareholders are protected against personal liability for acts or obligations of the investment company.

(5) The bank's investment policy, as formally approved by its board of directors, specifically provides for such investments; prior approval of the board of directors is obtained for initial investments in specific investment companies and recorded in the official board minutes; and procedures, standards, and controls for managing such investments are implemented prior to acquiring these investments.

(6) If the investment company makes use of futures, forwards, options, repurchase agreements and securities lending arrangements, their use must be consistent with standards adopted for use of such instruments in the bank's portfolio.

(7) Regulatory reporting of holdings in investment companies is consistent with established standards formarketable investment securities.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-116, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 01-06-024, § 208-512-116, filed 2/27/01, effective 3/30/01
WSR 00-17-141, recodified as § 208-512-116, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.08.140(7). WSR 92-04-027, § 50-12-116, filed 1/28/92, effective 2/28/92. Statutory Authority: RCW 30.08.140. WSR 87-20-036 (Order 70), § 50-12-116, filed 9/30/87.

Wash. Admin. Code § 208-512-117 Investment securities—Investments in corporations.

Nothing in WAC 208-512-110, 208-512-115, or 208-512-116 shall limit the authority of a bank to invest in corporations or entities pursuant to chapters 32.20 and 33.24 RCW, or with the prior authorization of the director pursuant to RCW 30A.04.127.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-117, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 01-06-024, § 208-512-117, filed 2/27/01, effective 3/30/01
WSR 00-17-141, amended and recodified as § 208-512-117, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.08.140. WSR 87-24-042 (Order 71), § 50-12-117, filed 11/25/87.

Wash. Admin. Code § 208-512-130 Community Reinvestment Act—Purpose.

WAC 208-512-180 and 208-512-190, inclusive, are intended to further refine the requirements under chapter 30A.60 RCW and RCW 30A.04.212 to encourage banks to help meet the credit needs of their local communities in satisfying their continuing and affirmative obligations to help meet the credit needs of the local communities, including low-income and moderate-income neighborhoods, consistent with safe and sound operation of those banks; and, to provide for further consideration of those records in connection with certain applications.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-130, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-512-130, filed 8/22/00, effective 9/22/00. Statutory Authority: Chapter 30.60 RCW, RCW 30.04.212 and 30.04.214. WSR 87-02-010 (Order 66), § 50-12-130, filed 12/30/86.

Wash. Admin. Code § 208-512-180 Community Reinvestment Act—Limitation on single investment for commercial banks.

The total investment by a commercial bank in a single parcel of real property, and improvements thereon, shall not exceed twenty-five percent of the aggregate amount of such bank's real estate investments allowed by RCW 30A.04.212.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-180, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-512-180, filed 8/22/00, effective 9/22/00. Statutory Authority: Chapter 30.60 RCW, RCW 30.04.212 and 30.04.214. WSR 87-02-010 (Order 66), § 50-12-180, filed 12/30/86.

Wash. Admin. Code § 208-512-190 Community Reinvestment Act—Investment in qualifying community investments for commercial banks.

(1) An amount equal to ten percent of the aggregate amount invested in real estate by a commercial bank pursuant to RCW 30A.04.212 shall be placed in qualifying community investments.

(2) A qualifying community investment made by an entity that wholly owns a bank, is wholly owned by a bank, or is wholly owned by an entity that wholly owns the bank, shall be deemed to have been made by a bank to satisfy the requirements of subsection (1) of this section.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-190, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-512-190, filed 8/22/00, effective 9/22/00. Statutory Authority: Chapter 30.60 RCW, RCW 30.04.212 and 30.04.214. WSR 87-02-010 (Order 66), § 50-12-190, filed 12/30/86.

Wash. Admin. Code § 208-512-200 Community Reinvestment Act—Consideration of performance in approving and disapproving applications.

Subject to RCW 30A.60.020, the division shall consider, among other factors, the record of performance of the applicant in helping to meet the credit needs of the applicant's entire community, including low-income and moderate-income neighborhoods in determining the approval or disapproval for the following applications:

(1) New branch or satellite facility;

(2) Purchase or sale of assets;

(3) Merger;

(4) Acquisition;

(5) Authority to engage in a business activity;

(6) Conversion from a national bank to a state-chartered bank; and

(7) Such other application as the director may consider appropriate.

The performance record need not be considered for subsections (2), (3), and (4) of this section where solvency and safety soundness of the bank is threatened. Assessment of an institution's Community Reinvestment Act performance may be a basis for denying an application.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-200, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-512-200, filed 8/22/00, effective 9/22/00. Statutory Authority: Chapter 30.60 RCW, RCW 30.04.212 and 30.04.214. WSR 87-02-010 (Order 66), § 50-12-200, filed 12/30/86.

Wash. Admin. Code § 208-512-320 Insurance-related activities—Purpose.

WAC 208-512-320 through 208-512-370, inclusive, govern the authority of a bank to engage in insurance-related activities.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-320, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-512-320, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.030. WSR 90-10-074, § 50-12-320, filed 5/2/90, effective 6/2/90.

Wash. Admin. Code § 208-512-340 Insurance-related activities—General rule.

Except as provided in these rules, or as otherwise provided by law, a bank may not act as a principal in any insurance-related activity that is not permissible for a national bank, unless consistent with 12 U.S.C. Sec. 1831a.

(1) The Federal Deposit Insurance Corporation has determined that the activity would pose no significant risk to the Deposit Insurance Fund; and

(2) The bank is, and continues to be, in compliance with the capital standards required pursuant to 12 U.S.C. Sec. 1831o and as specified in 12 C.F.R. Part 325, or any applicable successor federal rule; and

(3) If the bank is a federal reserve member bank, any additional requirement or restriction involving insurance-related activities that the Board of Governors of the Federal Reserve system may prescribe.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-340, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-512-340, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.030. WSR 90-10-074, § 50-12-340, filed 5/2/90, effective 6/2/90.

Wash. Admin. Code § 208-512-350 Insurance-related activities—Exceptions.

Notwithstanding WAC 208-512-340, a bank may not engage in insurance underwriting except to the extent that activity is permissible for a national bank.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-350, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-512-350, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.030. WSR 90-10-074, § 50-12-350, filed 5/2/90, effective 6/2/90.

Wash. Admin. Code § 208-512-360 Insurance-related activities—Subsidiary.

(1) A bank may conduct insurance-related activities through a subsidiary of the bank as authorized by RCW 30A.04.125(8) subject to subsection 2 of this section.

(2) A subsidiary of a bank may not engage as a principal in any insurance-related activity that is not permissible for a subsidiary of a national bank unless, consistent with 12 U.S.C. Sec. 1831a.

(a) The Federal Deposit Insurance Corporation has determined that the activity would pose no significant risk to the Deposit Insurance Fund;

(b) The bank is, and continues to be, in compliance with the capital standards required pursuant to 12 U.S.C. Sec. 1831o and as specified in 12 C.F.R. Part 325, or any applicable successor federal rule; and

(c) If the parent bank is a Federal Reserve member bank, any additional requirement or restriction applicable to the subsidiary involving insurance-related activities that the Board of Governors of the Federal Reserve System may prescribe.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-360, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-512-360, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.030. WSR 90-10-074, § 50-12-360, filed 5/2/90, effective 6/2/90.

Wash. Admin. Code § 208-512-370 Insurance-related activities—Enforcement.

It shall be considered an unsafe and unsound practice in conducting the affairs of the bank if in the opinion of the director, the insurance-related activities of a bank or bank subsidiary are:

(1) A violation of WAC 208-512-340, 208-512-350, or 208-512-360; or

(2) A violation of any requirements under Title 48 RCW and the rules of the office of insurance commissioner involving insurance-related activities;

(3) In violation of any applicable state or federal consumer protection law; or

(4) In violation of any applicable state or federal statute prohibiting anti-competitive activities.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-370, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-512-370, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.030. WSR 90-10-074, § 50-12-370, filed 5/2/90, effective 6/2/90.

Wash. Admin. Code § 208-512-400 Subprime mortgage lending—Purpose of these rules.

These rules are designed to help Washington state-chartered banks (Title 30A RCW), savings banks (Title 32 RCW) and savings associations (Title 33 RCW) establish, reiterate, integrate and maintain their own policies and procedures regarding subprime and nontraditional mortgage lending guidance. These policies and procedures are required by a new state law, chapter 108, Laws of 2008 (chapter 19.144 RCW).

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-400, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 19.144.040 [19.144.030]. WSR 08-22-070, § 208-512-400, filed 11/4/08, effective 12/5/08.

Wash. Admin. Code § 208-512-410 Subprime mortgage lending—What is the "guidance"?

Because of concerns about problems with subprime mortgage lending, the federal government issued the Interagency Guidance on Nontraditional Mortgage Product Risks and a Statement on Subprime Mortgage Lending (collectively, "the guidance"). In 2007, the governor convened the Washington state task force for homeowner security. The task force recommended including the federal guidance in state legislation. The 2008 Washington state legislature enacted SHB 2770, requiring the department of financial institutions to apply the two guidance documents to financial institutions in Washington. Starting in 2008, credit unions, banks, savings banks, savings associations, mortgage brokers and other Washington state consumer loan companies (collectively, "financial institutions") must have policies and procedures that use the guidance.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-410, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 19.144.040 [19.144.030]. WSR 08-22-070, § 208-512-410, filed 11/4/08, effective 12/5/08.

Wash. Admin. Code § 208-512-420 Subprime mortgage lending—What does the guidance require of banks, savings banks and savings associations?

The stated intent of the guidance is to help borrowers to better understand adjustable rate mortgage (ARM) risks. The guidance requires financial institutions to have policies and procedures that focus on the various risks of subprime/nontraditional mortgage lending. The guidance requires financial institutions to be aware of portfolio and risk management practices, to use appropriate underwriting standards and to abide by consumer protection principles. Financial institutions also need to maintain strong internal control systems. Many of the recommendations in the guidance are good business practices and may already be followed by financial institutions.

Not all of the elements of the guidance may be applicable to all banks, savings banks and savings associations, or to all other financial institutions. Banks, savings banks and savings associations must determine which elements are relevant to their operations, and incorporate only those subjects into their policies and procedures.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-420, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 19.144.040 [19.144.030]. WSR 08-22-070, § 208-512-420, filed 11/4/08, effective 12/5/08.

Wash. Admin. Code § 208-512-430 Subprime mortgage lending—Is there a list of subjects that banks, savings banks and savings associations must include in their policies and procedures?

Yes, the guidance requires all financial institutions, including banks, savings banks and savings associations, to focus on the following subjects and apply the relevant ones to their existing policies and procedures:

(1) Help borrowers understand ARM risks, including:

(a) Low initial payment;

(b) High or unlimited reset rate caps;

(d) Problems of frequent refinancing;

(e) Risk layering;

(f) Simultaneous second lien loans;

(g) Prepayment penalties;

(h) FDIC or FRB prohibited practices (banks, savings banks and savings associations).

(2) Understand portfolio and risk management practices, including:

(a) Relationship between subprime lending and predatory lending;

(b) Risks of loans based on foreclosed or liquidation value;

(d) Fraud detection;

(e) Use of qualifying standards;

(f) Maintenance of appropriate capital levels;

(g) Use of appropriate allowance for loan and lease loss levels;

(h) Risks of stated income loans.

(3) Underwriting standards.

(4) Workout arrangements.

(5) Consumer protection principles, including:

(a) Use of a summary disclosure form;

(b) Avoidance of steering borrowers to inappropriate products;

(d) Explanation of prepayment penalty;

(e) Explanation of balloon payment;

(f) Explanation of costs of low documentation or stated income loans;

(g) Compliance with the Truth in Lending Act and other federal requirements;

(h) Importance of good consumer communications in promotional materials and product descriptions;

(i) Explanation of borrower responsibility for taxes and insurance.

(6) Development and maintenance of strong internal controls, including:

(a) Management of deals with third-party originators;

(b) Management of secondary market risk;

(d) Use of stress testing and performance measures;

(e) Actual practices consistent with policies.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-430, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 19.144.040 [19.144.030]. WSR 08-22-070, § 208-512-430, filed 11/4/08, effective 12/5/08.

Wash. Admin. Code § 208-512-440 Subprime mortgage lending—Where can I read the guidance documents?

You can find the two federal guidance documents on the internet: http://www.fdic.gov/news/news/press/2006/pr06086b.pdf; and http://www.fdic.gov/news/news/press/2007/pr07055a.html.

You can also click on the links on the DFI website at www.dfi.wa.gov.

If you do not have internet access, you may contact the department of financial institutions, division of banks (division of banks) for a copy of the documents.

Read these documents to ensure proper application of the law to your institution and to comply with the required integration of the guidance into your policies and procedures. If your institution needs help incorporating the guidance or reconciling it to your policies and procedures, contact your legal counsel.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-440, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 19.144.040 [19.144.030]. WSR 08-22-070, § 208-512-440, filed 11/4/08, effective 12/5/08.

Wash. Admin. Code § 208-512-450 Subprime mortgage lending—Why do I need to read the federal guidance documents?

The federal guidance consists of two lengthy documents that are very detailed. Because they are required by state statutory law, they apply in their entirety. Division of banks cannot merely summarize them or give you a checklist. You must read the documents in order to apply them to your particular institution by means of integrating the guidance into your own policies and procedures.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-450, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 19.144.040 [19.144.030]. WSR 08-22-070, § 208-512-450, filed 11/4/08, effective 12/5/08.

Wash. Admin. Code § 208-512-460 Subprime mortgage lending—What will the division of banks do about compliance with guidance policies and procedures?

Every state-chartered bank, savings banks and savings association is different. There is no "one-size-fits-all" guidance available. Division of banks will not issue model guidance, because the process of self-analysis that your institution needs to do, in order to develop its own guidance policies and procedures, is beneficial. The division of banks does not provide technical legal advice. Also, the guidance is complex and will result in variations in wording or applicability of guidance policies and procedures among institutions, depending upon the size and complexity of a particular institution, the overall characteristics of its mortgage lending market base, and the specific types of mortgage lending it does, if any.

For supervision purposes, the division of banks will:

(1) Verify that an institution has integrated the guidance into its policies and procedures, as part of its risk-focused examination. Division of banks will not mandate the length or exact wording used in the guidance policies and procedures.

(2) Review the guidance policies and procedures with the institution, if a consumer complaint indicates a problem or issue regarding subprime and nontraditional mortgage lending practices.

(3) Verify that an institution is following its policies and procedures.

The division of banks expects prompt compliance by banks, savings banks and savings associations with the requirements of this rule.

The law provides the division of banks with examination, enforcement and investigation authority to take appropriate action against banks, savings banks and savings associations that are in noncompliance with the guidance policies and procedures requirement.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.12.060, 30A.04.140, 30A.04.210, 30A.04.212, 30A.60.010 – [30A.60.]901, 30A.08.140, 30A.08.150, 30A.04.125 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512-460, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 19.144.040 [19.144.030]. WSR 08-22-070, § 208-512-460, filed 11/4/08, effective 12/5/08.

Chapter 208-512A Limits on loans and extensions of credit.

Wash. Admin. Code § 208-512A-001 Promulgation of rules.

The division of banks of the department of financial institutions (hereinafter, the "division"), after due and proper notice, and pursuant to the provisions of RCW 30A.04.030, 30A.04.111, 30A.04.215, 30A.08.140, 32.08.157, 43.320.040, and 43.320.050, hereby adopts and promulgates this chapter, effective January 21, 2013.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.04.111, 30A.04.215, 30A.08.140, 32.08.157 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512A-001, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-001, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-003 Findings and purpose.

(1) The director of the division (hereinafter, the "director of banks"), by and through the director of bank's delegated authority from the director of the department of financial institutions under RCW 43.320.040 and 43.320.050, finds and determines, that pursuant to RCW 30A.04.030, the division has the broad administrative authority to adopt and promulgate rules and regulations that establish and maintain appropriate standards of safety and soundness with respect to the loans and extensions of credit made by Washington state-chartered banks under Titles 30A and 32 RCW including, without limitation, nonloan investments in derivative and similar transactions.

(2) As of January 21, 2013, the effective date of section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (hereinafter, "Dodd-Frank Act"), codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. Sec. 1828(y), a state insured bank may engage in a derivative transaction, as defined in section 5200 (b)(3) of the Revised Statutes of the United States (12 U.S.C. Sec. 84 (b)(3)), only if the law with respect to lending limits of the state in which the state-insured bank is chartered takes into consideration credit exposure to derivative transactions. In addition to making loans, Washington state-chartered banks under Titles 30A and 32 RCW invest in derivative transactions as a regular and often-essential component of their overall investment strategy, including, without limitation, as a tool to manage their liquidity. It is necessary that Washington state law (including statute or regulation, or interpretation of the same by the division), be in compliance with the afore-stated federal statute and preserve the authority of banks under Titles 30A and 32 RCW to continue to engage in derivative transactions on or after January 21, 2013. Therefore, it is prudent and expeditious for the division to assert the full measure of its statutory authority to adopt this chapter so as to clearly set forth the manner in which a bank under Title 30A or 32 RCW may, in addition to its investment in other types of loans and extensions of credit, safely and soundly engage in derivative transactions.

(3) Section 610(a) of the Dodd-Frank Act, amending the National Bank Act, at 12 U.S.C. Sec. 84(b), revises the definition of "loans and extensions of credit" to include credit exposure of a national bank arising from its investment in a derivative transaction, repurchase agreement, reverse repurchase agreement, securities lending transaction, or securities borrowing transaction. The aforementioned section 611 of the Dodd-Frank Act redefines "loans and extensions of credit" to include derivative transactions by, in effect, making derivative transactions applicable to state "lending limits" laws. Section 611 of the Dodd-Frank Act does not specifically address repurchase agreements, reverse repurchase agreements, securities lending transactions, or securities borrowing transactions. However, the director of banks finds and determines that it serves the convenience and advantage of depositors, borrowers, and the general public that Washington state-chartered banks and savings banks be able to continue to prudently invest in repurchase agreements, reverse repurchase agreements, securities lending transactions, and securities borrowing transactions despite any future contingency that may be made applicable to them by federal banking regulations. Therefore, director of banks further finds and determines that the division may, in its safety and soundness standards for state member banks and state insured banks, respectively, apply the same definition of "loans and extensions of credit" as applicable to national banks under section 610 of the Dodd-Frank Act (12 U.S.C. Sec. 84(b)), but only to the extent required by the board of governors of the Federal Reserve System (hereinafter, the "Federal Reserve Board") or the Federal Deposit Insurance Corporation (hereinafter, the "FDIC").

(4) The director of banks finds and determines that, pursuant to RCW 30A.04.111(5) and 30A.04.215 (3) and (5), it serves the convenience and advantage of depositors, borrowers, and the general public, and further maintains the fairness of competition between state-chartered banks and national banks, that, on or after January 21, 2013, banks under Title 30A RCW be permitted to continue to invest in derivative transactions, repurchase agreements, reverse repurchase agreements, securities lending transactions, and securities borrowing transactions as national banks are generally permitted to under the National Bank Act (12 U.S.C. Sec. 84(b)) and applicable rules of the Office of the Comptroller of the Currency (hereinafter, "OCC"), subject to (a) the restrictions, limitations, and requirements applicable to such powers and authorities of national banks, and (b) the authority of the division to adopt and promulgate rules for banks, which, consistent with Title 30A RCW, vary from the precise powers and authorities of national banks.

(5) The director of banks finds and determines that, pursuant to RCW 32.08.157, a mutual or stock savings bank under Title 32 RCW may be permitted to engage in derivative transactions on or after January 21, 2013, the same as for a bank under Title 30A RCW, provided it subjects itself to all of the restrictions, limitations, and requirements for exercise of any powers and authorities under RCW 30A.04.111 as set forth in this chapter respecting loans and extensions of credit applicable to banks under Title 30A RCW.

(6) There are certain standards of safety and soundness embodied in definitions of terms and other provisions used in RCW 30A.04.111, including, without limitation, the term "capital and surplus," which have heretofore been inconsistent with the standards for computation of lending limits for national banks under the National Bank Act and the OCC rules. Pursuant to RCW 30A.04.215 (3) and (5), the director of banks finds and determines that it both serves the convenience and advantage of depositors, borrowers, and the general public, and further maintains the fairness of competition and parity between Washington state-chartered banks and national banks, if the division adopts, for purposes of RCW 30A.04.111, the same definition of "capital and surplus" as permitted for national banks, while maintaining the higher general lending limit of twenty percent of "capital and surplus" for banks under Title 30A RCW than exists for national banks under the OCC rules. In addition, the director of banks finds and determines that changes in other definitions of terms and technical provisions, as set forth in this chapter, serve the convenience and advantage of depositors, borrowers, and the general public, and further maintain the fairness of competition and parity between Washington state-chartered banks and national banks.

(7) Since RCW 30A.04.111 does not define "loans and extensions of credit" and the words "extensions of credit" are not specified, the director of banks herein exercises the director of bank's broad administrative authority under RCW 30A.04.030 and looks to applicable federal banking law and regulation for clarification of the term "extensions of credit," in keeping with well-settled principles of statutory construction. Accordingly, in promulgating and adopting the definition of "loans and extensions of credit" set forth in this chapter, the director of banks is herein guided by the restrictions on insider lending set forth in Federal Reserve Board Regulation O, at 12 C.F.R. Sec. 215.3, to the extent that (a) "extension of credit" has been therein broadly defined by the Federal Reserve Board to include "an extension of credit in any manner whatsoever" and (b) on account of Regulation O having been adopted by the Federal Reserve Board based on comparable principles of safety and soundness in regard to banks.

(8) The director of banks finds and determines that certain powers and authorities of an out-of-state state-chartered bank with a branch or branches in Washington state, which affect the operations of banking and delivery of financial services in Washington state, and which provide certain exceptions to the general lending limit in emergency circumstances, ought to and will be deemed to be exceptions to the general lending limit under RCW 30A.04.111, subject to the conditions set forth in this chapter.

(9) These rules and regulations are intended to:

(a) Prevent one person, or a relatively small group of persons who directly benefit from each other or who are engaged in a common enterprise, from borrowing or otherwise obtaining an unduly large amount of a bank's funds or other extension of credit;

(b) Safeguard a bank's depositors by establishing and maintaining standards that promote spreading of a bank's loans and extensions of credit among a relatively large number of persons engaged in different lines of business; and

(c) Prescribe standards of safety and soundness with respect to the credit exposure of a bank to its investment in derivative transactions, and to the extent required by the board of governors of the Federal Reserve System and the Federal Deposit Insurance Corporation for state member banks and state insured banks, respectively, to the credit exposure of a bank to its investment in repurchase agreements, reverse repurchase agreements, securities lending transactions, or securities borrowing transactions.

(10) These rules include, without limitation, provisions for:

(a) Defining or further defining or clarifying terms used in RCW 30A.04.111;

(b) Establishing limits or requirements other than those specified in RCW 30A.04.111 for particular classes or categories of loans and extensions of credit;

(c) Determining when a loan or extension of credit putatively made to a person shall, for purposes of this section, be attributed to another person;

(d) Setting standards for computation of time in relation to determining limits on loans and extensions of credit; and

(e) Implementing and incorporating other changes in limits on loans and extensions of credit necessary to conform to federal statute and rule required or otherwise authorized by RCW 30A.04.111.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.04.111, 30A.04.215, 30A.08.140, 32.08.157 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512A-003, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-003, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-005 "Loans and extensions of credit" and "contractual commitment to advance funds"—Defined.

(1) "Loan or extension of credit" generally includes:

(a) Any direct or indirect advance of funds to a person made on a basis of any obligation of that person to repay the funds, or repayable from specific property pledged by or on behalf of a person;

(b) Any credit exposure of a bank arising from a derivative transaction or a securities financing transaction, but only to the extent that a securities financing transaction is required, by the Federal Reserve Board or the FDIC, with respect to state member banks and state insured banks, respectively, to be treated as a loan or extension of credit for purposes of RCW 30A.04.111 and this chapter; and

(c) Any contractual commitment to advance funds, and includes a renewal, modification, or extension of the maturity date of a loan or extension of credit.

(2) Notwithstanding any other provision of this section, a "loan or extension of credit" excludes the following:

(a) Special exceptions, conditions and limitations to the general lending limit to the extent set forth in WAC 208-512A-020 through 208-512A-090, inclusive;

(b) A renewal, extension or restructuring of an existing loan, with interest paid current and no further advance of funds, by a bank under the direction and control of a conservator appointed by the director;

(c) A renewal or restructuring of a loan as a new loan or extension of credit, following the exercise by a bank of reasonable efforts, consistent with safe and sound banking practices, to bring the loan into conformance with the lending limit, unless new funds are advanced by the bank to the borrower (except as permitted by WAC 208-512A-015), or a new borrower replaces the original borrower, or unless the division determines that a renewal or restructuring was undertaken as a means to evade the bank's lending limit;

(d) Additional funds advanced for the benefit of a borrower by a bank for payment of taxes, insurance, utilities, security, and maintenance and operating expenses necessary to preserve the value of real property securing the loan, consistent with safe and sound banking practices, but only if the advance is for the protection of the bank's interest in the collateral, and provided that such amounts must be treated as an extension of credit if a new loan or extension of credit is made to the borrower;

(e) Accrued and discounted interest on an existing loan or extension of credit, including interest that has been capitalized from prior notes and interest that has been advanced under terms and conditions of a loan agreement;

(f) Financed sales of a bank's own assets, including other real estate owned, if the financing does not put the bank in a worse position than when the bank held title to the assets;

(g) Amounts paid against uncollected funds in the normal process of collection;

(h) Credit exposures arising from securities financing transactions in which the securities financed are Type I securities, or securities listed in section 5 (c)(1)(C), (D), (E), and (F) of the Home Owners Loan Act and general obligations of a state or subdivision as listed in section 5 (c)(1)(H) of the Home Owners Loan Act, at 12 U.S.C. Sec. 1464 (c)(1)(C), (D), (E), (F), and (H);

(i) Intraday credit exposures arising from a derivative transaction or securities financing transaction; and

(j) That portion of a loan or extension of credit sold as a participation by a bank on a nonrecourse basis, provided that the participation results in a pro rata sharing of credit risk proportionate to the respective interests of the originating and participating lenders. Where a participation agreement provides that repayment must be applied first to the portions sold, a pro rata sharing will be deemed to exist only if the agreement also provides that, in the event of a default or comparable event defined in the agreement, participants must share in all subsequent repayments and collections in proportion to their percentage participation at the time of the occurrence of the event. When an originating bank funds the entire loan, it must receive funding from the participants before the close of business of its next business day. If the participating portions are not received within that period, then the portions funded will be treated as a loan by the originating bank to the borrower. If the portions so attributed to the borrower exceed the originating bank's lending limit, the loan may be treated as nonconforming subject to WAC 208-512A-012, rather than a violation, if:

(i) The originating bank had a valid and unconditional participation agreement with a participant or participants that was sufficient to reduce the loan to within the originating bank's lending limit;

(ii) The participant reconfirmed its participation and the originating bank had no knowledge of any information that would permit the participant to withhold its participation; and

(iii) The participation was to be funded by close of business of the originating bank's next business day.

As used in this chapter and to the extent used in RCW 30A.04.111, the term "loans and extensions of credit," unless otherwise indicated, shall have the meaning set forth in this section. As used in RCW 30A.04.111 and this chapter, the terms "loan," "loans," "extension of credit," "extensions of credit," and "loan or extension of credit" refer, as applicable, to the singular or plural of "loans and extensions of credit."

(3) "Contractual commitment to advance funds" generally means a bank's obligation to advance funds under a legally binding contractual commitment to make a loan or extension of credit.

(a) For purposes of this chapter and calculation of the general lending limit, "contractual commitment to advance funds" includes:

(i) A bank's obligation to make payment (directly or indirectly) to a third person contingent upon default by a customer of the bank in performing an obligation and to make such payment in keeping with the agreed upon terms of the customer's contract with the third person, or to make payments upon some other stated condition;

(ii) A bank's obligation to guarantee or act as surety for the benefit of a person; and

(iii) A bank's obligation to advance funds under a standby letter of credit, a put, or other similar arrangement.

(b) For purposes of this chapter and calculation of the general lending limit, "contractual commitment to advance funds" does not include:

(i) The undisbursed portion of any loan or extension of credit;

(ii) The entire amount of any such commitment that has not yet been drawn upon; and

(iii) Letters of credit and similar instrument:

(A) Which do not guarantee payment;

(B) Which do not provide for payment in the event of a default of a third party; and

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.04.111, 30A.04.215, 30A.08.140, 32.08.157 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512A-005, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-005, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-007 Other general chapter definitions.

As used in this chapter and to the extent used in RCW 30A.04.111, the following additional terms, unless otherwise indicated, mean:

(1) "ALLL" means a bank's allowance for loan and lease losses.

(2) "Bank" includes a commercial bank chartered and regulated under Title 30A RCW and, to the extent applicable to this chapter pursuant to WAC 208-512A-009, a mutual or stock savings bank chartered and regulated under Title 32 RCW.

(3) "Borrower" means:

(a) A person who is named as a borrower or debtor in a loan or extension of credit;

(b) A person to whom a bank has credit exposure arising from a derivative transaction or a securities financing transaction, entered by the bank; or

(c) Any other person, including a drawer, endorser, or guarantor, who is deemed to be a borrower under the "direct benefit" or the "common enterprise" tests set forth in WAC 208-512A-100.

(4) "Call report" means a bank's Consolidated Report of Condition and Income.

(5) "Capital and surplus" means:

(a) A bank's Tier 1 and Tier 2 capital as reported in a bank's call report; plus

(b) The balance of a bank's ALLL not included in the bank's Tier 2 capital as reported in the bank's call report.

(6) "Close of business" means the time at which a bank closes its accounting records for the business day.

(7) "Control" is presumed to exist when a person directly or indirectly, or acting through or together with one or more persons:

(a) Owns, controls, or has the power to vote twenty-five percent or more of any class of voting securities of another person;

(b) Controls, in any manner, the election of a majority of the directors, trustees, or other persons exercising similar functions of another person; or

(8) "Credit derivative" has the same meaning as this term has in 12 C.F.R. Part 3, Appendix C, section 2.

(9) "Current market value" means the bid or closing price listed for an item in a regularly published listing or an electronic reporting service.

(10) "Derivative transaction" includes any transaction that is a contract, agreement, swap, warrant, note, or option that is based, in whole or in part, on the value of, any interest in, or any quantitative measure or the occurrence of any event relating to, one or more commodities, securities, currencies, interest or other rates, indices, or other assets.

(11) "Director of banks" means the director of the division of banks of the department of financial institutions.

(12) "Division" means the division of banks of the department of financial institutions.

(13) "Effective margining arrangement" means a master legal agreement governing derivative transactions between a bank and a counterparty that requires the counterparty to post, on a daily basis, variation margin to fully collateralize that amount of the bank's net credit exposure to the counterparty created by the derivative transactions covered by the agreement, subject to any monetary threshold requirements as prudently determined by the bank and its counterparty as contained in the master legal agreement.

(14) "Eligible credit derivative" means a single-name credit derivative or a standard, nontranched index credit derivative provided that:

(a) The derivative contract meets the requirements of an eligible guarantee, as defined in 12 C.F.R. Part 3, Appendix C, and has been confirmed by the protection purchaser and the protection provider;

(b) Any assignment of the derivative contract has been confirmed by all relevant parties;

(i) Failure to pay any amount due under the terms of the reference exposure, subject to any applicable minimal payment threshold that is consistent with standard market practice and with a grace period that is closely in line with the grace period of the reference exposure; and

(ii) Bankruptcy, insolvency, or inability of the obligor on the reference exposure to pay its debts, or its failure or admission in writing of its inability generally to pay its debts as they become due and similar events;

(d) The terms and conditions dictating the manner in which the derivative contract is to be settled are incorporated into the contract;

(e) If the derivative contract allows for cash settlement, the contract incorporates a robust valuation process to estimate loss with respect to the derivative reliably and specifies a reasonable period for obtaining post-credit event valuations of the reference exposure;

(f) If the derivative contract requires the protection purchaser to transfer an exposure to the protection provider at settlement, the terms of at least one of the exposures that is permitted to be transferred under the contract provides that any required consent to transfer may not be unreasonably withheld; and

(g) If the credit derivative is a credit default swap, the derivative contract clearly identifies the parties responsible for determining whether a credit event has occurred, specifies that this determination is not the sole responsibility of the protection provider, and gives the protection purchaser the right to notify the protection provider of the occurrence of a credit event.

(15) "Eligible guarantee" means a guarantee that:

(a) Is written and unconditional;

(b) Covers all or a pro rata portion of all contractual payments of the obligor on the reference exposure;

(d) Is not unilaterally cancelable by the protection provider for reasons other than the breach of the contract by the beneficiary;

(e) Is legally enforceable against the protection provider in a jurisdiction where the protection provider has sufficient assets against which a judgment may be attached and enforced;

(f) Requires the protection provider to make payment to the beneficiary on the occurrence of a default (as defined in the guarantee) of the obligor on the reference exposure in a timely manner without the beneficiary first having to take legal actions to pursue the obligor for payment;

(g) Does not increase the beneficiary's cost of credit protection on the guarantee in response to deterioration in the credit quality of the reference exposure; and

(h) Is not provided by an affiliate of the bank, unless the affiliate is an insured depository institution, bank, securities broker or dealer, or insurance company that:

(i) Does not control the bank; and

(ii) Is subject to consolidated supervision and regulation comparable to that imposed on U.S. depository institutions, securities broker-dealers, or insurance companies (as the case may be).

(16) "Eligible protection provider" means:

(a) A sovereign entity (a central government, including the U.S. government, an agency, department, ministry, or central bank);

(b) The Bank for International Settlements, the International Monetary Fund, the European Central Bank, the European Commission, or a multilateral development bank;

(d) The Federal Agricultural Mortgage Corporation;

(e) A depository institution, as defined in section 3 of the Federal Deposit Insurance Act, 12 U.S.C. 1813(c);

(f) A bank holding company, as defined in section 2 of the Bank Holding Company Act, as amended, 12 U.S.C. 1841;

(g) A savings and loan holding company, as defined in section 10 of the Home Owners' Loan Act, at 12 U.S.C. 1467a;

(h) A securities broker or dealer registered with the U.S. Securities and Exchange Commission under the Securities Exchange Act of 1934, 15 U.S.C. 78o et seq.;

(i) An insurance company that is subject to the supervision of the Washington state office of insurance commissioner;

(j) A foreign banking organization;

(k) A non-U.S.-based securities firm or a non-U.S.-based insurance company that is subject to consolidated supervision and regulation comparable to that imposed on U.S. depository institutions, securities broker-dealers, or insurance companies; and

(l) A qualifying central counterparty.

(17) "FDIC" means the Federal Deposit Insurance Corporation.

(18) "Federal Reserve Board" means the board of governors of the Federal Reserve System.

(19) "Financial instrument" means stocks, notes, bonds, and debentures traded on a national securities exchange, over-the-counter (OTC) margin stocks as defined in Regulation U, 12 C.F.R. Part 221, commercial paper, negotiable certificates of deposit, bankers' acceptances, and shares in money market and mutual funds of the type that issue shares in which banks may perfect a security interest. Financial instruments may be denominated in foreign currencies that are freely convertible to U.S. dollars. The term "financial instrument" does not include mortgages.

(20) "OCC" means the Office of the Comptroller of the Currency.

(21) "Person" means: An individual; sole proprietorship; partnership; joint venture; association; trust; estate; business trust; corporation; limited liability company; limited liability partnership; not-for-profit corporation; sovereign government or agency, instrumentality, or political subdivision thereof; or any similar entity or organization.

(22) "Qualifying central counterparty" has the same meaning as this term has in 12 C.F.R. Part 3, Appendix C, section 2.

(23) "Qualifying master netting agreement" has the same meaning as this term has in 12 C.F.R. Part 3, Appendix C, section 2.

(24) "Readily marketable collateral" means financial instruments and bullion which are saleable under ordinary circumstances with reasonable promptness at a fair market value determined by daily quotations based on actual transactions on an auction or a similarly available daily bid and ask price market.

(25) "Readily marketable staple" means an article of commerce, agriculture, or industry, such as wheat and other grains, cotton, wool, and basic metals such as tin, copper and lead, in the form of standardized interchangeable units, that is easy to sell in a market with sufficiently frequent price quotations. An article comes within this definition if the exact price is easy to determine and the staple itself is easy to sell at any time at a price that would not be considerably less than the amount at which it is valued as collateral. Whether an article qualifies as a readily marketable staple is determined on the basis of the conditions existing at the time the loan or extension of credit that is secured by the staples is made.

(26) "Securities financing transaction" means a repurchase agreement, reverse repurchase agreement, securities lending transaction, or securities borrowing transaction.

(27) "State insured bank" denotes a bank, as defined in this chapter, which is an "insured depository institution" as defined in section 3(c) of the Federal Deposit Insurance Act (12 U.S.C. Sec. 1813(c)).

(28) "State member bank" denotes a bank, as defined in this chapter, which is a member of a federal reserve bank as authorized under section 9 of the Federal Reserve Act (12 U.S.C. Sec. 321) and, for purposes of this chapter, has the same meaning as that term is defined in section 3(d) of the Federal Deposit Insurance Act (12 U.S.C. Sec. 1813(d)).

(29) "Subsidiary" means:

(a) Any company twenty-five percent or more of whose voting shares (excluding shares owned by the United States or by any company wholly owned by the United States) is directly or indirectly owned or controlled by such person, or is held by it with power to vote;

(b) Any company the election of a majority of whose directors is controlled in any manner by such person; or

(c) Any company with respect to the management or policies of which such person has power, directly or indirectly, to exercise a controlling influence, as determined by the division, after notice and opportunity for hearing.

(30) "Type I securities" has the same meaning as set forth in 12 C.F.R. Sec. 1.2(j) and includes:

(a) Obligations of the United States;

(b) Obligations issued, insured, or guaranteed by a department or an agency of the United States government, if the obligation, insurance, or guarantee commits the full faith and credit of the United States for the repayment of the obligation;

(c) Obligations issued by a department or agency of the United States, or an agency or political subdivision of a state of the United States, that represent an interest in a loan or a pool of loans made to third parties, if the full faith and credit of the United States has been validly pledged for the full and timely payment of interest on, and principal of, the loans in the event of nonpayment by the third-party obligor(s);

(d) General obligations of a state of the United States or any political subdivision thereof; and

(e) Municipal bonds if the bank is well capitalized as defined as that term is used in the Federal Deposit Insurance Act, 12 U.S.C. Sec. 1831o (b)(1).

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.04.111, 30A.04.215, 30A.08.140, 32.08.157 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512A-007, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-007, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-009 Applicability of chapter.

This chapter is applicable, notwithstanding any other provision thereof, only to:

(1) A commercial bank under Title 30A RCW;

(2) A mutual or stock savings bank under Title 32 RCW, which, on January 21, 2013, or thereafter, invests in derivative transactions;

(3) A mutual or stock savings bank under Title 32 RCW, which, on January 21, 2013, or thereafter, invests in securities financing transactions, if:

(a) The mutual or stock savings bank is a state member bank and the Federal Reserve Board has determined that loans and extensions of credit apply to securities financing transactions; or

(b) The FDIC has determined that loans and extensions of credit apply to securities financing transactions in relation to state-chartered banks and savings banks; and

(4) A mutual or stock savings bank under Title 32 RCW that has notified the division, as of January 21, 2013, or thereafter, that it has elected to be regulated by and comply with this chapter, even if it does not invest in derivative transactions or securities financing transactions.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.04.111, 30A.04.215, 30A.08.140, 32.08.157 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512A-009, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-009, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-010 General limitation on loans and extensions of credit.

The total amount of loans and extensions of credit by a bank to a person outstanding at one time and not fully secured by collateral in a manner set forth in WAC 208-512A-011, shall not exceed twenty percent of the capital and surplus of such bank; provided, that a bank shall not be deemed to have violated this section on account of any loan or extension of credit, if such loan or extension of credit would be classified as an exception to the lending limit for national banks or federal savings associations under applicable federal banking laws and rules that existed as of July 28, 1985, or as of any subsequent date not later than July 27, 2003.

History

Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-010, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-011 Exception to general limitation—Loans and extensions of credit fully secured by readily marketable collateral.

(1) A loan or extension of credit by a bank to a person outstanding at one time and fully secured by readily marketable collateral having a market value, as determined by reliable and continuously available price quotations, shall not be subject to any limitations based on capital and surplus.

(2) Notwithstanding subsection (1) of this section, if the total of such loans and extensions of credit, together with loans made under general limitations pursuant to WAC 208-512A-010 exceed forty-five percent of capital and surplus, the division will review the credits as a possible concentration, with regard to both risk diversification within the bank's asset structure and diversification or other risk in the marketable collateral securing the loan. This limitation shall be separate and in addition to the general twenty percent limitation set forth in WAC 208-512A-010.

(3) Each loan or extension of credit based on the foregoing limitation shall be secured by readily marketable collateral having a current market value of at least one hundred fifteen percent of the amount of the loan or extension of credit at all times.

(4) Financial instruments may be denominated in foreign currencies which are freely convertible to United States dollars. If collateral is denominated and payable in a currency other than that of the loan or extension of credit which it secures, the bank's procedures must require that the collateral be revalued at least monthly, using appropriate foreign exchange rates, in addition to being repriced at current market value.

(5) Each bank must institute adequate procedures to ensure that the collateral value fully secures the outstanding loan at all times. If collateral values fall below one hundred fifteen percent of the outstanding loan, to the extent that the loan is no longer in conformance with this section and exceeds the general twenty percent limitation, the loan must be brought into conformance within five business days, except where judicial proceedings, regulatory actions, or other extraordinary occurrences prevent the bank from taking action.

History

Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-011, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-012 Exception to general limitation—Nonconforming loans.

(1) A loan or extension of credit that was within the limit on loans and extensions of credit when made, will not be deemed a violation of the legal lending limit and will be treated as "nonconforming" if the loan or extension of credit is no longer in conformity with the bank's limit on loans and extensions of credit because:

(a) The bank's capital has declined, borrowers have subsequently merged or formed a common enterprise, lenders have merged, or the limit on loans and extensions of credit or capital rules have changed; or

(b) Collateral securing the loan or extension of credit, in order to satisfy the requirements of an exception to the limit, has declined in value; or

(c) In the case of an extension of credit arising from a derivative transaction (or, if required by the FDIC or Federal Reserve Board, a securities financing transaction), and measured by the internal model method described in WAC 208-512A-300, the extension of credit subject to the lending limit increases after execution of the transaction.

(2) A bank must use reasonable efforts to bring a loan or extension of credit that is nonconforming as a result of subsection (1)(a) or (c) of this section into conformity with the bank's limit on loans and extensions of credit unless to do so would be inconsistent with safe and sound banking practices.

(3) A bank must bring a loan or extension of credit that is nonconforming as a result of circumstances described in subsection (1)(b) of this section into conformity with the bank's limit on loans and extensions of credit within thirty calendar days, except when judicial proceedings, regulatory actions, or other extraordinary circumstances beyond the bank's control prevent the bank from taking action.

(4) Notwithstanding any provision of this section, the director of banks may by interpretation and policy statement prescribe standards for treatment of nonconforming extensions of credit that are derivative transactions, repurchase agreements, reverse repurchase agreements, securities lending transactions, or securities borrowing transactions, and may, if required for state insured banks or state member banks, rely upon rules or interpretations of the FDIC or the Federal Reserve Board, as applicable.

History

Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-012, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-013 Exception to general limitation—Declining capital—Inability to otherwise effectively operate in marketplace—Director discretion.

Notwithstanding any provision of this chapter to the contrary, in the event that a bank's capital declines sufficiently to seriously impair the bank's ability to effectively operate in its marketplace or serve the needs of its customers or the community in which it is located, the director of banks may, upon written application and in the exercise of his or her discretion, grant a bank temporary permission to fund loans and extensions of credit in excess of such bank's limit on loans and extensions of credit. In the exercise of discretion, the director of banks may further specify conditions for granting such emergency exception and may limit emergency lending authority to particular types or classes of loans and extensions of credit.

History

Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-013, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-014 Exception to general limitation—Extenuating facts and circumstances—Standards for division determination—Director of banks' discretion.

(1) Notwithstanding any provision of this chapter to the contrary, the director of banks, in his or her discretion, may grant an exception to the limit on loans and extensions of credit based on extenuating facts and circumstances.

(2) In deciding whether to grant an exception under this section, the director of banks shall consider:

(a) The proposed transaction for which the exception is sought;

(b) How the requested exception would affect the capital adequacy and safety and soundness of the requesting bank if the exception is not granted or, if the exception is granted, if the proposed borrower should ultimately default;

(d) The competency of the bank's management to handle the proposed transaction and any resulting safety and soundness issues;

(e) The marketability and value of the proposed collateral (if any); and

(f) The extenuating facts and circumstances that warrant an exception in light of the purpose of the limit on loans and extensions of credit set forth in RCW 30A.04.111 and this chapter.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.04.111, 30A.04.215, 30A.08.140, 32.08.157 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512A-014, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-014, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-015 Renewals and additional advances under a contractual commitment to advance funds—Project funding.

(1) A bank may renew a contractual commitment to advance funds and complete funding under that commitment if all of the following criteria are met:

(a) The completion of funding is consistent with safe and sound banking practices and is made to protect the position of the bank;

(b) The completion of funding will enable the borrower to complete a project for which the contractual commitment to advance funds was made;

(c) The amount of the additional funding does not exceed the unfunded portion of the bank's contractual commitment to advance funds; and

(d) Such contractual commitment to advance funds, when combined with all other outstanding loans and contractual commitments to advance funds to a borrower, was within the bank's lending limit when entered into, calculated pursuant to WAC 208-512A-200.

(2) In determining whether a contractual commitment to advance funds is within the bank's lending limit when made, the bank may deduct from the amount of the commitment the amount of any legally binding loan participation commitments that are issued concurrent with the bank's commitment and that would be excluded from the definition of loan or extension of credit.

History

Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-015, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-020 Special rule—Discount of commercial or business paper.

A loan or extension of credit arising from the discount of commercial or business paper evidencing an obligation to the person negotiating it with recourse is excluded from the calculation of the general lending limit, subject to the following terms and conditions:

(1) This exclusion applies to negotiable paper given in payment of the purchase price of commodities in domestic or export transactions purchased for resale or to be used in the fabrication of a product, or to be used for any other business purposes which may reasonably be expected to provide funds for payment of the paper; and

(2) Loans or extensions of credit arising from the discount of paper must bear the full recourse endorsement of the owner; provided, however, that:

(a) Loans or extensions of credit arising from the discount of such paper in export transactions may be endorsed by such owner without recourse or with limited recourse, or may be accompanied by a separate agreement for limited recourse; and

(b) If transferred without full recourse, the paper must be supported by an assignment of appropriate insurance covering the political, credit, and transfer risks applicable to the paper.

History

Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-020, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-030 Special rule—Purchase of bankers' acceptances.

The purchase of bankers' acceptances of the kind described in section 13 of the Federal Reserve Act and which are issued by other depositary institutions, is excluded from the calculation of the general lending limit, subject to the following terms and conditions:

(1) Acceptances by a bank of time drafts which do not meet the requirements for discount with a Federal Reserve Bank, are subject to the general twenty percent limitation of WAC 208-512A-010; and

(2) During any period within which a bank holds its own acceptances, eligible or ineligible, having given value therefor, the amount given is considered to be a loan or extension of credit to the customer for whom the acceptance was made and is subject to the lending limits. To the extent that a loan or extension of credit created by discounting the acceptance is covered by a bona fide participation agreement, the discounting bank need only consider that portion of the discounted acceptance which it retains as being subject to appropriate limitations.

History

Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-030, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-040 Special rule—Readily marketable staples.

(1) Loans and extensions of credit secured by bills of lading, warehouse receipts, or similar documents transferring or securing title to readily marketable staples shall be subject to a limitation of thirty-five percent of capital and surplus, in addition to the general limit set forth in WAC 208-512A-010, if the market value of the staples securing each additional loan or extension of credit at all times equals or exceeds one hundred fifteen percent of the outstanding amount of such loan or extension of credit.

(2) The following additional terms and conditions shall apply to a loan or extension of credit secured by staples:

(a) The staples shall be fully covered by insurance whenever it is customary to insure such staples.

(b) For purposes of such a transaction, "capital and surplus" shall be calculated at thirty-five percent in addition to the general twenty percent limitation.

(c) A "readily marketable staple" means an article of commerce, agriculture, or industry of such uses as to make it the subject of dealings in a ready market with sufficiently frequent price quotations as to make (i) the price easily and definitely ascertainable, and (ii) the staple itself easy to realize upon sale at any time at a price which would not involve any considerable sacrifice from the amount at which it is valued as collateral.

(d) Staples eligible for this exception must be nonperishable, may be refrigerated or frozen.

(e) This exception is intended to apply primarily to basic commodities, such as wheat and other grains, cotton, wool, and basic metals such as tin, copper, lead, and the like. Whether a commodity is readily marketable depends upon existing conditions and it is possible that a commodity that qualifies at one time may cease to qualify at a later date.

(f) Fabricated commodities which do not constitute standardized interchangeable units and do not possess uniformly broad marketability do not qualify as readily marketable staples.

(g) Since commodities sometimes fail to qualify as nonperishable because of the manner in which they are handled or stored during the life of the loan or extension of credit, the question as to whether a staple is nonperishable must be determined on a case-by-case basis.

(h) This exception is applicable to a loan or extension of credit arising from a single transaction or secured by the same staples for (i) not more than ten months if secured by nonperishable staples, and (ii) not more than six months if secured by refrigerated or frozen staples.

(i) The important characteristic of warehouse receipts, order bills of lading, or other similar documents is that the holder of such documents has control of the commodity and can obtain immediate possession. (However, the existence of brief notice periods, or similar procedural requirements under state law, for the disposal of the collateral will not affect the eligibility of the instruments for this exception.) Only documents with these characteristics are eligible security for loans under this exception. In the event of default on a loan secured by one of these documents, the bank must be in a position to sell the underlying commodity and promptly transfer title and possession to the purchaser, thus being able to protect itself without extended litigation. Generally, documents qualifying as "documents of title" under the Uniform Commercial Code are "similar documents" qualifying for this exception.

(j) Field warehouse receipts are an acceptable form of collateral when they are issued by a duly bonded and licensed grain elevator or warehouse having exclusive possession and control of the commodities even though the grain elevator or warehouse is maintained on the commodity owner's premises.

(k) Warehouse receipts issued by the borrower-owner which is a grain elevator or warehouse company, duly bonded and licensed and regularly inspected by state or federal authorities, may be considered eligible collateral under this exception only when the receipts are registered with a registrar whose consent is required before the commodities can be withdrawn from the warehouse.

History

Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-040, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-050 Special rule—U.S. bonds, notes, certificates of indebtedness, or treasury bills, etc.

Loans or extensions of credit secured by bonds, notes, certificates of indebtedness, or treasury bills of the United States or by other such obligations wholly guaranteed as to principal and interest by the United States are excluded from the calculation of the general lending limit in WAC 208-512A-010, subject to the following terms and conditions:

(1) This exception applies only to loans or extensions of credit which are fully secured by the current market value of obligations of the United States or guaranteed by the United States.

(2) If the market value of the collateral declines so that the loan is no longer in conformance with this exception and exceeds the general lending limit set forth in WAC 208-512A-010, the loan must be brought into conformance within five business days.

(3) Securities issued by any department, agency, bureau, board, commission or establishment of the United States, or any corporation wholly owned, directly or indirectly, shall not be considered eligible collateral for purposes of this subsection (3), unless such securities shall be direct obligation of or fully guaranteed as to principal and interest by the United States.

History

Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-050, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-060 Special rule—Unconditional takeout commitments or guarantees of federal government.

Loans or extensions of credit to or secured by unconditional takeout commitments or guarantees of any department, agency, bureau, board, commission, or establishment of the United States or any corporation wholly owned directly or indirectly by the United States shall be excluded from the calculation of the general lending limit set forth in WAC 208-512A-010, subject to the following terms and conditions:

(1) This exclusion will apply to only that portion of a loan or extension of credit that is covered by a federal guarantee or commitment.

(2) For purposes of this exclusion, the commitment or guarantee must be payable in cash or its equivalent within sixty days after demand for payment is made.

(3) A guarantee or commitment is unconditional if the protection afforded the bank is not substantially diminished or impaired in the case of loss resulting from factors beyond the bank's control. Protection against loss is not materially diminished or impaired by procedural requirements, including default over a specific period of time, a requirement that notification of default be given within a specific period after its occurrence, or a requirement of good faith on the part of the bank.

History

Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-060, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-070 Special rule—Segregated deposit account in lender bank.

Loans or extensions of credit secured by a segregated deposit account in the lending bank are excluded from the calculation of the general lending limit set forth in WAC 208-512A-010, subject to the following terms and conditions:

(1) Deposit accounts which may qualify for this exception include deposits in any form generally recognized as deposits. In the case of the secured loan, the bank must establish internal procedures which will prevent the release of the security.

(2) The bank must ensure that a security interest has been perfected in the deposit, including the assignment of a specifically identified deposit and any other actions required by state law.

(3) A deposit which is denominated and payable in a currency other than that of the loan or extension of credit which it secures may be eligible for this exception if it is freely convertible to United States dollars. The deposit must be revalued at least monthly, using appropriate foreign exchange rates, to ensure that the loan or extension of credit remains fully secured. This exception applies to only that portion of the loan or extension of credit that is covered by the United States dollar value of the deposit. If the United States dollar value of the deposit falls to the extent that the loan is in nonconformance with this exception and exceeds the general twenty percent limitation, the loan must be brought into conformance within five business days, except where judicial proceedings, regulatory actions, or other extraordinary occurrences prevent the bank from taking such action. This exception is not authority for a bank to take deposits denominated in foreign currencies.

History

Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-070, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-080 Special rule—Sale of bank's assets—Unpaid portion of purchase price.

The unpaid portion of the purchase price of a sale of a bank's asset or assets, if secured by such asset or assets, shall be excluded from the calculation of the general lending limit set forth in WAC 208-512A-010, subject to the following terms and conditions:

(1) Any sale of a bank's asset or assets, resulting in an unpaid purchase price exceeding the bank's lending limit must be approved in advance of the sale by the board of directors, including the terms of payment of such unpaid purchase price, and if the purchase is by a director, officer or employee of the bank, shall conform to RCW 30A.12.060 and the Federal Reserve Board's Regulation O, at 12 C.F.R. Sec. 215.3.

(2) The bank must ensure that a security interest has been perfected in the collateral, including execution and recording or filing of documents and any other action required by state law.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.04.111, 30A.04.215, 30A.08.140, 32.08.157 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512A-080, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-080, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-090 Special rule—Discount of negotiable or nonnegotiable installment consumer paper.

(1) Loans and extensions of credit arising from the discount of negotiable or nonnegotiable installment consumer paper which carries a full recourse endorsement or unconditional guarantee by the person transferring the paper shall be subject to a maximum limitation equal to twenty per centum of capital and surplus.

(2) If a bank's files or the knowledge of its officers of the financial condition of each maker of such consumer paper is reasonably adequate, and an officer of the bank designated for that purpose by the board of directors of the bank certifies in writing that the bank is relying primarily upon the responsibility of each maker for payment of such loans or extensions of credit and not upon any full or partial recourse endorsement or guarantee by the transferor, the limitations of this section as to the loans or extensions of credit of each such maker shall be the sole applicable loan limitations.

(3) This exception allows a bank to discount negotiable or nonnegotiable installment consumer paper of one person in an amount equal to twenty per centum of its capital and surplus if the paper carries a full recourse endorsement or unconditional guarantee by the seller transferring such paper. The unconditional guarantee may be in the form of a repurchase agreement or a separate guarantee agreement. A condition reasonably within the power of the bank to perform, such as the repossession of collateral, will not be considered to make conditional an otherwise unconditional agreement.

(4) For purposes of this section:

(a) "Consumer" means the user of any products, commodities, goods, or services, whether leased or purchased, and does not include any person who purchases products or commodities for the purpose of resale or for fabrication into goods for sale; and

(b) "Consumer paper" includes paper relating to automobiles, mobile homes, residences, office equipment, household items, tuition fees, insurance premium fees, and similar consumer items. Also included is paper covering the lease (where the bank is not the owner or lessor) or purchase of equipment for use in manufacturing, farming, construction, or excavation.

(5) Under certain circumstances, installment consumer paper which otherwise meets the requirements of this exception will be considered a loan or extension of credit to the maker of the paper rather than the seller of the paper. Specifically, where (i) through the bank's files it has been determined that the financial condition of each maker is reasonably adequate to repay the loan or extension of credit, and (ii) an officer designated by the bank's chairman or chief executive officer pursuant to authorization by the board of directors certifies in writing that the bank is relying primarily upon the maker to repay the loan or extension of credit, the loan or extension of credit is subject only to the lending limits of the maker of the paper. Where paper is purchased in substantial quantities, the records, evaluation, and certification may be in such form as is appropriate for the class and quantity of paper involved.

(6) If a loan under this subsection is in default and the dealer or seller of the loan has contractually committed to repurchase the paper, then the loan will be aggregated with the dealer or seller's other outstanding debt for lending limit purposes and will be subject to the twenty per centum limitation.

(7) If loan payments are received and/or controlled by the dealer or seller of the paper and remitted to the bank, then those loans will be aggregated with the dealer or seller's other outstanding debt for lending limit purposes and will be subject to the twenty per centum limitation.

History

Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-090, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-100 Combining loans and extensions of credit made to separate persons—Generally.

(1) Loans or extensions of credit to one person will be attributed to another person or persons when:

(a) The proceeds of the loans or extensions of credit are intended for or are used for the direct benefit of the other person or persons; or

(b) A "common enterprise" exists between the persons.

(2) The proceeds of a loan or extension of credit to a borrower will be deemed to be used for the "direct benefit" of another person and will be attributed to the other person when the proceeds, or assets purchased with the proceeds, are transferred to another person, other than in a bona fide arm's length transaction, where the proceeds are used to acquire property, goods, or services.

(3) Determination of whether a "common enterprise" exists depends upon a realistic evaluation of the facts and circumstances of the applicable transactions. A "common enterprise" exists when:

(a) The expected source of repayment for each of the multiple loans or extensions of credit is the same for each person; or

(b) Separate persons borrow from a bank for the purpose of acquiring a business enterprise of which those persons will own or control more than fifty percent of the voting securities; or

(c) The loans or extensions of credit are made to persons who are related by common control and (i) are engaged in interdependent business or (ii) there is substantial financial interdependence among them; or

(d) The division determines, based upon a reasonable evaluation of the facts and circumstances of particular transactions, that a common enterprise exists.

(4) "Substantial financial interdependence" occurs when fifty percent or more of one person's gross receipts or gross expenditures (on an annual basis) are derived from transactions with one or more persons related through common control (gross receipts and expenditures include gross revenues/expenses, intercompany loans, dividends, capital contributions, and similar receipts or payments).

(5) Throughout this section, the term "control" is presumed to exist when one or more persons acting in concert, directly or indirectly:

(a) Own, control, or have power to vote twenty-five percent or more of any class of voting securities of another person;

(b) Exercise a controlling influence over the management or policies of another person; or

(c) Control in any manner the election of a majority of the directors, trustees or other persons exercising similar functions of another person. "Common control" includes control of one person by another person.

History

Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-100, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-110 Loans to partnerships, joint ventures, and associations.

(1) Loans or extensions of credit to a partnership, joint venture, or association shall, for purposes of this chapter, be considered loans or extensions of credit to each member of such partnership, joint venture, or association.

(2) Loans or extensions of credit to members of a partnership, joint venture, or association shall be considered loans or extensions of credit to the partnership, joint venture, or association if one or more of the tests set forth in WAC 208-512A-100 is satisfied with respect to one or more of the members. However, loans to members of a partnership, joint venture, or association will not be attributed to other members of the partnership, joint venture, or association unless one or more of the tests set forth in WAC 208-512A-100 is satisfied with respect to such other members. The tests set forth in WAC 208-512A-100 shall be deemed satisfied when loans or extensions of credit are made to members of a partnership, joint venture, or association for the purpose of purchasing an interest in such partnership, joint venture, or association.

(3) The rule set forth in subsection (1) of this section is not applicable to limited partners in limited partnerships or to members of joint ventures if such partners or members, by the terms of the partnership or membership agreement, are not to be held liable for the debts or actions of the partnership, joint venture, or association. However, the rules set forth in WAC 208-512A-100 are applicable to such partners or members.

History

Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-110, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-120 Loans to limited liability companies.

Loans or extensions of credit to a limited liability company shall, for purposes of this chapter, be considered loans or extensions of credit to a corporation, and shall not be subject to the provisions of WAC 208-512A-110.

History

Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-120, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-130 Loans to subsidiaries and corporate groups.

(1) Loans or extensions of credit to a person and its subsidiaries or to subsidiaries of one person will not be combined where the person and its subsidiaries are not engaged in a "common enterprise" as defined in WAC 208-512A-100(2).

(2) If members of a corporate group (a person and all its subsidiaries) are either:

(a) "Substantially financially interdependent," as defined in WAC 208-512A-100(3); or

(b) Engaged in "common enterprise," as defined in WAC 208-512A-100(2), then the total amount of loans or extensions of credit to these persons must be attributed to each of the other persons in the corporate group.

Conversely, if members of a corporate group are neither substantially financially interdependent nor engaged in "common enterprise," then the loans to different members are separately subject to a twenty percent limitation. In no event may the total amount of loans or extensions of credit by a state bank to a corporate group exceed fifty percent of the bank's capital and surplus.

(3) For purposes of this section, a corporation or a limited liability company is a subsidiary of a person if the person owns or beneficially owns, directly or indirectly, more than fifty percent of the voting securities or voting interests of the corporation or limited liability company.

History

Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-130, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-200 Computation of time—Calculation date of lending limits.

(1) For purposes of determining compliance with RCW 30A.04.111 and this chapter, a bank shall determine its lending limit as of the most recent of the following dates:

(a) The last day of the preceding calendar quarter; or

(b) The date on which there is a change in the bank's capital category for purposes of the Federal Deposit Insurance Act, at 12 U.S.C. 1831o (b)(1).

(2) A bank's lending limit calculated in accordance with subsection (1)(a) of this section will be effective as of the earlier of the following dates:

(a) The date on which the bank's call report is submitted; or

(b) The date on which the bank's call report is required to be submitted.

(3) A bank's lending limit calculated in accordance with subsection (1)(b) of this section will be effective on the date that the limit is to be calculated.

(4) If the division determines for safety and soundness reasons that a bank should calculate its lending limit more frequently than required by subsection (1) of this section, the division may provide written notice to the bank directing it to calculate its lending limit at a more frequent interval, and the bank shall thereafter calculate its lending limit at that interval until further notice.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.04.111, 30A.04.215, 30A.08.140, 32.08.157 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512A-200, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-200, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-300 Credit exposure arising from derivative transactions.

(1) This section sets forth the rules for calculating the credit exposure arising from a derivative transaction entered into by a bank for purposes of determining the bank's lending limit pursuant to RCW 30A.04.111 and this chapter.

(2) Subject to the direction of the division, a bank shall calculate the credit exposure to a counterparty arising from a derivative transaction by means of:

(a) The internal model method;

(b) The conversion factor matrix method;

(d) The current exposure method.

(3) Except as otherwise required by the division, a bank shall use the same method for calculating counterparty credit exposure arising from all of its derivative transactions.

(4) The division may require a bank to use the internal model method, the conversion factor matrix method, or the remaining maturity method to calculate the credit exposure of derivative transactions if it finds that such method is necessary to promote the safety and soundness of the bank.

(5) The requirements for using the internal model method are as follows:

(a) The credit exposure of a derivative transaction under the internal model method shall equal the sum of the current credit exposure of the derivative transaction and the potential future credit exposure of the derivative transaction.

(b) A bank shall determine its current credit exposure by the mark-to-market value of the derivative contract. If the mark-to-market value is positive, then the current credit exposure equals that mark-to-market value. If the mark-to-market value is zero or negative, than the current credit exposure is zero.

(c) A bank may not use the internal model method in its calculation of potential credit exposure to a derivative transaction unless the bank obtains prior approval of the division or unless it is already using the internal model method, as of January 21, 2013, and the division thereafter determines that the bank's internal model method is safe and sound and that bank's management is competent to administer its derivative investment program using such internal model method.

(d) A bank that calculates its credit exposure by using the internal model method may net credit exposures of derivative transactions arising under the same qualifying master netting agreement.

(6) The credit exposure arising from a derivative transaction under the conversion factor matrix method shall equal and remain fixed at the potential future credit exposure of the derivative transaction as determined at the execution of the transaction by reference to Table 1 below.

Table 1 - Conversion Factor Matrix for Calculating Potential Future Credit Exposure1

| Original Maturity2 | Interest Rate | Foreign Exchange Rate and Gold | Equity | Other3 (includes commodities and precious metals except gold) | | --- | --- | --- | --- | --- | | 1 year or less | 0.015 | 0.015 | 0.20 | 0.06 | | Over 1 to 3 years | 0.030 | 0.030 | 0.20 | 0.18 | | Over 3 to 5 years | 0.060 | 0.060 | 0.20 | 0.30 | | Over 5 to 10 years | 0.120 | 0.120 | 0.20 | 0.60 | | Over ten years | 0.300 | 0.300 | 0.20 | 1.00 |

| 1 | For an OTC derivative contract with multiple exchanges of principal, the conversion factor is multiplied by the number of remaining payments in the derivative contract. | | --- | --- | | 2 | For an OTC derivative contract that is structured such that on specified dates any outstanding exposure is settled and the terms are reset so that the market value of the contract is zero, the remaining maturity equals the time until the next reset date. For an interest rate derivative contract with a remaining maturity of greater than one year that meets these criteria, the minimum conversion factor is 0.005. | | 3 | Transactions not explicitly covered by any other column in Table 1 are to be treated as "Other." |

(7) The credit exposure arising from a derivative transaction under the remaining maturity method shall equal the greater of zero or the sum of the current mark-to-market value of the derivative transaction added to the product of the notional amount of the transaction, the remaining maturity in years of the transaction, and a fixed multiplicative factor determined by reference to Table 2 below.

Table 2 - Remaining Maturity Factor for Calculating Credit Exposure

| | Interest Rate | Foreign Exchange Rate and Gold | Equity | Other1 (includes commodities and precious metals except gold) | | --- | --- | --- | --- | --- | | Multiplicative Factor | 1.5% | 1.5% | 6% | 6% |

| 1 | Transactions not explicitly covered by any other column in Table 2 are to be treated as "Other." | | --- | --- |

(8) The credit exposure arising from a derivative transaction under the current exposure method shall be calculated pursuant to the Office of the Comptroller of the Currency regulations, 12 C.F.R. Part 32, at Sec. 9 (b)(iii).

(9) Notwithstanding any other provision of this section, a bank that uses the conversion factor matrix method or remaining maturity method, or that uses the internal model method without entering an effective margining arrangement, shall calculate the counterparty credit exposure arising from credit derivatives entered by the bank by adding the net notional value of all protection purchased from the counterparty on each reference entity.

(10) A bank shall calculate the credit exposure to a reference entity arising from credit derivatives entered by the bank by adding the notional value of all protection sold on the reference entity. However, the bank may reduce its exposure to a reference entity by the amount of any eligible credit derivative purchased on that reference entity from an eligible protection provider.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.04.111, 30A.04.215, 30A.08.140, 32.08.157 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512A-300, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-300, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-310 Securities financing transactions.

(1) Only to the extent required by the FDIC, a bank that is a state insured bank shall comply with all rules governing limits on extensions of credit related to a state insured bank's credit exposure to securities financing transactions.

(2) Only to the extent required by the Federal Reserve Board, a bank that is a state member bank shall comply with all rules governing limits on extensions of credit related to a state member bank's credit exposure to securities financing transactions.

History

Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-310, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-320 Policies and procedures related to derivative transactions, etc.

To fulfill the requirements of section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. Sec. 1828(y), and the requirements (if any) of the FDIC and the Federal Reserve Board in relation to securities financing transactions by state insured banks and state member banks, respectively, the division may publish and implement policies and procedures, consistent with RCW 30A.04.111 and this chapter, related to examination for and supervision and enforcement of WAC 208-512A-300 and 208-512A-310.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.04.111, 30A.04.215, 30A.08.140, 32.08.157 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512A-320, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-320, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-400 Effect of OCC rules, interpretations and opinions as guidance.

Where RCW 30A.04.111 and this chapter do not specifically address certain transactions involving loans and extensions of credit, the division may, as necessary, in its interpretations and supervision and enforcement of banks, be guided by applicable rules, interpretations, and opinions of the Office of the Comptroller of the Currency in the interest of a bank's safety and soundness, but only to the extent that such rules, interpretations, and opinions are compatible with the provisions of RCW 30A.04.111 and this chapter.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.04.111, 30A.04.215, 30A.08.140, 32.08.157 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512A-400, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-400, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-500 Loans and extensions of credit to insiders and their immediate family.

No provision of Titles 30A and 32 RCW, chapter 208-512 WAC, or this chapter, shall limit the duty of a bank or a bank's affiliate, independent of any requirements of this chapter, to also comply with the provisions of Federal Reserve Board Regulation O, 12 C.F.R. Part 215, which relates to loans and extensions of credit to insiders of a bank or bank affiliate and their immediate family.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.04.111, 30A.04.215, 30A.08.140, 32.08.157 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512A-500, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-500, filed 1/8/13, effective 2/8/13.

Wash. Admin. Code § 208-512A-600 Transitional rules.

(1) Loans or extensions of credit that were in violation of RCW 30A.04.111 and the former lending limits rules prior to January 21, 2013, will be considered to remain in violation of law until they are paid in full, regardless of whether the loans or extensions of credit conform to the rules established in this chapter. Renewals or extensions of such loans or extensions of credit will also be considered violations of law.

(2) A bank that has outstanding loans or extensions of credit to a person in violation of RCW 30A.04.111 and the former lending limits rules as of January 21, 2013, may make additional advances to such person after those dates if the additional advances are permitted under this chapter. The additional advances, however, may not be used directly or indirectly to repay any outstanding illegal loans or extensions of credit.

(3) Loans or extensions of credit which were in conformance with RCW 30A.04.111 and the former lending limits rules prior to January 21, 2013, but are not in conformance with this chapter will not be considered to be violations of law during the existing contract terms of such loans or extensions of credit. Renewals or extensions of such loans or extensions of credit which are not in conformance with this chapter may be made on or after January 21, 2013, if the nonconformity is caused by WAC 208-512A-005 (1)(b) and 208-512A-300; however, all loans or extensions of credit made under such renewals or extensions must conform with this chapter no later than June 1, 2013. Loans or extensions of credit which are not in conformance with this chapter for any other reason (i.e., a reduction in the bank's capital) must conform to this section upon renewal or extension.

(4) If a bank, prior to January 21, 2013, entered into a legally binding commitment to advance funds on or after such date, and such commitment was in conformance with RCW 30A.04.111 and the former lending limits rules, advances under such commitment may be made notwithstanding the fact that such advances are not in conformance with this chapter. The bank must, however, demonstrate that the commitment represents a legal obligation to fund, either by a written agreement or through file documentation.

(5) As used in this section, "former lending limits rules" means WAC 208-512-210 through 208-512-300, inclusive.

(6) Notwithstanding any other provision of this chapter, a savings bank under Title 32 RCW will not be considered to be in violation of law during the existing contract terms of any loan or extension of credit, which:

(a) In the case of a savings bank under WAC 208-512A-009 (2) or (3), was made and funded prior to June 1, 2013; or

(b) In the case of a savings bank under WAC 208-512A-009(4) but not subject to WAC 208-512A-009 (2) or (3), was made and funded prior to a date, earlier than June 1, 2013, upon which the savings bank gave notice to the division of its election to conform to the provisions of this chapter pursuant to WAC 208-512A-009(4).

(7) Notwithstanding any other provision of this chapter, a renewal or extension of such a loan or extension of credit by a savings bank under subsection (6)(a) and (b) of this section, which is not in conformance with this chapter, may be made if the nonconformity is caused by WAC 208-512A-005 (1)(b) and 208-512A-300; however, any loan or extension of credit made under such renewals or extensions must conform with this chapter no later than December 31, 2013. However, a loan or extension of credit by such a savings bank which is not in conformance with this chapter for any other reason (i.e., a reduction in the bank's capital) must conform to this section upon renewal or extension.

(8) A bank will not be deemed to be in violation of law, including this chapter, if:

(a) It is engaged in derivative transactions prior to January 21, 2013;

(b) Uses an internal model method in connection with any part of its derivative transaction program;

(c) It is later determined by the division that the bank's specific internal model method is unsafe and unsound or that the bank's management is not competent to administer its derivative transaction program using such specific internal model method; and

(d) The director of banks does not find that the bank has shown a lack of good faith in its use of a specific internal model method.

(9) In the event of a determination pursuant to subsection (8) of this section, the division will treat the bank's derivative transactions program as "nonconforming" rather than a violation of law. In that event, the director of banks may issue a directive to the bank to exercise reasonable efforts to either bring its derivative transactions program into compliance or, if the director of banks so finds in exceptional cases, unwind its derivative transactions program.

History

Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.04.111, 30A.04.215, 30A.08.140, 32.08.157 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512A-600, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-600, filed 1/8/13, effective 2/8/13.

Chapter 208-514 Mutual savings banks.

Wash. Admin. Code § 208-514-010 Facilitating loans—Real property.

For purposes of this section the following words shall have the following meanings:

(1) "Foreclosed property" means real estate or interest therein, or other property used in connection therewith acquired through foreclosure or similar action, deed of trust sales, or by deed in lieu of any thereof.

(2) "Facilitating loan" means a loan or real estate contract covering foreclosed property made by a mutual savings bank to the purchaser of the foreclosed property.

(3) "Loan limits" means the limitations on investments imposed by RCW 32.20.410.

A mutual savings bank may make a facilitating loan for not in excess of the sale price of the property if the board of trustees or officers or committees designated by the board deem it prudent to dispose of the property in that manner. Facilitating loans shall not be deemed violations of RCW 32.20.250 or 32.20.260, nor shall the division of banks require facilitating loans to be classified as loans made pursuant to RCW 32.20.255. Until such time as a facilitating loan conforms to the requirements of RCW 32.20.250, 32.20.255 or 32.20.260, or other investment statutes relating to mutual savings bank, it shall be carried on the books and records of the bank as "Other real estate loans - Debts previously contracted," and shall not be carried at more than the value of the property securing it. Facilitating loans shall be included in determining the amounts invested which are subject to the loan limits to the extent of the value at which they are carried on the books of the bank. The bank may, however, make facilitating loans regardless of the loan limits.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-514-010, filed 8/22/00, effective 9/22/00
Order 36, § 50-14-010, filed 7/8/76.

Wash. Admin. Code § 208-514-020 Introduction.

This chapter implements the authority of the director of the department of financial institutions (the "director") under chapters 32.08, 32.34, and 34.05 RCW to enact regulations concerning the organization and operation of mutual holding companies. It addresses only those features of the organization and operation of mutual holding companies and their subsidiary stock savings banks that are not governed by Title 32 RCW. Among the provisions that must be considered are:

(1) Chapter 32.32 RCW for the chartering of a mutual savings bank and the conversion of a mutual savings bank to a stock savings bank;

(2) Title 32 RCW generally for the operations of any such savings bank; and

(3) Chapter 32.34 RCW for any merger or acquisition of assets involving a mutual holding company or banking subsidiary of a mutual holding company.

In addition, the director has determined that formation of a business trust is not the sole and exclusive method by which a state savings bank may form a mutual holding company ("MHC").

Under RCW 32.34.050, a state savings bank is allowed to form a business trust that, in turn, is authorized to become a MHC. However, based on the statutory authority granted to the director under that statute as well as chapters 32.08 and 34.05 RCW, the director has determined that utilization of a business trust is not the exclusive procedure for creation of MHCs.

By enacting RCW 32.08.142, the legislature evidenced a clear intent that state-chartered savings banks not be placed at a competitive disadvantage to federally chartered savings banks. While the state Constitution prohibits automatic incorporation into state law of federal laws enacted after adoption of RCW 32.08.142, that restriction does not invalidate the legislative intent that state institutions not be placed at an undue competitive disadvantage with federal savings banks.

Conditioning MHC formation on the utilization of a business trust to act as the MHC is potentially disadvantageous to state savings banks in view of:

(a) The absence of state statutory and regulatory guidance concerning the governance and authority of trusts when acting as holding companies;

(b) The uncertainty of regulations of such trusts as MHCs; and

(c) The potential federal tax uncertainties that would arise by utilizing a trust in connection with a tax free reorganization into a mutual holding company.

In addition, business trusts are permitted by statute (chapter 23.90 RCW) to exercise the general powers of domestic corporations, including the power to merge into a domestic corporation. As a result, the director has determined that the scope of chapter 32.34 RCW and the incidental powers clause of RCW 32.08.140 make it convenient or useful in connection with a savings bank's performance of its specifically enumerated powers to accomplish a MHC reorganization, to utilize either a corporation formed under the laws of the state of Washington or a business trust.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-514-020, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW. WSR 93-13-142, § 50-14-020, filed 6/23/93, effective 7/24/93. Statutory Authority: RCW 32.34.040 - [32.34.]050. WSR 92-06-041, § 50-14-020, filed 2/28/92, effective 3/30/92.

Wash. Admin. Code § 208-514-030 Definitions—Regulations not exclusive.

(1) The definitions in RCW 32.32.025 shall apply to any transaction under these rules unless the context requires otherwise and except as provided herein.

(2) The reorganization of a mutual savings bank into mutual holding company form ("reorganization") and the subsequent conversion of the MHC into stock form or the offering of common stock of a subsidiary of a MHC that will cause the MHC to hold less than fifty-one percent of the issued and outstanding common stock of the stock savings bank ("conversion to stock form") shall be governed by chapter 32.32 RCW, except as provided in these rules.

(3) The term "mutual holding company" shall mean the business trust or mutually owned corporation, or the successor of either, originally established by a savings bank to serve as the holding company of a stock savings bank subsidiary, provided that a MHC shall at all times own fifty-one percent or more of the issued and outstanding common stock of a stock savings bank subsidiary that is the successor by merger or purchase to substantially all of the assets and all of the deposits and other liabilities of the savings bank that has reorganized into a mutual holding company pursuant to RCW 32.34.050 and these rules.

(4) To achieve the intent of RCW 32.34.050 in a manner that ensures consistency with chapter 32.32 RCW, and acting pursuant to RCW 32.32.010, the director hereby waives or modifies to the extent set forth in these rules the applicability of the following provisions of chapter 32.32 RCW as they relate to the organization and operation of mutual holding companies and their stock savings bank subsidiaries: RCW 32.32.035, 32.32.045 through 32.32.070, 32.32.085, 32.32.090, 32.32.095, 32.32.110, 32.32.120, 32.32.135 through 32.32.160, 32.32.185 through 32.32.205, 32.32.240 through 32.32.275, 32.32.315, 32.32.320, 32.32.330, 32.32.335, 32.32.355, 32.32.440, and 32.32.485.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-514-030, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW. WSR 93-13-142, § 50-14-030, filed 6/23/93, effective 7/24/93. Statutory Authority: RCW 32.34.040 - [32.34.]050. WSR 92-06-041, § 50-14-030, filed 2/28/92, effective 3/30/92.

Wash. Admin. Code § 208-514-040 Authorization to form mutual holding companies.

(1) Notwithstanding any other provision of law, and in accordance with the general requirements set forth in WAC 208-514-050 through 208-514-140, a mutual savings bank may reorganize under a plan of reorganization so as to cause its deposit-taking and one or more other activities to be conducted by a stock savings bank subsidiary of a mutual holding company, which subsidiary is formed for such purpose. The plan of reorganization must be adopted by the bank's trustees and submitted to and approved by the director as provided in these rules.

(2) Except to the extent that such provisions are inconsistent with these rules, the new stock savings bank subsidiary of the mutual holding company shall be subject to the same provisions of Title 32 RCW as apply to other stock savings banks.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-514-040, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW. WSR 93-13-142, § 50-14-040, filed 6/23/93, effective 7/24/93. Statutory Authority: RCW 32.34.040 - [32.34.]050. WSR 92-06-041, § 50-14-040, filed 2/28/92, effective 3/30/92.

Wash. Admin. Code § 208-514-050 Required approvals.

(1) A reorganization of a mutual savings bank pursuant to these rules shall be approved by not less than two-thirds of the board of trustees of the mutual savings bank.

(2)(a) A mutual savings bank proposing a reorganization pursuant to these rules shall provide the director with written notice of such proposed reorganization. Such notice shall include (i) a copy of the plan of reorganization approved by the board of trustees pursuant to subsection (1) of this section, (ii) the proposed incorporation and authorization certificates for the mutual holding company and/or the stock savings bank subsidiary, as appropriate, and (iii) such other information as the director shall require. The director shall approve or disapprove the plan of reorganization within sixty days of acceptance of a completed plan of reorganization.

(b) In determining whether to approve the plan of reorganization, the director shall consider:

(i) Whether the formation of the mutual holding company would be in the interests of the depositors of the mutual savings bank proposing to reorganize;

(ii) Whether the reorganization would promote safe and sound banking practices;

(iii) Whether the reorganization would serve the public interest;

(iv) Whether the financial and management resources of the mutual savings bank proposing to reorganize are sufficient to warrant approval of the reorganization; and

(v) Whether the mutual savings bank proposing to reorganize either fails to furnish any information required under (a) of this subsection or furnishes information containing any statement that, at the time and in the circumstances under which it was made, was false or misleading with respect to any material fact or omits any material fact necessary to make statements therein not false or misleading.

(c) When the director shall have determined to approve or disapprove the plan of reorganization, the director shall so advise the mutual savings bank in writing and, if appropriate, shall endorse approval on the incorporation and authorization certificates and cause the same to be filed in such manner and in the respective offices provided in chapter 32.08 RCW. Upon the filing of the authorization certificate as provided in RCW 32.08.080, the existence of the mutual holding company and/or stock savings bank, as appropriate, shall commence. As used in these rules, the term "authorization certificate" shall include an amended authorization certificate.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-514-050, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW. WSR 93-13-142, § 50-14-050, filed 6/23/93, effective 7/24/93. Statutory Authority: RCW 32.34.040 - [32.34.]050. WSR 92-06-041, § 50-14-050, filed 2/28/92, effective 3/30/92.

Wash. Admin. Code § 208-514-060 Formation of a mutual holding company.

(1)(a) The plan of reorganization may authorize the formation of a MHC by:

(i) The organization by or at the discretion or request of the mutual savings bank of a business trust or mutual corporation that shall serve as a MHC, the organization by the MHC of a stock savings bank subsidiary and the transfer to such stock savings bank of substantially all of the mutual savings bank's assets and liabilities, including all of its deposit liabilities, in accordance with these rules;

(ii) The organization by or at the direction or request of the mutual savings bank of a business trust or mutual corporation that shall serve as the MHC, and the organization by such MHC of a stock savings bank subsidiary that merges with the mutual savings bank; or

(iii) The reorganization of the mutual savings bank under any other method approved by the director.

(b) For the purposes of (a) of this subsection and when authorized by the director, as hereinafter provided, the trustees of the mutual holding company, consisting of five or more natural persons who are citizens of the United States, may incorporate an interim stock savings bank subsidiary in the manner herein prescribed. No savings bank shall incorporate for less amount nor commence business unless it has a paid-in capital stock in such amount as may be determined by the director after consideration of the proposed transaction.

(i) Persons desiring to incorporate an interim stock savings bank shall file with the director a notice of their intention to organize a savings bank in such form and containing such information as the director shall prescribe by regulation or otherwise require, together with proposed articles of incorporation and bylaws, which shall be submitted for examination to the director at his office in Olympia. The proposed articles of incorporation shall state:

(A) The name of such savings bank.

(B) The city, village or locality and county where the head office of such savings bank is to be located.

(D) The amount of its capital stock, which shall be divided into shares of a par or no par value as may be provided in the articles of incorporation.

(E) The names, places of residence, and mailing addresses of the persons who as directors are to manage the bank until the first annual meeting of its shareholders.

(F) If there is to be preferred or special classes of stock, a statement of preferences, voting rights, if any, limitations and relative rights in respect of the shares of each class; or a statement that the shares of each class shall have the attributes as shall be determined by the bank's board of directors from time to time with the approval of the director.

(G) Any provision granting the shareholders the preemptive right to acquire additional shares of the bank and any provision granting shareholders the right to cumulate their votes.

(H) Any provision, not inconsistent with law, which the incorporators elect to set forth in the articles of incorporation for the regulation of the internal affairs of the corporation, including, without limitation, any provision restricting the transfer of shares.

(I) Any provision the incorporators elect to so set forth, not inconsistent with law or with the purposes for which the bank is organized, or any provision limiting any of the powers granted in the applicable provisions of the Revised Code of Washington.

It shall not be necessary to set forth in the articles of incorporation any of the corporate powers granted in the applicable provisions of the Revised Code of Washington. The articles of incorporation shall be signed by all of the incorporators and acknowledged before an officer authorized to take acknowledgements.

(ii) In case of approval, the director shall forthwith give notice thereof to the proposed incorporators and file one of the triplicate articles of incorporation in his own office, transmit another triplicate to the secretary of state, and the last to the incorporators. Upon receipt from the proposed incorporators of the same fees as are required for filing and recording other articles of incorporation, the secretary of state shall file such articles and record the same. Upon the filing of articles of incorporation approved as aforesaid by the director, with the secretary of state, all persons named therein and their successors shall become and be a corporation, which shall have the powers and be subject to the duties and obligations prescribed by the applicable provisions of the Revised Code of Washington, and whose existence shall continue from the date of the filing of such articles until terminated pursuant to law; but such corporation shall not transact any business, except as is necessary or convenient to its organization and preparation to engage in business, until it has received from the director a certificate of authority to engage in the banking business as a stock savings bank.

(c) For the purposes of (a) of this subsection, WAC 208-514-080 permits a newly organized stock savings bank to issue to persons other than its parent MHC, an amount of common stock and securities convertible into common stock that, in the aggregate, does not exceed forty-nine percent of the issued and outstanding common stock of such stock savings bank upon completion of the offering. Issued and outstanding securities that are convertible into common stock shall be considered issued and outstanding common stock for purposes of computing the forty-nine percent limitation. This subsection shall not limit the authority of such stock savings bank to issue equity or debt securities other than common stock and securities convertible into common stock.

(2) In connection with the reorganization of a mutual savings bank as provided in WAC 208-514-040, the MHC may acquire assets of the mutual savings bank to the extent that such assets are not then required to be transferred to (or retained by) the stock savings bank in order to satisfy capital or reserve requirements of any applicable state or federal law or regulation.

(3) A stock savings bank whose outstanding common stock is at least fifty-one percent but less than one hundred percent owned by a mutual holding company shall have at least one director, but no more than two-fifths of its directors, who are "unaffiliated directors" who shall represent the interests of the minority shareholders. An "unaffiliated director" is a director who is not:

(a) An officer or employee of the stock savings bank (or any affiliate thereof); or

(b) An officer, trustee, or employee of the mutual holding company.

If the incorporation certificate or bylaws of the stock savings bank provide that the board of directors shall be divided into two or more classes, then to the extent possible, each class shall contain the same number of unaffiliated directors as each other class.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-514-060, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW. WSR 93-13-142, § 50-14-060, filed 6/23/93, effective 7/24/93. Statutory Authority: RCW 32.34.040 - [32.34.]050. WSR 92-06-041, § 50-14-060, filed 2/28/92, effective 3/30/92.

Wash. Admin. Code § 208-514-070 Mutual holding company powers.

(1) Upon the formation of a MHC:

(a) The MHC shall possess all the rights, powers, and privileges (except deposit-taking powers) and shall be subject to all the limitations, not inconsistent with these rules, of a mutual savings bank under Title 32 RCW; and

(b) The MHC shall be subject to the limitations imposed by the Bank Holding Company Act of 1956 (12 U.S.C. Section 1841, et seq.) or, in the case of a MHC resulting from the reorganization of a savings bank that elected either before or after such reorganization to be treated as a savings association (as defined in 12 U.S.C. Section 1467a), such mutual holding company shall be subject to the limitations imposed by the savings and loan holding company provisions of the Home Owners' Loan Act (12 U.S.C. Section 1467a).

(2) Notwithstanding any inconsistent provisions of Title 32 RCW, and subject to the express approval of (or additional rules promulgated by) the director, a MHC may:

(a) Merge with, acquire, or purchase the assets of a mutual holding company established pursuant to these rules or the savings and loan holding company provisions of the Home Owners' Loan Act (12 U.S.C. Section 1467a);

(b) Acquire or purchase the assets or stock of a stock savings bank, commercial bank, credit union, stock savings and loan association, stock federal savings bank, or stock federal savings and loan association;

(c) Acquire a mutual savings bank, mutual savings and loan association, federal mutual savings bank, or federal mutual savings and loan association through the merger of such institution with a stock subsidiary of such mutual holding company;

(d) Convert to a stock holding company pursuant to the provisions of a plan which is approved by the director, preserves the subscription and liquidation account rights of depositors of the mutual savings bank who then remain depositors of the stock savings bank and otherwise complies with WAC 208-514-130; and

(e) Engage in any other acquisition or combination, specifically permitted by the director, including a merger into or sale of assets to another mutual or stock corporation.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-514-070, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW. WSR 93-13-142, § 50-14-070, filed 6/23/93, effective 7/24/93. Statutory Authority: RCW 32.34.040 - [32.34.]050. WSR 92-06-041, § 50-14-070, filed 2/28/92, effective 3/30/92.

Wash. Admin. Code § 208-514-080 Offering of securities.

(1) Any offering of shares of voting securities by a MHC which converts to stock form or of common stock of a stock savings bank subsidiary of a MHC that will cause the holding company to hold less than fifty-one percent of the issued and outstanding common stock of the stock savings bank upon completion of the offering (a "subsequent offering") shall be governed by the rules prescribed in chapter 32.32 RCW, except to the extent that those rules are explicitly waived or modified by the director.

(2) Any offering of shares of any class of stock of a stock savings bank subsidiary of a MHC that will not cause the MHC to hold less than fifty-one percent of the issued and outstanding common stock of the stock savings bank upon completion of the offering may be accomplished through either a public distribution or by means of a limited distribution or placement of the securities, none of which methods of offering will require the stock of the savings bank subsidiary to be offered to members of the unconverted mutual savings bank or of the MHC. Any such offering shall comply with the disclosure requirements of chapter 32.32 RCW, shall be made by means of an offering circular approved by the director, and shall be sold at a price that is approved (a) by the director in the case of the initial offering of shares to persons other than the MHC, and in such case based upon a proposed price range established by qualified persons who are independent of the bank and (b) by the board of directors in the case of other offerings contemplated by this subsection.

(3) The procedures to follow in conducting a subsequent offering may, with the director's approval, differ from those set forth in chapter 32.32 RCW.

(4) Notwithstanding any contrary provision of Title 32 RCW, there shall be no requirement to use an underwriter in an offering made pursuant to subsection (2) of this section, though such use is permissible.

(5) Subject to approval of the director, a stock savings bank subsidiary of a MHC may declare or pay a cash dividend that is payable only to shareholders of the stock savings bank other than the MHC.

(6) Notwithstanding any contrary provision of Title 32 RCW, no offering circular used in connection with an offering pursuant to subsection (2) of this section shall be required to set forth the estimated subscription price range of the shares being offered.

(7) A stock savings bank subsidiary of a MHC may issue and, consistent with these rules, any person may acquire any amount of preferred stock of the bank.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-514-080, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW. WSR 93-13-142, § 50-14-080, filed 6/23/93, effective 7/24/93. Statutory Authority: RCW 32.34.040 - [32.34.]050. WSR 92-06-041, § 50-14-080, filed 2/28/92, effective 3/30/92.

Wash. Admin. Code § 208-514-090 Subscription rights.

(1) Upon a conversion to stock form, as such conversion is defined in WAC 208-514-030(2), by a MHC or a stock savings bank subsidiary of a MHC, depositors of the stock savings bank at the record date of the conversion to stock form who continuously have been depositors since the reorganization, or were depositors of any savings association subsequently acquired by a MHC at a time when the association was in mutual form and remained depositors of the stock savings bank, shall receive, without payment, nontransferable rights to subscribe for stock of the converted MHC or the converted stock savings bank to be sold in the subsequent offering, to the extent that such depositors would have received those rights pursuant to RCW 32.32.045 in a stock conversion of the savings bank as prescribed in chapter 32.32 RCW; provided, however, that such depositors who are not shareholders of the stock savings bank at the record date for the subsequent offering shall have priority rights, not inconsistent with the provisions of chapter 32.32 RCW, to subscribe for shares to be issued in the subsequent offering in accordance with a plan approved by the director or made pursuant to subsequent rules to be promulgated by the director.

(2) For purposes of this section, an "eligible account holder" is any depositor of a stock savings bank at the record date for a conversion to stock form of the bank or the MHC who has continuously owned in such bank one or more accounts valued in the aggregate of fifty dollars or more since the date that the trustees of the unconverted mutual savings bank approved the reorganization or the date that the bank's predecessor mutual association was acquired by the MHC.

(3) Nothing in chapter 32.34 RCW or chapter 208-514 WAC shall be construed to authorize or require that depositors in a mutual savings bank that reorganizes as a MHC be offered stock in the stock savings bank subsidiary except as provided in subsection (1) of this section.

(4) Depositors in a mutual savings bank that reorganizes as a MHC with a stock savings bank subsidiary shall become depositors in such subsidiary when the mutual savings bank merges with or transfers its assets and liabilities to the stock savings bank.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-514-090, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW. WSR 93-13-142, § 50-14-090, filed 6/23/93, effective 7/24/93. Statutory Authority: RCW 32.34.040 - [32.34.]050. WSR 92-06-041, § 50-14-090, filed 2/28/92, effective 3/30/92.

Wash. Admin. Code § 208-514-100 Stock issuance and stock award plans.

The authority for a stock savings bank subsidiary of a MHC to issue stock shall be subject to the following limitations, unless otherwise approved by the director.

(1) The stock sold in the reorganization shall be sold at a total price equal to the estimated pro forma market value of such stock, based on an independent valuation as provided in WAC 208-514-080(2) and any stock sold in a later offering shall be sold at its fair value as determined by the board of directors of the stock savings bank.

(2) The aggregate amount of issued and outstanding common stock of the stock savings bank owned or controlled by persons other than the MHC at the close of any proposed issuance shall be forty-nine percent or less than the savings bank's total outstanding common stock.

(3) The aggregate amount of common stock acquired in the proposed issuance, plus all prior issuances of the savings bank, by any nontax-qualified employee stock benefit plan of the savings bank or any insider (which for the purpose of these rules will mean an officer, director, or associate of an officer or director) of the savings bank (exclusive of any stock acquired by said plan or insider and his or her associates in the secondary market) shall not exceed ten percent of the outstanding shares of common stock of the savings bank held by persons other than the savings bank's MHC parent at the close of the proposed issuance. In calculating the number of shares held by any insider or associate, shares held by any tax-qualified or nontax-qualified employee stock benefit plan of the savings bank that are attributable to such person shall not be counted.

(4) The aggregate amount of stock, whether common or preferred, acquired in the proposed issuance, plus all prior issuances of the savings bank, by any nontax-qualified employee stock benefit plan of the savings bank or any insider of the savings bank and his or her associates (exclusive of any stock acquired by said plan or insider and his or her associates in the secondary market) shall not exceed ten percent of the stockholders' equity of the savings bank held by persons other than the MHC parent at the close of the proposed issuance.

(5) The aggregate amount of common stock acquired in the proposed issuance, plus all prior issuances of the savings bank, by any one or more tax-qualified employee stock benefit plans of the savings bank (exclusive of any stock acquired by such plans in the secondary market) shall not exceed ten percent of the outstanding shares of common stock of the savings bank held by persons other than the MHC parent at the close of the proposed issuance.

(6) The aggregate amount of stock, whether common or preferred, acquired in the proposed issuance, plus all prior issuances of the savings bank, by any one or more tax-qualified employee stock benefit plans of the savings bank (exclusive of any stock acquired by such plans in the secondary market) shall not exceed ten percent of the stockholders' equity of the savings bank held by persons other than the MHC parent at the close of the proposed issuance.

(7) The aggregate amount of common stock acquired in the proposed issuance, plus all prior issuances of the savings bank by all nontax-qualified employee stock benefit plans of the savings bank and insiders of the savings bank (exclusive of any stock acquired by said plans and by insiders in the secondary market) shall not exceed thirty-five percent of the outstanding shares of common stock of the savings bank held by persons other than the MHC parent at the close of the proposed issuance if the savings bank has less than fifty million dollars in total assets prior to the issuance or twenty-five percent of such outstanding shares if the savings bank has more than five hundred million dollars in total assets before the issuance. If the savings bank has between fifty million dollars and five hundred million dollars in total assets before the issuance, the maximum percentage shall be equal to thirty-five percent minus one percent multiplied by the quotient of total assets less fifty million dollars divided by forty-five million dollars. In calculating the number of shares held by insiders and their associates, shares held by any tax-qualified or nontax-qualified employee stock benefit plan of the savings bank that are attributable to such persons shall not be counted.

(8) The aggregate amount of stock, whether common or preferred, acquired in the proposed issuance, plus all prior issuances of the savings bank, by all nontax-qualified employee stock benefit plans of the savings bank, insiders of the savings bank, and associates of insiders of the savings bank (exclusive of any stock acquired by said plans and by insiders in the secondary market) shall not exceed thirty-five percent of the stockholders' equity of the savings bank held by persons other than the association's mutual holding company parent at the close of the proposed issuance if the savings bank has less than fifty million dollars in total assets before the issuance or twenty-five percent of such stockholders' equity if the savings bank has more than five hundred million dollars in total assets prior to the issuance. If the savings bank has between fifty million dollars and five hundred million dollars in total assets before the proposed issuance, the maximum percentage shall be equal to thirty-five percent minus one percent multiplied by the quotient of total assets less fifty million dollars divided by forty-five million dollars.

(9) Shares of authorized but unissued stock of a stock savings bank subsidiary of a MHC may be reserved to satisfy and may be issued pursuant to any stock-based incentive plan for employees, directors, and others approved by the savings bank's board of directors and a majority of its stockholders.

(10) If, at the close of any stock issuance, the stock savings bank has holders of record of its outstanding voting securities that would require registration under the Securities Exchange Act of 1934, then such requirement shall be met.

(11) For a period of three years following the proposed issuance, no insider of the savings bank shall sell, without the director's prior written approval, any stock of the savings bank purchased in connection with the reorganization except that the personal representative of such insider may sell shares in the event of the death of the insider.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-514-100, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW. WSR 93-13-142, § 50-14-100, filed 6/23/93, effective 7/24/93. Statutory Authority: RCW 32.34.040 - [32.34.]050. WSR 92-06-041, § 50-14-100, filed 2/28/92, effective 3/30/92.

Wash. Admin. Code § 208-514-110 Liquidation account.

(1) The entire unconsolidated net worth of a MHC shall constitute a liquidation account for the benefit of the depositors of its subsidiary stock savings banks who continuously have been depositors since the reorganization or were depositors of any savings association subsequently acquired by a MHC at a time when the association was in mutual form and remained depositors of the stock savings bank ("eligible depositors"). The liquidation account shall not be a fixed amount but may increase (as to the entire account but not as to any individual eligible depositor) or decrease (as provided in RCW 32.32.190 through 32.32.205, except as application of those sections is inconsistent with these rules) over time. The function of the liquidation account is to establish that upon the complete liquidation of the mutual holding company, the entire net worth of the mutual holding company will be distributed among those persons who are the eligible depositors of its subsidiary savings bank(s) as of the date of the liquidation. The designation of the mutual holding company's net worth as a liquidation account shall not operate to restrict the use or application of the mutual holding company's net worth accounts.

(2) In the event of a complete liquidation of a mutual holding company, the remaining liquidation account of the mutual holding company shall be distributed ratably among all the eligible depositors of its subsidiary savings bank(s) as of the date of the liquidation.

(3) Upon the conversion to stock form of a mutual holding company, the liquidation account of the holding company shall no longer be maintained. Instead, each subsidiary savings bank shall at that time establish a liquidation account, which liquidation accounts shall in the aggregate equal the mutual holding company's liquidation account as of its last periodic report of condition immediately preceding its conversion into a stock-form holding company. The liquidation account established by each subsidiary savings bank shall be in the same proportion to the mutual holding company's liquidation account as the total of the subaccount balances of the then eligible depositors of the subsidiary savings bank bears to the total subaccount balances of the eligible depositors of all subsidiary savings banks of the mutual holding company. The liquidation account established by a subsidiary savings bank shall comply with the rules contained in RCW 32.32.185 through 32.32.205, to the extent not inconsistent with these rules.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-514-110, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW. WSR 93-13-142, § 50-14-110, filed 6/23/93, effective 7/24/93. Statutory Authority: RCW 32.34.040 - [32.34.]050. WSR 92-06-041, § 50-14-110, filed 2/28/92, effective 3/30/92.

Wash. Admin. Code § 208-514-120 Reorganization into mutual holding company form.

(1) The mutual holding company may retain or acquire assets of the mutual savings bank only to the extent permitted by the director.

(2) A stock savings bank established in connection with a reorganization shall reserve no authorized but unissued shares, except as necessary to satisfy a stock option plan or issue securities convertible into stock.

(3) A plan of reorganization shall contain the provisions referenced in RCW 32.32.035, except that it need not provide for the sale of any stock and the aggregate price of any stock sold shall bear the same proportion to total estimated pro forma market value of the subsidiary savings bank(s) determined by an independent appraisal that the shares sold bear to the total issued and outstanding shares of the savings bank(s).

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-514-120, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 32.34.040 - [32.34.]050. WSR 92-06-041, § 50-14-120, filed 2/28/92, effective 3/30/92.

Wash. Admin. Code § 208-514-130 Conversion of mutual holding company into stock holding company.

(1) If approved by the director, a MHC may convert to a stock form holding company.

(2) The MHC shall adopt a plan of conversion which the director finds to be in accordance with the provisions of chapter 32.32 RCW and these rules.

(3) The conversion must include such provisions requiring the exchange of shares of the subsidiary savings bank(s) for shares of the resulting stock holding company as the director finds to be fair to members of the MHC who possess subscription rights and to stockholders of the subsidiary banks.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-514-130, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW. WSR 93-13-142, § 50-14-130, filed 6/23/93, effective 7/24/93. Statutory Authority: RCW 32.34.040 - [32.34.]050. WSR 92-06-041, § 50-14-130, filed 2/28/92, effective 3/30/92.

Wash. Admin. Code § 208-514-140 Construction.

Nothing contained in chapter 208-514 WAC shall be construed to prohibit the de novo chartering of a stock savings bank not intended to be in holding company form.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 01-06-024, § 208-514-140, filed 2/27/01, effective 3/30/01
WSR 00-17-141, recodified as § 208-514-140, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 32.34.040 - [32.34.]050. WSR 92-06-041, § 50-14-140, filed 2/28/92, effective 3/30/92.

Chapter 208-528 New state banks and trust companies—Application and investigation.

Wash. Admin. Code § 208-528-010 Purpose.

The purpose of this chapter shall be to provide persons desiring to incorporate a bank or trust company with the requirements and guidelines necessary to comply with statutory provisions and to insure expeditious processing of a notice of intention to organize a bank or trust company.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-528-010, filed 8/22/00, effective 9/22/00
Order 21, § 50-28-010, filed 8/6/73.

Wash. Admin. Code § 208-528-020 Operations and procedures.

A notice of intention to incorporate a bank or trust company shall be filed with the director at the division of banks in Olympia. As a matter of general procedure, it has been found desirable and is recommended that interested groups visit the office of the director for a round-table discussion of statutory and other requirements, the forms, documentation and general information needed, the fees payable to the division of banks and the secretary of state, plus a general discussion of the primary market area the applicants wish to serve and of economic resources of that area together with a brief review of existing financial institutions now serving that area.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-528-020, filed 8/22/00, effective 9/22/00
Order 21, § 50-28-020, filed 8/6/73.

Wash. Admin. Code § 208-528-030 Policy and guidelines.

The notice of intention to organize a state bank or trust company shall be filed with the director in duplicate, on a form furnished by the division of banks. It is the established policy of the division of banks to require diligent and timely completion and submission of forms, schedules, surveys, economic studies, maps and all supporting data deemed necessary and required to conduct the statutory investigation. For the purpose of expediting the investigation and correlating said investigation with that of the Federal Deposit Insurance Corporation, in the event deposits of the proposed bank or trust company are to be insured by that agency, the schedules, statements and supporting data shall be organized under six basic general headings or factors:

(1) Financial history and condition.

(a) Pro forma statement of condition - beginning of business.

(b) Premises to be occupied by proposed bank, whether owned or leased, whether permanent or temporary, details as to description, costs, from whom purchased or leased, insurance coverage, estimated annual depreciation. If property is to be purchased or leased from a director, officer, a large shareholder, or an interest of any such, complete details should be furnished.

(d) Relationships and associations with proposed bank of any of the sellers or lessors of land, buildings or equipment, either directly or indirectly.

(e) Organization expenses (which should not be borrowed from any source) - complete and detailed accounting is required for all expenses related to organization, including detailed account of actual legal work performed together with any additional costs anticipated prior to opening or costs incurred or work performed during the organization period for which disbursement has been deferred beyond the opening date.

(2) Adequacy of the capital structure.

(a) Proposed allocations within total capital structure.

(i) Amount of paid-in common capital stock (No. shares x par value).

(ii) Amount of paid-in surplus.

(iii) Amount of paid-in undivided profits.

(iv) Amount of other segregations, including the organization or expense fund, if planned.

(b) Minimum capital requirements of state law (RCW 30.08.010 as amended by chapter 104, Laws of 1973).

(i) The population of the community to be served.

(ii) Ratio the projected net total capital structure will bear to the estimated volume of deposits at the end of each of the first three years of operations.

(3) Future earnings prospects. A detailed projection of earnings and expenses is to be submitted showing the breakdown of income and expenses for each of the first three years of operations. Provision should be made for the bad debt reserve (loan losses) based upon the major types of loaning demands the proposed bank expects to serve and total loans expected by the end of the first, second and third years of operations.

(4) General character of management.

(a) A financial report and a biographical report for each officer and director is required together with a report by each officer and director stating the number of shares to be purchased, the total cost of such shares and details as to source and financing terms for such portion as not paid in cash. (If disclosure of any of the proposed officers would jeopardize current employment, include the information in a special "confidential section.")

(b) The subscribers (proposed shareholders) are to be listed alphabetically with name and address, occupation and number of shares being purchased indicated by number of shares and total subscription price. The list should indicate "D" for the directors designee, "O" for officers.

(c) For any subscribers for 5% or more of the proposed capital stock, the financing terms are required as for directors and officers.

(d) The membership of the committees of the directorate are to be designated and duties outlined, including:

(i) Loan and/or executive committee.

(ii) Investment committee.

(iii) Audit committee.

(e) Management of the proposed bank will report:

(i) Name of principal correspondent bank or banks and basis upon which the selection was made.

(ii) Determination that sufficiency of surety bond coverage conforms with generally accepted banking practices.

(f) Any changes contemplated in the proposed directorate or active management during the first year are to be reported, or, if none, so state.

(5) Convenience and needs of the community to be served.

(a) Applicants have the responsibility of developing as fully as possible the economic support and justification for the proposed bank including:

(i) The community and "surrounding country" (the trade territory or market area) which the proposed bank will serve, including the geographic boundaries within which all or most of the bank's potential customers reside.

(1) Furnish a detail map of such area pinpointing and indexing each financial institution (banks and savings and loan associations and mutual savings bank, whether head office or branch office).

(2) Provide list or recapitulation of subscribers residing in or closely identified with the area to be served.

(3) Provide estimates of the total deposits anticipated during the early period of operations together with totals expected by the end of each of the first three years. The latter should be segregated:

(a) Demand deposits.

(b) Savings passbook accounts.

(d) Public funds.

(e) Recapitulation as to total demand and total time.

(4) The economic characteristics of the trade territory specified above for the most recent five-year period where possible… including manufacturing, agricultural and other industrial data, construction activity, retail and wholesale sales, housing starts, school population, census figures and projections.

(5) Such additional data relating to the trade area considered relevant and indicating support for the proposed bank as may be obtained from such sources as local offices of utilities, planning commission, chamber of commerce or trade associations, traffic surveys, county auditor, title insurance company, etc. (In the event an economic survey or feasibility study has been prepared it may provide most of the information needed.)

(ii) List principal business and industries of the market area by name of company, type of business, average number of employees, approximate annual payroll and annual sales. If significant, furnish details as to public employment of the area, including schools, military, U.S., state, county, municipal or other.

(b) List all banks, branches, trust companies, mutual savings banks and branches, together with savings and loan associations presently serving in the proposed market area and surrounding country, including any authorized but unopened offices, indicating "N/A" for information determined unobtainable:

(i) Name of the financial institution.

(ii) Location.

(iii) Distance (road miles or city blocks) from proposed site.

(iv) Direction from site.

(v) Date established.

(vi) Date of latest statement available.

(vii) Deposits: Demand, time and total.

(viii) Loans: Commercial, consumer, real estate secured and total to extent available.

(6) Consistency of corporate powers. In addition to the proposed articles of incorporation submitted with the notice of intention to organize, the proposed bylaws should be submitted together with articles of incorporation and complete details for any proposed affiliate (i.e., a premises holding company).

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-528-030, filed 8/22/00, effective 9/22/00
Order 21, § 50-28-030, filed 8/6/73.

Wash. Admin. Code § 208-528-040 Fees.

The filing fee to accompany the notice of intention to organize a bank or trust company shall be that established by WAC 208-512-045, as now or hereafter amended. If the application is withdrawn by applicants before a field investigation is undertaken a refund will be made based upon retention of that portion deemed adequate to cover processing and preliminary investigation costs. The retained portion shall be the greater of:

(1) $500.00, or

(2) Estimated number of hours times the current hourly rate as established by WAC 208-512-045 as devoted to processing and preliminary review and investigation.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 01-06-024, § 208-528-040, filed 2/27/01, effective 3/30/01
WSR 00-17-141, recodified as § 208-528-040, filed 8/22/00, effective 9/22/00
Order 21, § 50-28-040, filed 8/6/73.

Wash. Admin. Code § 208-528-050 Field investigation.

The required field investigation will be undertaken promptly upon submission of the notice of intention to organize a bank or trust company accompanied by statutory fees, provided the required documentation is determined by preliminary review to be complete in all respects. If, in the judgment of the director, matters of substantive nature are missing or incomplete the notice of intent to organize and submitted documents may be returned to the correspondent of record. If the matters deemed incomplete be of relatively minor nature the applicants may be notified in writing thereof and given a reasonable time to make corrections or submit additional information or schedules required. For purposes of section 5, chapter 104, Laws of 1973 1st ex. sess. (RCW 30.08.030), a notice of intention to organize a bank or trust company shall not be deemed to be received by the director unless and until all of the information required by the director has been provided to him.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-528-050, filed 8/22/00, effective 9/22/00
Order 21, § 50-28-050, filed 8/6/73.

Wash. Admin. Code § 208-528-060 Adoption of form.

The division of banks hereby adopts for use of all persons requesting permission to organize a state bank or trust company, the form attached hereto as Appendix No. 1, entitled "Notice of intention to organize a state bank or trust company."

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-528-060, filed 8/22/00, effective 9/22/00
Order 21, § 50-28-060, filed 8/6/73.

Wash. Admin. Code § 208-528-070 Payment on subscription for the capital stock.

The subscription agreement with prospective purchasers of the capital stock of a proposed new bank or trust company shall not contain any agreement for any amount to be paid in advance for the purpose of defraying organization costs. No payment on subscription for stock shall be made until the articles of incorporation have been approved by the director of the department of financial institutions and filed with the secretary of state.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-528-070, filed 8/22/00, effective 9/22/00
Order 30, § 50-28-070, filed 10/2/75.

Wash. Admin. Code § 208-528-990 Appendix I—Form—Notice of intention to organize a state bank or trust company.

appendix i

notice of intention to organize a

state bank or trust company

To the Director of the Department of Financial Institutions:

We, the undersigned, as proposed incorporators and subscribing shareholders, being natural persons and citizens of the United States of America, make application for permission to organize a (state bank or trust company) under the title of . . . . . . to be located in . . . . . . , County of . . . . . . . , State of Washington, with capital stock of

$ . . . . . , surplus of $ . . . . . , and undivided profits of $ . . . . .

We submit herewith the proposed articles of incorporation for examination together with all such data, information, schedules, maps and supporting documentation specified by statute and regulations as necessary and required to conduct the statutory investigation.

We enclose Cashier's Check for $2,000 to apply upon the statutory cost of investigation. If the cost of the investigation to be made exceeds $2,000, we agree to pay such excess in accordance with WAC 208-512-040.

We designate . . . . . . . . , whose address is . . . . . . . . , as correspondent of records to receive all instructions and correspondence in connection with this application.

subscribed at . . . . . . . . , Washington, this . . . . day of . . . . . . . . , 19 . . .

| | | *. . . . | | --- | --- | --- | | | | *. . . . | | | | *. . . . | | | | *. . . . | | | | *. . . . | | | | . . . . | | Enclosure: | $2,000 Cashier's Check Payable to the Division of Banks | | | () Please type name under signature. | | |

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-528-990, filed 8/22/00, effective 9/22/00
Order 21, Appendix I—Form (codified as WAC 50-28-990), filed 8/6/73.

Chapter 208-532 Establishment of alien banks in Washington—Procedure.

Wash. Admin. Code § 208-532-010 Purpose.

The purpose of this chapter is to ensure compliance with and provide the rules and regulations necessary to administer the provisions and requirements of chapter 53, Laws of 1973 1st ex. sess.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-18-103, recodified as § 208-532-010, filed 9/6/00, effective 10/7/00
Order 23, § 50-32-010, filed 8/14/73.

Wash. Admin. Code § 208-532-020 Definitions.

For purposes of these rules and regulations, the following terms are defined as:

(1) Act - chapter 53, Laws of 1973 1st ex. sess.

(2) Application - "Application" means an application of an alien bank to the director of the department of financial institutions for a certificate of authority to establish and operate an agency, branch or bureau in the state of Washington.

(3) Domiciliary country - "Domiciliary country" means the foreign country under the laws of which the alien bank is organized.

(4) Fiscal year - "Fiscal year" means the fiscal year of the alien bank.

(5) Depositary - "Depositary" shall mean a bank with its principal place of business within the state of Washington selected by the alien bank and approved by the director, for the deposit of the cash or liquid assets required by section 7 and 12 of the act.

(6) Rules and regulations - "Rules and regulations" means all of Title 208 WAC. Alien banks in conducting authorized banking business shall be subject to such rules and regulations under the same terms and conditions as applied to banks organized under the laws of this state to the extent that such rules and regulations as applied to alien banking operations are consistent with the intent and purposes of the alien bank act and subject to limitations and restrictions imposed by these alien bank rules and regulations.

(7) Section - Section numbers referred to herein are those found in chapter 53, Laws of 1973 1st ex. sess.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-18-103, amended and recodified as § 208-532-020, filed 9/6/00, effective 10/7/00
Order 23, § 50-32-020, filed 8/14/73.

Wash. Admin. Code § 208-532-030 Application procedure.

An application by an alien bank to establish and operate an office or bureau in the state of Washington shall be made on the form prescribed in Appendices 1, 2 or 3, whichever is applicable.

An application shall not be deemed complete if, in the opinion of the director, the applicant has not supplied all of the required information or the information supplied is deficient. After receipt of the completed application, the director shall conduct his required investigation.

(1) Office. The director shall notify the applicant of denial or conditional approval of an application for a certificate for an agency or branch within 180 days of his receipt of the completed application.

If the application for a certificate for an agency or branch is conditionally approved, the applicant must supply the following documents executed by the governing board and properly sworn to before a U.S. Consular Official within 60 days of notification.

(a) Appointment of the director of the department of financial institutions as agent

(b) Designation of bank's agent for service in Washington

(d) Appointment of depositary(ies)

(e) Certificate of allocation and assignment of capital

(f) Depositary agreements for assigned and allocated capital

(g) A power of attorney in favor of the person designated to be in charge of the business and affairs of the office.

The applicant shall also provide proof of fidelity bond coverage and the oath of the managing officer of the Washington office.

After receipt of these documents and after the director is satisfied that all statutory requirements have been met, he shall issue his certificate.

(2) Bureau. The director shall notify the applicant of denial or approval of an application for a certificate for a bureau within 90 days of his receipt of the completed application. If the application is approved, the certificate will be issued forthwith.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-18-103, amended and recodified as § 208-532-030, filed 9/6/00, effective 10/7/00
Order 23, § 50-32-030, filed 8/14/73.

Wash. Admin. Code § 208-532-040 Examination—Frequency—Scope.

The accountant selected to audit the books of account of an alien office shall be an independent accountant licensed to practice by the state of Washington and who is not an employee, officer, or holder of the securities of the alien bank or its subsidiaries. Such accountant must have knowledge and experience with respect to auditing books of international corporations. A resume' of such accountant wherein the knowledge and experience is set forth must accompany the alien bank's request that such accountant be approved by the director. The report of such independent accountant shall be based upon an audit made in accordance with generally accepted auditing standards without limitation on its scope and shall be unqualified.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-18-103, amended and recodified as § 208-532-040, filed 9/6/00, effective 10/7/00
Order 23, § WSR 50-32-040, filed 8/14/73.

Wash. Admin. Code § 208-532-050 Fees.

(1) The fees to accompany the filing of an application and attendant investigation are prescribed in WAC 208-512-045, as now or hereafter amended.

(2) Cost of examination. The examination fees charged to an alien bank for the examination of an office or bureau shall be the estimated actual cost of each examination calculated under the same terms and conditions as for state chartered banks and trust companies.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 01-06-024, § 208-532-050, filed 2/27/01, effective 3/30/01
WSR 00-18-103, recodified as § 208-532-050, filed 9/6/00, effective 10/7/00
Order 23, § 50-32-050, filed 8/14/73.

Wash. Admin. Code § 208-532-060 Records and books of account.

Records and books of account of an alien bank office shall be kept as though the Washington office was conducted as a separate and distinct entity with its assets and liabilities entirely separate and apart from other operations of its head office and its subsidiaries or affiliated corporations. Books and accounts shall be maintained, where possible, as are the books and accounts of banks chartered by the state of Washington, to:

(1) Facilitate the preparation of required reports of condition.

(2) Facilitate the preparation of the required report of income.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-18-103, recodified as § 208-532-060, filed 9/6/00, effective 10/7/00
Order 23, § 50-32-060, filed 8/14/73.

Wash. Admin. Code § 208-532-070 Branch records.

An alien branch shall:

(1) Identify United States domiciled creditors.

(2) Segregate and maintain controls for:

(a) Demand deposits.

(b) Time deposits.

for each class of depositors specified and authorized in section 11(1)(i) through (vii) of the act.

(3) Maintain loan records and controls to:

(a) Identify loan customers as to types as restricted by section 11 (2)(a)(i) through (iv) of the act.

(b) Specify the purpose of each loan or guarantee with respect to the restrictions imposed by section 11 (2)(b)(i), (ii) and (iii) of the act.

(c) Organize and maintain credit files, including appropriate comments relative to (a) and (b) above and to demonstrate the credit worthiness and standing of the customer.

(4) Maintain credit files to reflect the credit worthiness or rating of assets held as required or authorized by sections 7 and 12(2) of the act.

(5) Establish and maintain controls to reflect at all times that liquid assets held in accordance with the requirements of section 12(2) of the act are not less than one hundred eight percent of the aggregate amount of liabilities of the alien bank payable at or through its Washington office.

(6) Establish and maintain controls to reflect maintenance of additional capital equal to not less than ten percent of deposit liabilities.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-18-103, recodified as § 208-532-070, filed 9/6/00, effective 10/7/00
Order 23, § 50-32-070, filed 8/14/73.

Wash. Admin. Code § 208-532-080 Agency records.

With consideration to the statutory requirements imposed upon an approved agency of an alien bank by section 18 of the act, an agency shall maintain controls and records relating to the making of loans and guaranteeing obligations for the financing of the international movement of goods and services and for all operational needs including working capital and short-term operating needs and for the acquisition of fixed assets to:

(a) Readily identify the customer and basis upon which the loan or guaranty was granted;

(b) The purpose and terms of such loan or guaranty; and

(c) The precise manner in which the business of the customer is directly related to the international movement of goods and services.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-18-103, recodified as § 208-532-080, filed 9/6/00, effective 10/7/00
Order 23, § 50-32-080, filed 8/14/73.

Wash. Admin. Code § 208-532-090 Reports—Required reports.

Each alien bank shall file the following periodic reports relating to the financial condition of the office:

(1) Examination (audit) report by an accountant approved by the director as of the last business day of the fiscal year as prescribed by section 14 of the act.

(2) Reports of resources and liabilities as required by banks chartered by the state of Washington as prescribed by RCW 30.08.180 and 30.08.190, together with proof of publication. An agency need not publish such reports.

(3) Annual report of income on calendar year basis as a special report as required of banks chartered by the state of Washington (RCW 30.08.190).

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-18-103, amended and recodified as § 208-532-090, filed 9/6/00, effective 10/7/00
Order 23, § 50-32-090, filed 8/14/73.

Wash. Admin. Code § 208-532-100 Notice concerning deposit insurance.

Every alien bank branch, the deposits of which are not insured by the Federal Deposit Insurance Corporation, shall display at its place of business in Washington a sign at least seven inches by three inches at each window or place where deposits are accepted stating that deposits are not insured by the Federal Deposit Insurance Corporation. A statement may be included on the same sign to the effect that deposits of U.S. domiciled depositors are partially protected by capital maintained pursuant to RCW 30.42.120(1).

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-18-103, recodified as § 208-532-100, filed 9/6/00, effective 10/7/00
Order 25, § 50-32-100, filed 3/21/74.

Wash. Admin. Code § 208-532-99001 Appendix I—Forms—Application for certificate authorizing an alien bank to establish and operate a branch in the state of Washington.

application for certificate authorizing

an alien bank to establish and

operate a branch in the state of washington

| TO: | Director of the Department of Financial Institutions Division of Banks Olympia, Washington 98504 | | --- | --- |

The (Applicant alien bank) , with its head office and principal place of business located at (Domiciliary Country) hereby initiates this application for certificate authorizing the establishment and operation of a branch to be located . . . . . . . . in the City of . . . . . . , County of . . . . . . . . , State of Washington.

The (Bank) , is incorporated, chartered or otherwise authorized to conduct a banking business under the laws of (Domiciliary Country) . We enclose a verified copy of the resolution adopted by the bank's governing board, properly sworn to before a U.S. Consular Official, authorizing the filing of this application and designating the officer(s) who is (are) to sign this application and provide the material required herein, authorizing the payment of fees required by law or regulation, and designating the managing officer(s) of the proposed branch. We enclose a bank draft for $1,500.00 to apply upon the statutory cost of investigation. If the cost of investigation to be made exceeds $1,500.00 we agree to pay such excess in accordance with WAC 208-512-040 together with such other costs and fees as may be legally required by statute or regulation.

Correspondence, instructions, requests for information, reports, etc., should be addressed:

| . . . . Head Office | | --- | | . . . . Proposed Branch |

To expedite the statutory investigation the following information, schedules, certifications, resume's, etc., are furnished:

(a) Name of present Chief Executive Officer . . . . . . . . and Name of the Secretary . . . . . . . .

(b) The bank's fiscal year ends . . . .

(c) (English translation): Four certified copies of the most recent edition of the bank's certificate of authority or other legal authorization of your country to conduct a banking business and the bank's articles of incorporation.

(d) Date of certificate of authority or its equivalent under which presently operating . . . . . . . . and expiration date, or duration, of the certificate of authority or its equivalent . . . .

(e) Capital structure at end of last fiscal year: (i.e., equity capital, surplus, undivided profits, unallocated or contingency reserves).

(f) Two copies of last available statement of condition.

(g) Statement of object and purpose or purposes which bank proposes to pursue in the transaction of business in the state of Washington.

(h) Copy of (English translation where applicable) laws of domiciliary country under which applicant bank is organized which permits a bank with its principal place of business in the state of Washington to establish in that foreign country a branch, agency or similar operation. Attached to a copy of such laws shall be either (a) an opinion of counsel (a member of the bar in the foreign country under whose laws the applicant is organized), including references to or extracts from relevant statutes, if any, to the effect that a bank with its principal place of business in the state of Washington may be permitted to establish and maintain in such foreign country a branch, agency or similar operation, or (b) a certificate of an official of the applicant's country who is authorized under its laws to issue a license to a bank with its principal place of business in the state of Washington to maintain either a branch or agency, to the effect he is so authorized.

(i) An opinion of counsel for the applicant (a member of the bar in the foreign country under whose laws the applicant is organized) to demonstrate that this application to establish a branch is in compliance with local laws. Such opinion should state that (a) the applicant's charter authorizes it to carry on the business contemplated by the application, (b) the applicant has conducted, and is now conducting, its business as authorized by the charter and bylaws in compliance with the laws of its country of incorporation, and (c) the making of the application is in compliance with the laws of the country of incorporation.

(j) Letter or certificate from banking authorities of domiciliary country granting permission to the applicant to apply for a branch in this state.

(k) Furnished herewith:

(1) Name, title and resume' for each officer of the proposed branch in Washington.

(2) Confidential financial statement for the managing officer of the proposed branch in Washington.

(l) Deposit projections for the first three years of operations:

I. Highest deposit totals anticipated by end of first year of operations of the proposed branch $. . . .

II. Highest deposit totals anticipated by end of second year of operations of the proposed branch $. . . .

III. Highest deposit totals anticipated by the end of the third year of operations of the proposed branch $. . . .

(m) Indicate whether eligible deposit liabilities of the branch in the state of Washington will be covered by the insurance protection of the Federal Deposit Insurance Corporation (yes or no) .

(n) Outline of background information in support of application.

(o) Copy of option or conditional lease on proposed branch site.

(p) A verified or authenticated copy of the bank's bylaws.

executed at . . . . . . . . , for the (Bank) , this . . . . . day of . . . . . . , 19 . . .

| (By the bank's chief executive officer) | * . . . . | | --- | --- | | (and the secretary of the banking corporation) | * . . . . |

Bank Seal

*Please type name and official title under the signatures.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-18-103, amended and recodified as § 208-532-99001, filed 9/6/00, effective 10/7/00
Order 23, Appendix I (codified as WAC 50-32-99001), filed 8/14/73.

Wash. Admin. Code § 208-532-99002 Appendix II—Forms—Application for certificate authorizing an alien bank to establish and operate an agency in the state of Washington.

application for certificate authorizing

an alien bank to establish and

operate an agency in the state of washington

| TO: | Director of the Department of Financial Institutions Division of Banks Olympia, Washington 98504 | | --- | --- |

The (Applicant alien bank) with its head office and principal place of business located (Domiciliary Country) hereby initiates this application for certificate authorizing the establishment and operation of an agency to be located . . . . . . . . in the City of . . . . . . , County of . . . . . . . . , State of Washington.

The (Bank) , is incorporated, chartered or otherwise authorized to conduct a banking business under the laws of (Domiciliary Country) . We enclose a verified copy of the resolution adopted by the bank's governing board, properly sworn to before a U.S. Consular Official, authorizing the filing of this application and designating the officer(s) who is (are) to sign this application and provide the material required herein, authorizing the payment of fees required by law or regulation, and designating the managing officer(s) of the proposed agency. We enclose a bank draft for $1,500.00 to apply upon the statutory cost of investigation. If the cost of investigation to be made exceeds $1,500.00 we agree to pay such excess in accordance with WAC 208-512-040 together with such other costs and fees as may be legally required by statute or regulation.

Correspondence, instructions, requests for information, reports, etc., should be addressed:

| . . . . Head Office | | --- | | . . . . Proposed Agency |

To expedite the statutory investigation, the following information, schedules, certifications, resume's, etc., are furnished:

(a) Name of present chief executive officer . . . . . . . . and name of the secretary . . . . . . .

(b) The bank's fiscal year ends . . . . . . .

(c) Four certified copies (English translation where applicable) of the most recent edition of the bank's certificate of authority or other legal authorization of your country to conduct a banking business and the bank's articles of incorporation.

(d) Date of certificate of authority or its equivalent under which presently operating . . . . . . . and expiration date, or duration, of the certificate of authority or its equivalent . . . . . . .

(e) Capital structure at end of last fiscal year: (i.e., equity capital, surplus, undivided profits, unallocated or contingency reserves).

(f) Two copies of last available statement of condition.

(g) Statement of object and purpose or purposes which bank proposes to pursue in the transaction of business in the state of Washington.

(h) Copy of (English translation where applicable) laws of domiciliary country under which applicant bank is organized which permits a bank with its principal place of business in the state of Washington to establish in that foreign country a branch, agency of similar operation. Attached to a copy of such laws shall be either (a) an opinion of counsel (a member of the bar in the foreign country under whose laws the applicant is organized), including references to or extracts from relevant statutes, if any, to the effect that a bank with its principal place of business in the state of Washington may be permitted to establish and maintain in such foreign country a branch, agency or similar operation, or (b) a certificate of an official of the applicant's country who is authorized under its laws to issue a license to a bank with its principal place of business in the state of Washington to maintain either a branch or agency, to the effect he is so authorized.

(i) An opinion of counsel for the applicant (a member of the bar in the foreign country under whose laws the applicant is organized) to demonstrate that this application to establish an agency is in compliance with local laws. Such opinion should state that (a) the applicant's charter authorizes it to carry on the business contemplated by the application, (b) the applicant has conducted, and is now conducting, its business as authorized by the charter and bylaws in compliance with the laws of its country of incorporation, and (c) the making of the application is in compliance with the laws of the country of incorporation.

(j) Letter or certificate from banking authorities of domiciliary country granting permission to the applicant to apply for an agency in this state.

(k) Furnished herewith:

(1) Name, title and resume' for each officer of the proposed agency in Washington.

(2) Confidential financial statement of the managing officer of the proposed agency in Washington.

(l) Outline of background information in support of application.

(m) Copy of option or conditional lease on proposed agency site.

(n) A verified or authenticated copy of the bank's bylaws.

| executed at . . . . . . . . , for the (Bank) , this . . . . day of . . . . . . , 19 . . . | | | --- | --- | | (By the bank's chief executive officer) | * . . . . | | (and the secretary of the banking entity) | * . . . . | | Bank Seal | | | *Please type name and official title under the signatures. | |

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-18-103, amended and recodified as § 208-532-99002, filed 9/6/00, effective 10/7/00
Order 23, Appendix II (codified as WAC 50-32-99002), filed 8/14/73.

Wash. Admin. Code § 208-532-99003 Appendix III—Forms—Application for certificate authorizing an alien bank to establish and operate a bureau in the state of Washington.

application for certificate authorizing

an alien bank to establish and

operate a bureau in the state of washington

(To be filed in duplicate)

| TO: | Director of the Department of Financial Institutions Division of Banks Olympia, Washington 98504 | | --- | --- |

The (Applicant alien bank) , with its head office and principal place of business located at (Domiciliary Country) , hereby initiates this application for certificate authorizing the establishment and operation of a bureau to be located . . . . . . . . in the City of . . . . . . , County of . . . . . . . . , State of Washington.

The (Bank) is incorporated, chartered or otherwise authorized to conduct a banking business under the laws of (Domiciliary Country) .

We enclose a verified copy of the resolution, adopted . . . . . . by the bank's governing board, specifically empowering its President (or Chief Executive Officer) and the bank's Secretary (or equivalent officer) to execute this application, pay the fees required by law or regulation, provide such information and furnish such reports and enter into such agreements as may be necessary.

Correspondence, instructions, and requests for information, reports, etc., should be addressed:

| . . . . Head Office | | --- | | . . . . Proposed Bureau |

To expedite the statutory investigation, the following information, schedules, documents, etc., are furnished:

(a) Name of present Chief Executive Officer . . . . . . . . and name of the Secretary . . . . . . . .

(b) The bank's fiscal year ends . . . .

(c) (English translation) Four certified copies of most recent edition of the bank's certificate of authority or other legal authorization of your country to conduct an international banking business and the bank's articles of incorporation.

(d) Date of certificate of authority or its equivalent under which presently operating . . . . . . . . and expiration date, or duration, of the certificate of authority or its equivalent . . . .

(e) Capital structure at end of last fiscal year: (i.e., equity capital, surplus or rest accounts, undivided profits, unallocated or contingency reserves).

(f) Two copies of last available statement of condition.

(g) Statement of object, purpose and activities which bank proposes to pursue the establishment and operation of a bureau in this state at the place designated herein.

Enclosed is a bank draft for $300.00 to apply upon the statutory cost of investigation. If the cost of investigation to be made exceeds $300.00, we agree to pay such excess in accordance with WAC 208-512-040 together with such other costs and fees as may be legally required by state or regulation.

. . . .executed in duplicate at . . . . . . . . . . .

for the (Legal name of applicant bank) this . . . . . day of . . . . . . , 19 . . .

| (By the chief executive officer) | * . . . . | | --- | --- | | (and the Secretary of the banking corporation) | * . . . . |

Bank Seal

*Please type name and official title under the signatures.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-18-103, amended and recodified as § 208-532-99003, filed 9/6/00, effective 10/7/00
Order 23, Appendix III (codified as WAC 50-32-99003), filed 8/14/73.

Chapter 208-536 Administration of trust companies—Investments, etc.

Wash. Admin. Code § 208-536-010 Definitions.

For purposes of this chapter, the following words are defined as:

(1) "Fiduciary powers" means the power to act in any fiduciary capacity authorized by the state of Washington including, but not limited to, trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, agent, custodian, investment adviser, if the trust company receives a fee for its investment advice, escrow agent, corporate bond paying and transfer agent, escrow holder, managing agent, depositary, committee of estates of incompetents, and any capacity in which the trust company possesses investment discretion on behalf of another.

(2) "Trust department" means that group or groups of officers and employees of a trust company organized under the supervision of officers or employees to whom are designated by the board of directors the performance of the fiduciary responsibilities of the trust company, whether or not the group or groups are so named.

(3) "Agency" means the fiduciary relationship in which title to the property constituting the agency does not pass to the trust institution but remains in the owner of the property, who is known as the principal, and in which the agent is charged with certain specific duties with respect to the property.

(4) "Agency coupled with an interest" means an agency in which the agent has a legal interest in the subject matter. Such an agency is not terminated automatically, as are other agencies, by the death of the principal but continue in effect until the agent can realize upon its legal interest.

(5) "Managing agent" means the fiduciary relationship assumed by a trust company upon the creation of an account which names the trust company as agent and confers investment discretion upon the trust company.

(6) "Trust company" as used herein shall also include banks which are authorized to exercise trust powers.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-536-010, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 43.320.010, 43.329.040 and 30.04.030. WSR 99-01-119, § 50-36-010, filed 12/18/98, effective 1/18/99
Order 22, § 50-36-010, filed 8/14/73.

Wash. Admin. Code § 208-536-020 Administration of fiduciary powers.

(1)(a) The board of directors is responsible for the proper exercise of fiduciary powers by the trust company. All matters pertinent thereto, including the determination of policies, the investment and disposition of property held in a fiduciary capacity, and the direction and review of the actions of all officers, employees, and committees utilized by the trust company in the exercise of its fiduciary powers, are the responsibility of the board. In discharging this responsibility, the board of directors may assign, by action duly entered in the minutes, the administration of such of the trust company's fiduciary powers as it may consider proper to assign to such director(s), officer(s), employee(s) or committee(s) as it may designate.

(b) No fiduciary account shall be accepted without the prior approval of the board, or of the director(s), officer(s) or committee(s) to whom the board may have designated the performance of that responsibility. A written record shall be made of such acceptances and of the relinquishment or closing out of all fiduciary accounts. Upon the acceptance of an account for which the trust company has investment responsibilities a prompt review of the assets shall be made. The board shall also ensure that at least once during every calendar year thereafter, all the assets held in or for each fiduciary account where the bank has investment responsibilities are reviewed to determine the advisability of retaining or disposing of such assets.

(2) All officers and employees taking part in the operation of the trust department shall be adequately bonded.

(3) Every qualified fiduciary subject to this regulation and exercising fiduciary powers in this state shall designate, employ or retain legal counsel who shall be readily available to pass upon fiduciary matters and to advise the trust company and its trust department.

(4)(a) The trust department may utilize personnel and facilities of other departments of the trust company or its affiliates, and other departments of the trust company may utilize the personnel and facilities of the trust department or its affiliates only to the extent not prohibited by law and as long as the separate identity of the trust department is preserved.

(b) Agency agreements. Pursuant to a written agreement, a trust company exercising fiduciary powers may perform services related to the exercise of fiduciary powers for another trust company or other entity, and may purchase services related to the exercise of fiduciary powers from another trust company or other entity.

(5) Fiduciary records shall be kept separate and distinct from other records of the trust company and maintained in compliance with the provisions of RCW 30.04.240. All fiduciary records shall be kept and retained for such time as to enable the fiduciary to furnish such information or reports with respect thereto as may be required by the director.

(6) Every such fiduciary shall keep an adequate record of all pending litigation to which it is a party in connection with its exercise of fiduciary powers.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-536-020, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 43.320.010, 43.329.040 and 30.04.030. WSR 99-01-119, § 50-36-020, filed 12/18/98, effective 1/18/99
Order 22, § 50-36-020, filed 8/14/73.

Wash. Admin. Code § 208-536-030 Audit of the trust department.

A committee of directors, exclusive of any active officers of the trust company, shall at least once during each calendar year make suitable audits of the trust department or cause suitable audits to be made by auditors responsible only to the board of directors, and at such time shall ascertain whether the department has been administered in accordance with law, this regulation and sound fiduciary principles. The board of directors may elect, in lieu of such periodic audits, to adopt an adequate continuous audit system. A report of the audits and examination required under this section, together with the action taken thereon, shall be noted in the minutes of the board of directors.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-536-030, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 43.320.010, 43.329.040 and 30.04.030. WSR 99-01-119, § 50-36-030, filed 12/18/98, effective 1/18/99
Order 22, § 50-36-030, filed 8/14/73.

Wash. Admin. Code § 208-536-040 Collective investment funds—Funds authorized.

Any trust company qualified to act as fiduciary in this state may establish common trust funds (referred to in this regulation as "collective investment funds") for the purpose of furnishing investments to itself as fiduciary, or to itself and others, as co-fiduciaries; and may, as such fiduciary or co-fiduciary, invest funds which it lawfully holds for investment in interests in such common trust funds, if such investment is not prohibited by the instrument, judgment, decree, or order creating such fiduciary relationship, and if, in the case of co-fiduciaries, the trust company procures the consent of its co-fiduciary or co-fiduciaries to such investment, and provided such investment is not in contravention with the provisions of chapter 30.24 RCW:

(a) In a common trust fund maintained by the trust company exclusively for the collective investment and reinvestment of moneys contributed thereto by the trust company in its capacity as trustee, executor, administrator, or guardian.

(b) In a fund consisting solely of assets of retirement, pension, profit sharing, stock bonus or other trusts which are exempt from federal income taxation under the Internal Revenue Code.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-536-040, filed 8/22/00, effective 9/22/00
Order 22, § 50-36-040, filed 8/14/73.

Wash. Admin. Code § 208-536-050 Collective investment funds—Administration of funds.

Collective investments of funds or other property held by such qualified fiduciary (and referred to in this paragraph as "collective investment funds") shall be administered as follows:

(1) Each collective investment fund shall be established and maintained in accordance with a written plan (referred to herein as the plan) which shall be approved by a resolution of the trust company's board of directors or by a committee authorized by the board and filed with the director of the department of financial institutions. The plan shall contain appropriate provisions not inconsistent with the rules and regulations of the director of the department of financial institutions as to the manner in which the fund is to be operated, including provisions relating to the investment powers and a general statement of the investment policy of the trust company with respect to the fund; the allocation of income, profits and losses; the terms and conditions governing the admission or withdrawal of participations in the fund; the auditing of accounts of the bank with respect to the fund; the basis and method of valuing assets in the fund, setting forth specific criteria for each type of asset; the minimum frequency for valuation of assets of the fund; the period following each such valuation date during which the valuation may be made (which period in usual circumstances should not exceed 10 business days); the basis upon which the fund may be terminated; and such other matters as may be necessary to define clearly the rights of participants in the fund. A copy of the plan shall be available at the principal office of the trust company for inspection during all banking hours, and upon request a copy of the plan shall be furnished to any person.

(2) Property held by a bank in its capacity as trustee of retirement, pension, profit sharing, stock bonus, or other trusts which are exempt from federal income taxation under any provisions of the Internal Revenue Code may be invested in collective investment funds established under the provisions of subparagraph (a) or (b) of WAC 208-536-040, subject to the provisions herein contained pertaining to such funds, and may qualify for tax exemption pursuant to section 584 of the Internal Revenue Code. Assets of retirement, pension, profit sharing, stock bonus, or other trusts which are exempt from federal income taxation by reason of being described in section 401 of the code may be invested in collective investment funds established under the provisions of subparagraph (b) of WAC 208-536-040, if the fund qualifies for tax exemption under Revenue Ruling 56-267 and following rulings.

(3) All participants in the collective investment fund shall be on the basis of a proportionate interest in all of the assets. In order to determine whether the investment of funds received or held by a trust company as fiduciary in a participation in a collective investment fund is proper, the trust company may consider the collective investment fund as a whole and shall not, for example, be prohibited from making such investment because any particular asset is nonincome producing.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-536-050, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 43.320.010, 43.329.040 and 30.04.030. WSR 99-01-119, § 50-36-050, filed 12/18/98, effective 1/18/99
Order 22, § 50-36-050, filed 8/14/73.

Wash. Admin. Code § 208-536-060 Collective investment funds—Valuation of assets, admissions and withdrawals.

(1) Not less frequently than once during each period of 3 months a trust company administering a collective investment fund shall determine the value of the assets in the fund as of the date set for the valuation of assets. No participation shall be admitted to or withdrawn from the fund except: (a) On the basis of such valuation, and (b) as of such valuation date, (c) no participation shall be admitted to or withdrawn from the fund unless a written request for or notice of intention of taking such action shall have been entered on or before the valuation date in the fiduciary records of the trust company and approved in such manner as the board of directors shall prescribe, and (d) no requests or notice may be canceled or countermanded after the valuation date. However, in the case of a fund that is invested primarily in real estate or other assets that are not readily marketable, the value of the fund's assets shall be determined at least once each year.

(2) When participations are withdrawn from a collective investment fund, distributions may be made in cash or ratably in kind, or partly in cash and partly in kind, provided that all distributions as of any one valuation date shall be made on the same basis.

(3) If for any reason an investment is withdrawn in kind from a collective investment fund for the benefit of all participants in the fund at the time of such withdrawal and such investment is not distributed ratably in kind, it shall be segregated and administered or realized upon for the benefit ratably of all participants in the collective investment fund at the time of withdrawal.

(4) Any trust company administering a collective investment fund shall have the responsibility of maintaining in cash and readily marketable investments such part of the assets of the fund as shall be deemed to be necessary to provide adequately for the needs of participants and to prevent inequities between such participants, and if prior to any admissions to or withdrawals from a fund the trust company shall determine that after effecting the admissions and withdrawals which are to be made less than 40 percent of the value of the remaining assets of the collective investment fund would be composed of cash and readily marketable investments, no admissions to or withdrawals from the fund shall be permitted as of the valuation date upon which such determination is made: Provided, That ratable distribution upon all participations shall not be so prohibited in any case.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-536-060, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 43.320.010, 43.329.040 and 30.04.030. WSR 99-01-119, § 50-36-060, filed 12/18/98, effective 1/18/99
Order 22, § 50-36-060, filed 8/14/73.

Wash. Admin. Code § 208-536-070 Collective investment funds—Audit.

A trust company administering a collective investment fund shall at least once during each period of 12 months cause an adequate audit to be made of the collective investment fund by auditors responsible only to the board of directors of the trust company. In the event such audit is performed by independent public accountants, the reasonable expenses of such audit may be charged to the collective investment fund.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-536-070, filed 8/22/00, effective 9/22/00
Order 22, § 50-36-070, filed 8/14/73.

Wash. Admin. Code § 208-536-080 Collective investment funds—Financial reports.

(1) A trust company administering a collective investment fund shall at least once during each period of 12 months prepare a financial report of the fund which shall be filed with the director of the department of financial institutions within 90 days after the end of the fund's fiscal year. This report, based upon the above audit, shall contain a list of investments in the fund showing the cost and current market value of each investment; a statement for the period since the previous report showing purchases, with cost; sales, with profit or loss and any other investment changes; income and disbursements; and an appropriate notation as to any investments in default.

(2) The financial report may include a description of the fund's value on previous dates, as well as its income and disbursements during previous accounting periods. No predictions or representations as to future results may be made. In addition, as to funds described in WAC 208-536-040, neither the report nor any other publication of the trust company shall make reference to the performance of funds other than those administered by the trust company.

(3) A copy of the financial report shall be furnished, or notice shall be given that a copy of such report is available and will be furnished without charge upon request, to each person to whom a regular periodic accounting would ordinarily be rendered with respect to each participating account. A copy of such financial report may be furnished to prospective customers. The cost of printing and distribution of these reports will be borne by the trust company. In addition, a copy of the report shall be furnished upon request to any person for a reasonable charge. The fact of the availability of the report for any fund described in WAC 208-536-040 may be given publicity solely in connection with the promotion of the fiduciary services of the trust company.

(4) Except as herein provided, the trust company shall not advertise or publicize its collective investment fund(s); provided, however, that publication in a newspaper, periodical, or other medium of the net asset value of collective investment fund(s) for which a daily net asset value is available, shall not be considered an advertisement or publication prohibited by this section. Restraint is required in fiduciary advertisements to preclude the violation of securities laws including the Mutual Fund Reform Act.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-536-080, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 43.320.010, 43.329.040 and 30.04.030. WSR 99-01-119, § 50-36-080, filed 12/18/98, effective 1/18/99
Order 22, § 50-36-080, filed 8/14/73.

Wash. Admin. Code § 208-536-090 Collective investment funds—Investments and administration.

(1) A trust company administering a collective investment fund shall have the exclusive management thereof, except as a prudent person might delegate responsibilities to others.

(2) No trust company shall have any interest in a collective investment fund other than in its fiduciary capacity. Except for temporary net cash overdrafts or as otherwise specifically provided herein, it may not lend money to a fund, sell property to, or purchase property from a fund. No assets of a collective investment fund may be invested in stock or obligations, including time or savings deposits, of the bank or any of its affiliates: Provided, That such deposits may be made of funds awaiting investment or distribution. Subject to all other provisions of this part, funds held by a trust company as fiduciary for its own employees may be invested in a collective investment fund.

(3) A trust company may not make any loan on the security of a participation in a fund. If because of a creditor relationship or otherwise the trust company acquires an interest in a participation in a fund, the participation shall be withdrawn on the first date on which such withdrawal can be effected. However, in no case shall an unsecured advance until the time of the next valuation date to an account holding a participation be deemed to constitute the acquisition of an interest by the bank.

(4) Any trust company administering a collective investment fund may purchase for its own account from such fund any devaluated fixed income investment held by such fund, if in the judgment of the board of directors the cost of segregation of such investment would be greater than the difference between its market value and its principal amount plus interest and penalty charges due. If the trust company elects to so purchase such investment, it must do so at its market value or at the sum of cost, accrued unpaid interest, and penalty charges, whichever is greater.

(5) Except in the case of collective investment funds described in paragraph (b) of WAC 208-536-040:

(a) No funds or other property shall be invested in a participation in a collective investment fund if as a result of such investment the participant would have an interest aggregating in excess of 10 percent of the then market value of the fund: Provided, That in applying this limitation if two or more accounts are created by the same person or persons and as much as one-half of the income or principal of each account is payable or applicable to the use of the same person or persons, such accounts shall be considered as one;

(b) No investment for a collective investment fund shall be made in stocks, bonds, or other obligations of any closely held corporation, as may be determined by the director of the department of financial institutions, or, of any one person, firm, or corporation if as a result of such investment the total amount invested in stocks, bonds, or other obligations issued or guaranteed by such person, firm, or corporation would aggregate in excess of 10 percent of the then market value of the fund: Provided, That this limitation shall not apply to investments in direct obligations of the United States or its agencies or other obligations fully guaranteed by the United States or its agencies as to principal and interest: And Provided Further, That this limitation shall not apply to investments in securities of, or other interests in, an open-end or closed-end management type investment company or investment trust registered under the Federal Investment Company Act of 1940, as now or hereafter amended, if both of the following conditions are met:

(i) The portfolio of the investment company or investment trust is limited to such obligations of, or fully guaranteed by, the United States or its agencies and to repurchase agreements fully collateralized by such obligations; and

(ii) The investment company or investment trust takes delivery of the collateral for any repurchase agreement either directly or through an authorized custodian;

(6) In addition to the investments permitted under WAC 208-536-040, funds or other property received or held by a trust company as fiduciary may be invested collectively, to the extent not prohibited by law, as follows:

(a) In shares of a mutual trust investment company, organized and operated pursuant to a statute that specifically authorizes the organization of such companies exclusively for the investment of funds held by corporate fiduciaries, commonly referred to as a "bank fiduciary fund."

(b) In a single real estate loan, a direct obligation of the United States, or an obligation fully guaranteed by the United States, or in a single fixed amount security, obligation or other property, either real, personal or mixed, of a single issue: Provided, That the trust company owns no participation in the loan or obligation and has no interest in any investment therein except in its capacity as fiduciary.

(c) In a common trust fund maintained by the trust company for the collective investment of cash balances received or held by a trust company in its capacity as trustee, executor, administrator, or guardian, which the trust company considers to be individually too small to be invested separately to advantage. The total investment for such fund must not exceed $1,000,000; the number of participating accounts is limited to 100, and no participating account may have an interest in the fund in excess of $1,000,000: Provided, That in applying these limitations if two or more accounts are created by the same person or persons and as much as one-half of the income or principal of each account is presently payable or applicable to the use of the same person or persons, such account shall be considered as one: And Provided, That no fund shall be established or operated under this subparagraph for the purpose of avoiding the provisions of chapter 208-536 WAC.

(d) In any investment specifically authorized by court order, or authorized by the instrument creating the fiduciary relationship, in the case of trusts created by a corporation, its subsidiaries or affiliates or by several individual settlors who are closely related: Provided, That such investment is not made under this subparagraph for the purpose of avoiding any provision of this regulation, in particular, but not limited to the provisions beginning with new section WAC 208-536-040.

(e) In such other manner as shall be approved in writing by the director of the department of financial institutions.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-536-090, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 43.320.010, 43.329.040 and 30.04.030. WSR 99-01-119, § 50-36-090, filed 12/18/98, effective 1/18/99. Statutory Authority: RCW 30.04.030. WSR 90-07-011, § 50-36-090, filed 3/13/90, effective 4/13/90
Order 22, § 50-36-090, filed 8/14/73.

Wash. Admin. Code § 208-536-100 Organization and management fees.

(1) A trust company administering a collective investment fund may charge reasonable expenses incurred in operating the collective investment fund but shall absorb the costs of establishing or reorganizing a collective investment fund.

(2) The trust company may charge a fee for the management of the collective investment fund provided (a) the fee is permitted under applicable law (and complies with fee disclosure requirements, if any) in the state in which the trust company maintains the fund; and (b) the amount of the fee does not exceed an amount commensurate with the value of legitimate services of tangible benefit to the participating fiduciary accounts that would not have been provided to the accounts were they not invested in the fund.

(3)(a) The reasonable expenses incurred in servicing mortgages held by a collective investment fund may be charged against the income account of the fund and paid to servicing agents, including the trust company administering the fund.

(b) A trust company may (but shall not be required to) transfer up to 5 percent of the net income derived by a collective investment fund from mortgages held by such fund during any regular accounting period to a reserve account: Provided, That no such transfers shall be made which would cause the amount in such account to exceed 1 percent of the outstanding principal amount of all mortgages held in the fund. The amount of such reserve account, if established, shall be deducted from the assets of the fund in determining the fair market value of the fund for the purposes of admissions and withdrawals.

(c) At the end of each accounting period, all interest payments which are due but unpaid with respect to mortgages in the fund shall be charged against such reserve account to the extent available and credited to income distributed to participants. In the event of subsequent recovery of such interest payments by the fund, the reserve account shall be credited with the amount so recovered.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-536-100, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 43.320.010, 43.329.040 and 30.04.030. WSR 99-01-119, § 50-36-100, filed 12/18/98, effective 1/18/99
Order 22, § 50-36-100, filed 8/14/73.

Wash. Admin. Code § 208-536-110 Certificate of interest.

No trust company administering a collective investment fund shall issue any certificate or other document evidencing a direct or indirect interest in such fund in any form, except to provide a withdrawing account with an interest in a segregated investment.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-536-110, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 43.320.010, 43.329.040 and 30.04.030. WSR 99-01-119, § 50-36-110, filed 12/18/98, effective 1/18/99
Order 22, § 50-36-110, filed 8/14/73.

Wash. Admin. Code § 208-536-120 Remedy of mistake made in good faith.

No mistake made in good faith and in the exercise of due care in connection with the administration of a collective investment fund shall be deemed to be a violation of this part if promptly after the discovery of the mistake the trust company takes whatever action may be practicable in the circumstances to remedy the mistake.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-536-120, filed 8/22/00, effective 9/22/00
Order 22, § 50-36-120, filed 8/14/73.

Chapter 208-544 Schedule of costs of examinations.

Wash. Admin. Code § 208-544-001 Scope.

This chapter establishes the rules mandated by RCW 30.04.070 for the collection of authorized fees and charges from regulated institutions. These rules apply unless the director makes a finding that their application in a specific case would be inconsistent with the division's mission to foster sound economic growth and sustainable economic prosperity in the state of Washington or with the principles of collection found in WAC 208-544-005.

History

Statutory Authority: RCW 43.320.040, 30.04.030, and 30.04.070. WSR 13-23-032, § 208-544-001, filed 11/13/13, effective 12/14/13.

Wash. Admin. Code § 208-544-002 Definitions.

Unless the context clearly requires otherwise, the definitions used in this section apply throughout this chapter.

(1) "Agricultural lender" has the definition given in RCW 31.35.020(1).

(2) "Alien bank" has the definition given in RCW 30.42.020(1).

(3) "Bank" has the definition given in RCW 30.04.010(2).

(4) "Bank holding company" has the definition given in RCW 30.04.010(3).

(5) "Branch" has the definition given in RCW 30.04.010(5).

(6) "Business development company" has the definition given in RCW 31.24.010(6).

(7) "Commercial bank" is a bank as defined under subsection (3) of this section.

(8) "Department" means the department of financial institutions.

(9) "Development credit corporation" means an entity organized under chapter 31.20 RCW.

(10) "Director" means the director of the division of banks of the department of financial institutions.

(11) "Division" means the division of banks of the department of financial institutions.

(12) "Financial holding company" has the definition given in RCW 30.04.010(8).

(13) "Foreign bank" has the definition given in RCW 30.04.010(9).

(14) "OCC" means the Office of the Comptroller of the Currency, as created under the National Bank Act of 1863.

(15) "OFM" means the office of financial management created by RCW 43.41.050.

(16) "Regulated institution" means an alien bank, agricultural lender, bank, bank holding company, business development company, commercial bank, financial holding company, foreign bank, savings bank, small business administration 7(a) lender, thrift holding company, trust company, or other institution over which the department of financial institutions has regulatory authority over.

(17) "Report of condition" includes the FDIC Call Report, or a regulated institution's quarterly balance sheet and income statement.

(18) "Savings bank" has the definition given in RCW 32.04.020(9), which includes a mutual savings bank and stock savings bank.

(19) "Small business administration 7(a) lender" means an entity licensed under chapter 31.40 RCW.

(20) "Thrift holding company" has the definition given in RCW 32.04.020(10).

(21) "Trust company" has the definition given in RCW 30.04.010(14).

History

Statutory Authority: RCW 43.320.040, 30.04.030, and 30.04.070. WSR 13-23-032, § 208-544-002, filed 11/13/13, effective 12/14/13.

Wash. Admin. Code § 208-544-005 Determination of collection method—Principles.

When determining the collection method for authorized fees and charges, the director shall consider, but not be limited to, the following principles:

(1) The revenue collected shall be sufficient to allow the division to examine institutions within all required time periods;

(2) Regulatory costs shall be apportioned in a manner consistent with the division's statutory mission to promote and provide the delivery of financial services to rural and economically distressed areas;

(3) No industry or regulated institution shall bear a disproportionate share of regulatory costs;

(4) The division shall have sufficient resources to maintain a competent and motivated staff; and

(5) Any other principles the director deems relevant.

History

Statutory Authority: RCW 43.320.040, 30.04.030, and 30.04.070. WSR 13-23-032, § 208-544-005, filed 11/13/13, effective 12/14/13. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-544-005, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.070 and 30.08.095. WSR 91-18-054, § 50-44-005, filed 8/30/91, effective 9/30/91.

Wash. Admin. Code § 208-544-010 Collection of examination costs—Collection method.

The division shall collect the following:

(1) A semiannual assessment based on asset size in order to recoup the indirect costs related to the examination of regulated institutions as specified in WAC 208-544-020;

(2) An hourly charge for the direct cost of examinations determined by the rate specified in WAC 208-544-030; and

(3) Fees for services as specified in WAC 508-544-040, 208-544-045, and 208-544-055.

History

Statutory Authority: RCW 43.320.040, 30.04.030, and 30.04.070. WSR 13-23-032, § 208-544-010, filed 11/13/13, effective 12/14/13. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-544-010, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.070 and 30.08.095. WSR 90-12-007, § 50-44-010, filed 5/25/90, effective 6/25/90. Statutory Authority: RCW 30.04.030. WSR 83-20-072 (Order 55), § 50-44-010, filed 10/3/83
WSR 82-24-074 (Order 48), § 50-44-010, filed 12/1/82. Statutory Authority: RCW 34.04.070. WSR 82-02-037 (Order 45), § 50-44-010, filed 12/31/81.

Wash. Admin. Code § 208-544-020 Semiannual asset charge—Assessment.

(1) The semiannual assessment shall be computed using the asset value reflected in the most recent report of condition. The director may adjust such rates if the director determines that a disproportionate amount of revenue is being collected. The rate of charge is set forth in the following schedules:

(a) Commercial banks, savings banks, savings associations, and alien banks.

| If the institution's total assets are: | The semiannual assessment is: | | | | | --- | --- | --- | --- | --- | | Over this amount (in millions) | But less than this amount (in millions) | This amount | Plus the excess over (in millions) | Multiplied by this rate | | $0 | $500 | ---- | ---- | .000017464 | | $500 | $1,000 | $8,732 | $500 | .000016746 | | $1,000 | $10,000 | $17,105 | $1,000 | .000016495 | | $10,000 | ---- | $165,560 | $10,000 | .000 | | The semiannual assessment is capped at $165,560. | | | | |

(b) Trust companies.

| Total assets under management | Semiannual assessment charge | | --- | --- | | $0-125 million | $125 | | $125-250 million | $250 | | $250-500 million | $500 | | $500 million - 1 billion | $1,000 | | $1-2 billion | $2,000 | | $2-3 billion | $3,000 | | $3-4 billion | $4,000 | | $4-5 billion | $5,000 | | Trust companies pay $1,000 for each additional $1 billion under management. Annual assessments are capped at $100,000. | |

(2) Assessments and statements of condition shall be remitted to the division in accordance with the following:

(a) The division shall provide an official notice of assessment to each financial institution in the months of June and December of each calendar year.

(b) The financial institution shall calculate the assessment amount due using the most recent statement of condition.

(c) The assessment payment shall be remitted to the division in accordance within the dates specified by the notice along with the statement of condition used to calculate the assessment.

(d) A fifty dollar fee shall be charged for each day a regulated institution fails to file the assessment payment and statement of condition after the deadline to file has passed, as set out under RCW 30.08.190(3).

History

Statutory Authority: RCW 43.320.040, 30.04.030, and 30.04.070. WSR 13-23-032, § 208-544-020, filed 11/13/13, effective 12/14/13. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-544-020, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 43.320.010, 43.329.040 and 30.04.030. WSR 96-04-022, § 50-44-020, filed 1/30/96, effective 3/1/96. Statutory Authority: RCW 30.04.070 and 30.08.095. WSR 91-18-054, § 50-44-020, filed 8/30/91, effective 9/30/91
WSR 90-12-007, § 50-44-020, filed 5/25/90, effective 6/25/90. Statutory Authority: RCW 30.04.030 and 31.04.150. WSR 89-09-004 (Order 77), § 50-44-020, filed 4/6/89. Statutory Authority: RCW 30.04.030. WSR 83-20-072 (Order 55), § 50-44-020, filed 10/3/83
WSR 82-24-074 (Order 48), § 50-44-020, filed 12/1/82. Statutory Authority: RCW 34.04.070. WSR 82-02-037 (Order 45), § 50-44-020, filed 12/31/81.

Wash. Admin. Code § 208-544-030 Hourly fees and charges—Regular, including extraordinary examination and special examinations.

(1) Each regulated institution shall pay to the division hourly fees in the amount of eighty-three dollars for regular examinations. This includes safety and soundness, information technology, trust, and any other examination requiring specialized expertise.

(a) The hourly rate applies to extraordinary examinations for the purpose of examining unusual conditions or circumstances, extensions of regular examinations, and any other reviews as determined by the director.

(b) The division may charge the actual cost of examinations performed under personal service contracts by third parties.

(2) The division may collect examination fees for out-of-state banks doing business in the state of Washington (host state) through a cooperative agreement with the home state under RCW 30.04.060.

(a) Fees may be collected directly from the out-of-state institution or may be collected from the home state.

(b) Such fees shall be agreed upon before the examination begins.

(3) The division shall provide to the institution an itemized statement outlining the charges upon completion of any applicable examination. The charges contained in the statement shall be paid no later than thirty days after the billing date of such statement.

(4) The division may require a lump sum payment in advance to cover the anticipated cost of review and investigation of the activities described in this section. In no event shall the lump sum payment required under this section exceed the actual cost incurred under those subsections.

History

Statutory Authority: RCW 43.320.040, 30.04.030, and 30.04.070. WSR 13-23-032, § 208-544-030, filed 11/13/13, effective 12/14/13. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-544-030, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.070 and 30.08.095. WSR 91-18-054, § 50-44-030, filed 8/30/91, effective 9/30/91
WSR 90-12-007, § 50-44-030, filed 5/25/90, effective 6/25/90. Statutory Authority: RCW 30.12.060. WSR 85-19-052 (Order 62), § 50-44-030, filed 9/13/85. Statutory Authority: RCW 34.04.070. WSR 82-02-037 (Order 45), § 50-44-030, filed 12/31/81.

Wash. Admin. Code § 208-544-040 Certificate and secretary of state filing fees.

(1) The division shall collect one hundred dollars for issuing each of the following:

(a) Branch certificates;

(b) Certificates of increase or decrease of capital stock;

(d) Certificates of corporate existence; and

(e) Any other certificates issued by the division.

(2) The division shall collect the following for filing documents with the secretary of state:

(a) One hundred dollars for filing articles of incorporation, amendments thereof, or any other documents filed with the secretary of state.

(b) Any amounts billed directly to the division by the secretary of state relating to subsection (2)(a) of this section.

History

Statutory Authority: RCW 43.320.040, 30.04.030, and 30.04.070. WSR 13-23-032, § 208-544-040, filed 11/13/13, effective 12/14/13.

Wash. Admin. Code § 208-544-045 Additional services fees.

(1) The division shall collect hourly fees in the amount of eighty-three dollars plus actual expenses for all services attendant to:

(a) The chartering of a new regulated institution;

(b) The conversion of an existing nonstate chartered institution to a Washington state chartered institution;

(d) The acquisition and control of more than five percent of the shares of voting stock or substantially all of the assets of a bank, trust company, national banking association, or bank holding company, where the principal operations are conducted within this state by an out-of-state bank holding company;

(e) The issuance or filing of a notice of change of control;

(f) Requests for division approval to use words indicating bank or trust company in a company name under RCW 30.04.020;

(g) Meeting attendance by division personnel with the board of directors or senior management of a regulated institution;

(h) Off-site monitoring of a regulated institution;

(i) Voluntary or involuntary liquidation under chapter 30.44 RCW;

(j) Acting as conservator of a bank or trust company under chapter 30.46 RCW;

(k) Investigation into, and the resolution of, consumer complaints;

(l) Any inquiry made to the division by a person, company, or regulated institution that is not in the normal course of business;

(m) Investigation into, and subsequent enforcement action(s) against, individuals, companies, or otherwise, that are operating an unlicensed bank or trust business in the state of Washington;

(n) Applications submitted to the division by an existing regulated institution to:

(i) Merge, consolidate, reorganize, or convert to another charter type;

(ii) Establish a new branch;

(iii) Relocate the main office or an existing branch;

(iv) Purchase or sell an existing branch;

(v) Confer trust powers on an existing state-chartered bank;

(vi) Change the legal name of the regulated institution.

(o) Any other activity the director deems relevant or necessary.

(2) The division shall collect per page for furnishing copies of papers filed with the division in accordance with the fees set out in WAC 208-12-090.

History

Statutory Authority: RCW 43.320.040, 30.04.030, and 30.04.070. WSR 13-23-032, § 208-544-045, filed 11/13/13, effective 12/14/13.

Wash. Admin. Code § 208-544-055 Legal fees.

The division may collect the following legal fees:

(1) Hourly fees in the amount of eighty-three dollars for legal opinions rendered interpreting statutes and rules;

(2) Pass-through costs for legal assistance rendered by an assistant attorney general or special counsel related to a specific regulated institution.

(a) The division shall notify a regulated institution before the division incurs expense for legal assistance that may be charged to the regulated institution under this section.

(b) The charges shall be paid no later than thirty days after the billing date of the rendered legal assistance.

(c) This section shall not govern the claim of attorney's fees in a judicial proceeding between the division and a regulated institution. Legal fees relating to such actions are governed by the Washington Administrative Procedure Act, chapter 34.05 RCW.

History

Statutory Authority: RCW 43.320.040, 30.04.030, and 30.04.070. WSR 13-23-032, § 208-544-055, filed 11/13/13, effective 12/14/13.

Wash. Admin. Code § 208-544-060 Banking fund—Minimum cash balance.

(1) The director may make a finding that a minimum cash balance of at least one month's allotment be maintained in the banking fund as set out in RCW 43.320.110. One month's allotment is the current biennium budget divided by twenty-four months.

(2) In the event the banking fund balance drops below the required amount, the director may declare the next semiannual asset assessment due. The department shall bill each institution based on the most current report of condition. Payment is due within thirty days of such declaration and shall be in lieu of the next regularly scheduled asset assessment.

History

Statutory Authority: RCW 43.320.040, 30.04.030, and 30.04.070. WSR 13-23-032, § 208-544-060, filed 11/13/13, effective 12/14/13. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-544-060, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.070 and 30.08.095. WSR 91-18-054, § 50-44-060, filed 8/30/91, effective 9/30/91.

Chapter 208-548 Acquisition of banks, trust companies, national banking associations of bank holding companies by out-of-state bank holding companies.

Wash. Admin. Code § 208-548-010 Authority and purpose.

These regulations are promulgated pursuant to section 9, chapter 157, Laws of 1983, to establish a procedure under which an out-of-state bank holding company which desires to acquire more than five percent of the shares of the voting stock, or all or substantially all of the assets, of a bank, trust company, national banking association or bank holding company, the principal operations of which are conducted within this state, may apply to the director for approval of such acquisition.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-548-010, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.230 as amended by 1983 c 157 § 9. WSR 83-20-073 (Order 56), § 50-48-010, filed 10/3/83.

Wash. Admin. Code § 208-548-020 Joint application.

An application for approval of such acquisition shall be submitted jointly by the acquiring bank holding company and the domestic institution or bank holding company to be acquired. The application need not be in any particular format, but must set forth all the information required under these regulations. The application shall include a copy of the agreement setting forth the plan of merger or acquisition, including certified copies of the resolutions of the respective boards of directors of parties to the agreement approving same. The application shall also include a statement authorizing any federal or state regulatory agency to make available to the director any and all information which such agency may have relating to the applicants or any of their subsidiaries.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-548-020, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.12.060. WSR 85-19-052 (Order 62), § 50-48-020, filed 9/13/85. Statutory Authority: RCW 30.04.230 as amended by 1983 c 157 § 9. WSR 83-20-073 (Order 56), § 50-48-020, filed 10/3/83.

Wash. Admin. Code § 208-548-030 Information required—Identity of applicant parties and operating subsidiaries—Designation of representative of each applicant.

Unless included in other information required by this chapter, the application shall set forth the name and main office address of all operating subsidiaries of both the acquiring bank holding company and the bank, trust company, national banking association or domestic bank holding company to be acquired. In addition, the application shall set forth the name, office address, and telephone of one or more persons designated by each applicant to be its official representative in connection with the application. All contact between the director's office and the applicant should, except in extraordinary circumstances, be through such representatives.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-548-030, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.230 as amended by 1983 c 157 § 9. WSR 83-20-073 (Order 56), § 50-48-030, filed 10/3/83.

Wash. Admin. Code § 208-548-040 Information required from applicant to be acquired.

The bank, trust company, national banking association, or domestic bank holding company to be acquired shall include with the application each of the following items of information:

(a) A statement verifying that the bank, trust company, national banking association or domestic bank holding company to be acquired is in such a liquidity or financial condition as to be in danger of closing, failing or insolvency, setting forth with specificity the circumstances upon which such conclusion is based.

(b) A statement of all courses of action actively considered as an alternative to the proposed merger or acquisition; a statement of why each such course of action or combination of more than one of them was not taken; a statement as to why assistance available from the Federal Reserve Board, the Federal Deposit Insurance Corporation, or other governmental agency either alone or in combination with other actions is not sufficient to alleviate the liquidity or financial situation so as to avoid the danger of closing, failing or insolvency; and if known, the course or courses of action which will be taken in the event the merger or acquisition is not consummated.

(c) Financial records including: (1) Copies of reports of condition required to be filed with the appropriate regulatory authorities and financial statements showing its assets and liabilities as of the end of each of the six most recent quarterly periods of operation; (2) copies of income and expense statements for each of the six most recent quarterly periods of operation; and (3) a copy of the most recent independent audit report.

Information submitted in response to this subsection shall be consolidated figures for the entire organization. If individual figures for operating subsidiaries are available, they shall also be submitted.

(d) A statement setting forth which, if any, state banks, trust companies, or national banking associations doing business in this state, or domestic bank holding companies have been solicited to make an offer for acquisition or merger. If no such solicitations have been made, the application shall include an explanation of the decision not to make such solicitations. The application shall include a summary of the terms of any bona fide offer for merger or acquisition received from any domestic bank, trust company, national banking association or bank holding company, and shall further state whether any domestic offerors have been given the opportunity to match the terms of the proposed acquisition by or merger with the out-of-state bank holding company.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-548-040, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.230 as amended by 1983 c 157 § 9. WSR 83-20-073 (Order 56), § 50-48-040, filed 10/3/83.

Wash. Admin. Code § 208-548-050 Information required from acquiring applicant.

The applicant out-of-state bank holding company shall submit with the application each of the following items of information:

(a) A copy of its most recent audited financial statement, its most recently prepared statement of assets and liabilities, including footnotes and explanations, and its most recent income and expense report.

(b) A statement of its then existing business plan, both short-range and long-range, for operation of the bank, trust company, national banking association or domestic bank holding company to be acquired. Such statement shall include comments by the acquiror as to how the proposed acquisition will meet the needs and convenience of the people of the state of Washington.

(c) A list of any other notices pursuant to the change in Bank Control Act (12 U.S.C. §1817(j)) filed on its behalf involving any other bank, trust company, national banking association or bank holding company which is presently pending. Such list shall include the date and place of filing each notice and the name and address of the institution to which each notice pertains.

(d) A statement as to what part, if any, of the funds to be used in making the acquisition or merger are borrowed from sources other than its own subsidiaries. With respect to any such funds, the applicant shall state: (1) The amount and source of borrowed funds; (2) collateral pledged, if any; (3) terms of the loan, including interest rates, amortization requirements, guarantors, endorsers, and any other arrangements or agreements among the parties to such loan transaction; (4) proposed source of funds for debt service; (5) whether and to what extent the acquiring party intends to rely on dividends, fees, etc. from the institution being acquired for debt servicing requirements.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-548-050, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.230 as amended by 1983 c 157 § 9. WSR 83-20-073 (Order 56), § 50-48-050, filed 10/3/83.

Wash. Admin. Code § 208-548-060 Information to be made available by acquiring applicant.

The applicant out-of-state bank holding company shall make available for review by the division of banks the following:

(a) Any current file which it or its principal banking subsidiary or subordinate is required to maintain by regulations promulgated by the appropriate federal financial supervisory authority (as defined in 12 U.S.C. §2902(1)) for purposes of the Community Reinvestment Act (12 U.S.C. §2902 et seq.).

(b) Copies of all internal documents having to do with the proposed merger or acquisition, including, without limitation, memoranda or analyses together with conclusions and recommendations to management and all financial or other information from which such memoranda, analyses, conclusions, recommendations or other documents were prepared.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-548-060, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.230 as amended by 1983 c 157 § 9. WSR 83-20-073 (Order 56), § WSR 50-48-060, filed 10/3/83.

Wash. Admin. Code § 208-548-070 Information to be made available by applicant to be acquired.

The bank, trust company, national banking association or domestic bank holding company to be acquired shall make available to the director all internally generated reports relating to the operation of any or all operating subsidiaries during the immediately preceding two-year period.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-548-070, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.230 as amended by 1983 c 157 § 9. WSR 83-20-073 (Order 56), § 50-48-070, filed 10/3/83.

Wash. Admin. Code § 208-548-080 Application to include statement of interlocking management or ownership.

The application must state whether any management official (as defined in 12 U.S.C. §3201(4)) of the acquiring out-of-state bank holding company or any of its affiliated corporations (as the term "affiliated" is defined by 12 U.S.C. §3201(3)) is also a management official of any other depository institution or holding company other than the bank, trust company, or national banking association being acquired, or whether any person, partnership or corporation who owns or controls, directly or indirectly, ten percent or more of the outstanding voting shares of the acquiring applicant also owns, directly or indirectly, ten percent or more of the outstanding voting shares of any other depository institution or holding company. If such circumstances do exist, the application shall include: (1) The name of such person or persons, partnerships or corporations; (2) name and address of the depository institution or holding company; (3) relationship triggering this reporting requirement; and (4) nature and extent of ownership interest held by such person, partnership or corporation in the applicant and other depository institution or holding company.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, recodified as § 208-548-080, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.230 as amended by 1983 c 157 § 9. WSR 83-20-073 (Order 56), § 50-48-080, filed 10/3/83.

Wash. Admin. Code § 208-548-090 Director may consult with and obtain information from appropriate federal regulatory authority.

The director may consult with appropriate federal regulatory agencies in connection with any application filed hereunder and shall consider any information received from such agency or agencies in ruling upon the application.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-548-090, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.230 as amended by 1983 c 157 § 9. WSR 83-20-073 (Order 56), § 50-48-090, filed 10/3/83.

Wash. Admin. Code § 208-548-100 Interstate acquisition reciprocity—States possessing.

The director of the department of financial institutions, having reviewed the laws of the following states as they relate to a domestic (Washington) bank holding company acquiring more than five percent of the shares of the voting stock or all or substantially all of the assets of a bank, trust company, or national banking association the principal operations of which are conducted within such states, has determined, pursuant to RCW 30.04.232, that the laws of such states allow a domestic bank holding company to acquire a bank, trust company, or national banking association, the principal operations of which are conducted within such states, and permit the operation of the acquired bank, trust company, or national banking association within such states on terms and conditions no less favorable than other banks, trust companies, or national banking associations doing a banking business within such states: (1) Alaska, (2) Arizona, (3) California, (4) Colorado, (5) Connecticut, (6) Idaho, (7) Illinois, (8) Kentucky, (9) Louisiana, (10) Maine, (11) Massachusetts, (12) Michigan, (13) Nebraska, (14) Nevada, (15) New Hampshire, (16) New Jersey, (17) New Mexico, (18) New York, (19) North Dakota, (20) Ohio, (21) Oklahoma, (22) Oregon, (23) Pennsylvania, (24) Rhode Island, (25) South Dakota, (26) Tennessee, (27) Texas, (28) Utah, (29) Vermont, (30) West Virginia, and (31) Wyoming.

Other states not listed shall be reviewed on a case-by-case basis.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-548-100, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.232 (1)(c). WSR 93-07-113, § 50-48-100, filed 3/23/93, effective 4/23/93. Statutory Authority: RCW 30.04.232. WSR 87-13-015 (Order 68), § 50-48-100, filed 6/9/87
WSR 87-10-047 (Order 67), § 50-48-100, filed 5/5/87.

Chapter 208-556 Small business administration 7(A) loan guaranty program nondepository lenders—Licensing and regulation.

Wash. Admin. Code § 208-556-010 Purpose.

The purpose of this chapter shall be to provide guidelines for application for a license to operate a nondepository small business lending venture under the auspices of the federal Small Business Administration (SBA) guaranty program known as the 7(a) loan guaranty program. Specifics of the program are set forth in section 7(a) of the federal "Small Business Investment Act of 1958," 15 U.S.C., part 636(a). These rules also establish other regulatory oversight guidelines and provide for fees. These rules are promulgated under the general rule-making authority of the state director of the department of financial institutions, and are required under legislation passed by the legislature (section 3(1), chapter 212, Laws of 1989.)

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-556-010, filed 8/22/00, effective 9/22/00. Statutory Authority: 1989 c 212 § 3(1). WSR 90-01-001, § 50-56-010, filed 12/7/89, effective 1/7/90.

Wash. Admin. Code § 208-556-020 Application procedures.

An application for state license to operate a nondepository small business lending venture to qualify for participation in the SBA 7(a) program shall be filed with the director of the department of financial institutions and shall include such fees as established elsewhere in these rules. As a matter of general procedure, it is recommended that interested parties visit the office of the director prior to submitting their application to review statutory and other requirements for this action.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-556-020, filed 8/22/00, effective 9/22/00. Statutory Authority: 1989 c 212 § 3(1). WSR 90-01-001, § 50-56-020, filed 12/7/89, effective 1/7/90.

Wash. Admin. Code § 208-556-030 Application format.

Applicants may use the same documentation as required by the SBA for their approval of the lender to the extent that such documentation meets the requirements of statute and these rules unless waived by the director. The application must contain the following:

(1) Applicant's name, address, and telephone number.

(2) A statement that the applicant is incorporated under the Washington Business Corporation Act or the Washington Nonprofit Corporation Act and a copy of applicant's Articles of Incorporation and Bylaws, properly certified.

(3) A list of officers, directors, associates, and all holders of ten or more percent of any class of the applicant's capital stock.

(4) A statement of personal history of all those listed in subsection (3) of this section. SBA Form 1081 or its equivalent may be used.

(5) A copy of the most recent audited financial statement of any entity other than a natural person holding ten or more percent of any class of stock of the applicant.

(6) An organizational chart showing the relationship of the applicant to its affiliates, as well as the applicant's internal organizational structure.

(7) Copies of the last three audited financial statements of the applicant, and supporting tax returns.

(8) Applicant's business plan which should include at a minimum:

(a) A detailed pro forma financial projection for at least three years of operations.

(b) A market study of the intended geographical area of operations.

(d) An outline of loan servicing procedures proposed.

(e) Copies of written policies and procedures to be used, which must include policies requiring disclosure of conflicts of interest of affiliates, directors, officers, and employees; prohibiting false statements or representations to the director; and preventing fraud or undue influence by the licensee.

(9) Certified copy of a resolution by the applicant's board of directors designating the person(s) authorized to act on behalf of applicant.

(10) An opinion of independent counsel that the applicant is in compliance with applicable state and federal laws in the formation and organization of the company, with applicable securities laws, and is chartered to conduct its business in the proposed operating area.

(11) Such marketing materials as may have been prepared that portray the nature of applicant's operations.

(12) Copies of all bonds in effect for directors, officers, and employees.

(13) Other such information as the director may require.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-556-030, filed 8/22/00, effective 9/22/00. Statutory Authority: 1989 c 212 § 3(1). WSR 90-01-001, § 50-56-030, filed 12/7/89, effective 1/7/90.

Wash. Admin. Code § 208-556-040 Continuing operations.

Licensees shall maintain an adequate financial condition.

(1) Minimum capital (unimpaired paid-in capital, surplus, and undivided profits) shall be in the amount of five hundred thousand dollars or five and one-half percent of total assets, whichever is greater, or a greater amount should the director determine that applicant's business plan or economic conditions require a greater amount to conduct the business of a 7(a) lender. The director may consider and include the net worth of any corporate shareholder of the applicant if the shareholder agrees to unconditionally guarantee the liabilities of the applicant and that shareholder agrees to the reporting requirements set forth in WAC 208-556-060.

(2) Capital below the required amount precludes the presentation of additional loans to the SBA for guaranty without the written consent of the director.

(3) Licensees shall maintain a reserve for anticipated loan losses appropriate to its needs, based on the following factors:

(a) The volume and mix of the existing loan portfolio, including the volume and severity of nonperforming loans and adversely classified credits, as well as an analysis of net charge-offs experienced on previously classified loans.

(b) The extent to which loan renewals and extensions are used to maintain loans on a current basis and the degree of risk associated with such loans.

(d) General and local economic conditions affecting the collectibility of the licensee's loans.

(e) Previous loan loss experience by loan type, including net charge-offs as a percent of average loans over the past several years.

(f) The relationship and trend over the past several years of recoveries as a percent of previous year's charge-offs.

(g) Available outside information of a comparable nature regarding the loan portfolios of other such lenders.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-556-040, filed 8/22/00, effective 9/22/00. Statutory Authority: 1989 c 212 § 3(1). WSR 90-01-001, § 50-56-040, filed 12/7/89, effective 1/7/90.

Wash. Admin. Code § 208-556-050 Records.

Licensees shall maintain records in a fashion consistent with a financial institution and shall have them at all times readily accessible to the director. Records shall be preserved under the following schedule:

(1) Preserve permanently:

(a) All general and subsidiary ledgers reflecting asset, liability, capital stock and surplus and income and expense accounts.

(b) All general and special journals or other records forming the basis for entries in such ledgers.

(2) Preserve for at least six years following final disposition of the related loan:

(a) All applications for financing.

(b) Financing instruments.

(d) Escrow agreements.

(e) All other documents and supporting material relating to such loans, including correspondence.

Records and other documents in subsections (1) and (2) of this section may be preserved by reproduction. Provided, however, that the licensee shall prepare a duplicate reproduction which shall be stored separately from the original for the time required. If such reproductions are used, the licensee shall maintain at all times facilities for the projection and reproduction of such records.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-556-050, filed 8/22/00, effective 9/22/00. Statutory Authority: 1989 c 212 § 3(1). WSR 90-01-001, § 50-56-050, filed 12/7/89, effective 1/7/90.

Wash. Admin. Code § 208-556-060 Reports.

Licensees shall submit the following reports to the director:

(1) Annual audits prepared in accordance with generally accepted accounting principles which shall be certified unless the director makes other provision in writing in advance.

(2) Quarterly financial reports which shall include a balance sheet and income and expense statement for both the period and year to date.

(3) A notification of any suit or proceeding involving fraud or dishonesty where the licensee or an employee may be a party, or where an adverse judgment could contribute materially to the impairment of the licensee's capital. Such notification must be forwarded with copies of the complaint within thirty days of the filing of such action.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-556-060, filed 8/22/00, effective 9/22/00. Statutory Authority: 1989 c 212 § 3(1). WSR 90-01-001, § 50-56-060, filed 12/7/89, effective 1/7/90.

Wash. Admin. Code § 208-556-070 Examinations.

The director will conduct examinations of licensees as provided by statute and will forward a report of examination to the licensee's board of directors for information and action as appropriate. These examination reports and all subsequent and related correspondence are the property of the director and will be subject to the same confidentiality requirements as established for financial institutions regulated by the division of banks.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 00-17-141, amended and recodified as § 208-556-070, filed 8/22/00, effective 9/22/00. Statutory Authority: 1989 c 212 § 3(1). WSR 90-01-001, § 50-56-070, filed 12/7/89, effective 1/7/90.

Wash. Admin. Code § 208-556-080 Fees.

The cost of regulation of nondepositary lenders licensed under Title 31 RCW, shall be borne by the licensees under the following schedule:

(1) Application fee. A fee of two thousand dollars must accompany an application for this license to cover the cost of investigation.

(2) Acquisition of control approval fee. A fee of two thousand dollars must accompany any request for acquisition of control of a licensee to cover the cost of investigation which will be conducted to the same degree as an initial application approval.

(3) Business combination fee. Other business combinations must be approved by the director. Costs of investigation will be borne by the licensee and will be based on actual staff costs of the division of banks, which are fifty dollars per hour per examiner assigned.

(4) Examination and supervision fees. Examination and supervision fees shall be billed based on rates charged commercial banks for examination costs and semiannual asset charges in chapter 208-544 WAC.

History

Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 01-06-024, § 208-556-080, filed 2/27/01, effective 3/30/01
WSR 00-17-141, amended and recodified as § 208-556-080, filed 8/22/00, effective 9/22/00. Statutory Authority: 1989 c 212 § 3(1). WSR 90-01-001, § 50-56-080, filed 12/7/89, effective 1/7/90.

Chapter 208-586 Examination and supervision fees for savings and loan associations.

Wash. Admin. Code § 208-586-020 Collection of examination and supervision costs—Collection method.

The requirement of RCW 33.28.020 that the director collect from each savings and loan association the actual costs of examinations and supervision shall be met in accordance with the procedures established in this chapter. The fee shall consist of three elements: (1) An hourly charge for the number of hours spent by division personnel in conducting an examination of the association, (2) a semiannual asset charge; and (3) an hourly charge for the number of hours of extraordinary or special services.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, amended and recodified as § 208-586-020, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.28.020. WSR 83-20-028 (Order 83-5), § 419-14-020, filed 9/26/83
WSR 82-13-015 (Order 82-4), § 419-14-020, filed 6/7/82.

Wash. Admin. Code § 208-586-030 Hourly charge for examinations.

The hourly charge for hours spent by personnel of the division of banks in conducting examinations shall be assessed as follows:

(1) For division personnel classified as financial examiner, $40.00 per hour;

(2) For division personnel classified as financial examiner senior, $45.00 per hour;

(3) For division personnel classified as case manager or financial examiner supervisor or above, $50.00 per hour;

In addition to the hourly examination fee, foreign associations doing business in the state of Washington will defray the costs of travel and per diem paid to division personnel in examinations performed outside the state of Washington.

The director may charge the actual cost of examinations performed under personal service contracts by third parties. The director shall submit a statement for the foregoing charges following the completion of any applicable examination, and the charges shall be paid not later than thirty days after submission of such statement.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, amended and recodified as § 208-586-030, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.28.020. WSR 91-06-063, § 419-14-030, filed 3/1/91, effective 4/1/91
WSR 85-07-009 (Order 85-3), § 419-14-030, filed 3/8/85. Statutory Authority: RCW 33.08.110. WSR 84-12-043 (Order 84-4), § 419-14-030, filed 5/31/84. Statutory Authority: RCW 30.28.020. WSR 82-13-015 (Order 82-4), § 419-14-030, filed 6/7/82.

Wash. Admin. Code § 208-586-040 Semiannual asset charge.

The semiannual asset charge will be assessed at a rate of three cents per thousand dollars of assets. Asset fees will be computed on assets as of June 30 and December 31 of each calendar year, and payable no later than July 15 and January 15 next following the respective assessment dates.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, recodified as § 208-586-040, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.28.020. WSR 91-06-063, § 419-14-040, filed 3/1/91, effective 4/1/91
WSR 85-07-009 (Order 85-3), § 419-14-040, filed 3/8/85. Statutory Authority: RCW 30.28.020. WSR 82-13-015 (Order 82-4), § 419-14-040, filed 6/7/82.

Wash. Admin. Code § 208-586-050 Investigation fee for new charter application.

The investigation fee required by RCW 33.08.060 for submission in connection with applications to charter a new savings and loan association shall be two thousand five hundred dollars. In the event the actual costs of the investigation conducted with respect to a particular application are less than the amount of the fee, such difference between the fee and the actual costs submitted shall be refunded, provided that in no event shall more than one thousand five hundred dollars be refunded. For the purposes of this section, actual costs shall include travel and per diem expenses paid to division personnel in connection with the investigation.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, recodified as § 208-586-050, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.08.110. WSR 82-13-015 (Order 82-4), § 419-14-050, filed 6/7/82.

Wash. Admin. Code § 208-586-060 Branch application fee—Domestic associations.

The fee required by RCW 33.08.110 to be submitted in connection with an application to establish a branch office of an association shall be five hundred dollars. In the event the actual costs of the investigation with respect to a particular application are less than the amount of the fee, such difference between the fee and the actual cost submitted shall be refunded, provided that in no event shall more than three hundred fifty dollars be refunded. For the purposes of this section, actual costs shall include travel and per diem expenses paid to division personnel in connection with the investigation.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, recodified as § 208-586-060, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.08.110. WSR 84-12-043 (Order 84-4), § 419-14-060, filed 5/31/84
WSR 82-13-015 (Order 82-4), § 419-14-060, filed 6/7/82.

Wash. Admin. Code § 208-586-070 Loans to directors, officers, or employees—Maximum amount.

The total value of loans made or obligations acquired under the authority of RCW 33.12.060 (2)(f) for any director, officer, or employee of an association shall not exceed twenty-five thousand dollars, unless all applicable regulations of the Federal Deposit Insurance Corporation have been complied with, in which case loans not in excess of one hundred thousand dollars total may be made. Loans in amounts larger than one hundred thousand dollars may be made only with the prior written approval of the director has been obtained in accordance with the provisions of this section.

Requests to the director for permission to exceed the maximum loan limit shall be made at least ten days in advance of the date upon which it is anticipated that funds will be disbursed, if the loan is approved. Such requests must be accompanied by a certified copy of the authorizing resolution, which shall set forth with specificity the reasons that the board of directors believes that exceeding the loan limitation established in this section is in the best interest of the association in each instance. The authorizing resolution shall also set forth the directors' evaluation of the quality of the security for the loan, and the ability of the debtor to repay the loan in accordance with its terms.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, amended and recodified as § 208-586-070, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.12.060 (2)(f). WSR 84-09-058 (Order 84-1), § 419-14-070, filed 4/18/84
WSR 82-13-015 (Order 82-4), § 419-14-070, filed 6/7/82.

Wash. Admin. Code § 208-586-075 Branch application fee—Foreign associations.

The fee required by RCW 33.08.110 to be submitted in connection with an application to establish a branch office of a foreign association in this state shall be two thousand five hundred dollars, nonrefundable for the first branch and five hundred dollars for each additional branch. In the event the actual costs of the investigation with respect to a particular application exceed the amount of the fee, such difference between the fee and the actual costs shall be paid by the applicant. For the purposes of this section, actual costs shall include travel and per diem expenses paid to division personnel in connection with the investigation.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, recodified as § 208-586-075, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.08.110. WSR 85-07-010 (Order 85-4), § 419-14-075, filed 3/8/85
WSR 84-12-043 (Order 84-4), § 419-14-075, filed 5/31/84.

Wash. Admin. Code § 208-586-080 Annual license fees.

Every savings and loan association organized under the laws of this state shall pay a license fee before the 31st of July each year. The license fee for each domestic association shall be fifty dollars for the office designated as the home office or executive office and an additional fifty dollar fee for each branch.

Every foreign association doing business in the state of Washington shall pay a license fee before the 31st of July each year. The license fee shall be in the amount of fifty dollars for each branch in business within the state of Washington as of the close of business June 30th immediately preceding.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, recodified as § 208-586-080, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.04.020(2). WSR 82-19-020 (Order 82-6), § 419-14-080, filed 9/8/82.

Wash. Admin. Code § 208-586-085 Loans to one borrower.

RCW 33.24.010 provides that an association may not invest more than two and one-half percent of its assets in any loan or obligation to any one person, except with the written approval of the supervisor. The director hereby gives written approval for any state chartered association to make a loan to any one borrower in an amount which, taken together with all other outstanding loans and obligation to the same borrower, does not exceed either ten percent of the institution's withdrawable accounts, or the association's net worth, whichever is less.

"One borrower" is defined as (a) any person or entity that is, or that upon the making of a loan will become, obligor on a loan; (b) nominees of such obligor; (c) all persons trusts, partnerships, syndicates, and corporations of which such obligor is a nominee or a beneficiary, partner, member, or record or beneficial stockholder owning ten percent or more of the capital stock, and (d) if such obligor is a trust partnership, syndicate, or corporation, all trusts, partnerships, syndicates, and corporations of which any beneficiary, partner, member, or record or beneficial stockholder owning ten percent of the capital stock, is also a beneficiary, partner, member, or record or beneficial stockholder owning ten percent or more of the capital stock of such obligor; and the term "total balances of all outstanding loans" means the original amounts loaned by an insured institution plus any additional advances and interest due unpaid, less repayments and participating interests sold and exclusive of any loan on the security of such institution's savings accounts or real estate, the title to which has been conveyed to a bona fide purchaser of such real estate.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, amended and recodified as § 208-586-085, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.24.010. WSR 84-09-058 (Order 84-1), § 419-14-085, filed 4/18/84.

Wash. Admin. Code § 208-586-090 Hourly charge for legal assistance.

The hourly charge for consultation involving an assistant attorney general shall be assessed at a rate of $60.00 per hour. Legal assistance shall include, but not be limited to, legal research and advice pertaining to granting new charters, acquisition of savings and loan associations, conversions, stock offerings, board meetings requiring legal assistance, preparation and enforcement of removal actions, involuntary liquidations, declarations of insolvency, cease and desist orders, and other agreements or actions requiring legal advice; and to administrative hearings and preparation of memorandum opinions which relate to a specific savings and loan association.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, recodified as § 208-586-090, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.28.020. WSR 91-06-063, § 419-14-090, filed 3/1/91, effective 4/1/91
WSR 83-20-028 (Order 83-5), § 419-14-090, filed 9/26/83.

Wash. Admin. Code § 208-586-100 Supervisory review of examination.

Upon completion of each examination the examiner's report shall be reviewed and an examination letter prepared by administrative personnel. The hourly charge for the review and preparation of the examination letter shall be assessed at the rate of $50.00 per hour.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, amended and recodified as § 208-586-100, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.28.020. WSR 91-06-063, § 419-14-100, filed 3/1/91, effective 4/1/91
WSR 85-07-009 (Order 85-3), § 419-14-100, filed 3/8/85
WSR 83-20-028 (Order 83-5), § 419-14-100, filed 9/26/83.

Wash. Admin. Code § 208-586-110 Special examinations.

Special examinations shall be assessed at the rate of $50.00 per hour. Special examinations shall include, but not be limited to electronic data processing examinations, special investigations, special examinations involving the division's staff supervisory personnel, and other special examinations and reviews the supervisor deems necessary.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, recodified as § 208-586-110, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.28.020. WSR 91-06-063, § 419-14-110, filed 3/1/91, effective 4/1/91
WSR 85-07-009 (Order 85-3), § 419-14-110, filed 3/8/85
WSR 83-20-028 (Order 83-5), § 419-14-110, filed 9/26/83.

Wash. Admin. Code § 208-586-120 Acquisition application fee.

RCW 33.28.020 requires the director to collect from each association a fee to cover the actual cost of supervision.

To maintain fairness to all associations the acquiring party(ies) will defray the costs involving the director and his staff as follows:

A minimum nonrefundable fee of $5,000 payable with the acquisition application described in RCW 33.24.360. In addition direct costs involving travel and lodging of the director or his staff and legal expense billed directly to the division will be paid by the acquirers.

Savings and loan associations merging under authority of RCW 33.04.010 are not considered within the scope of RCW 33.24.360 and are therefore not included with respect to this WAC.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, amended and recodified as § 208-586-120, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.24.360. WSR 84-12-042 (Order 84-5), § 419-14-120, filed 5/31/84.

Wash. Admin. Code § 208-586-140 Charges and fees effective July 1, 2001.

The division intends to increase the rate of its charges and fees each year for several bienniums. The division intends to initiate a rule making for this purpose each biennium. This rule provides for an automatic annual increase in the rate of charges and fees each fiscal year during the 2001-03 biennium.

(1) Effective July 1, 2001, the rate of charges and fees under chapters 208-586 and 208-594 WAC shall be as follows:

(a) WAC 208-586-030(1) - The fee shall be $45.51 per hour.

(b) WAC 208-586-030(2) - The fee shall be $51.19 per hour.

(d) WAC 208-586-040 - The asset charge shall be 0.0348046 per thousand dollars of assets.

(e) WAC 208-586-075 - The fee shall be $2,500.00 for the first branch and $500.00 for each additional branch.

(f) WAC 208-586-080 - The fee shall be $50.00 for the home office and each branch.

(g) WAC 208-586-090 - The fee shall be $68.27 per hour.

(h) WAC 208-586-100 - The fee shall be $56.89 per hour.

(i) WAC 208-586-110 - The fee shall be $56.89 per hour.

(j) WAC 208-586-120 - The fee shall be $5,000.00.

(k) WAC 208-594-070 - The fee shall be $1,000.00.

(2)(a) On July 1, 2002, the rate of charges and fees under subsection (1)(a), (b), (c), (d), (g), (h), and (i) of this section, as increased in the prior fiscal year, will increase by a percentage rate equal to the fiscal growth factor for the then current fiscal year. As used in this section, "fiscal growth factor" has the same meaning as the term is defined in RCW 43.135.025.

(b) The director may round off a rate increase under this subsection. However, no rate increase may exceed the applicable fiscal growth factor.

(c) By June 1 of each year, the director will make available a chart of the new rates that will take effect on the immediately following July 1.

(3) The director may waive any or all of the charges and/or fees imposed under this section, in whole or in part, when he or she determines that both of the following factors are present:

(a) The banking program fund exceeds the projected acceptable minimum fund balance level approved by the office of financial management; and

(b) That such course of action would be fiscally prudent.

History

Statutory Authority: RCW 30.04.030, 33.04.025, 43.320.040. WSR 01-12-003, § 208-586-140, filed 5/23/01, effective 7/1/01. Statutory Authority: RCW 30.04.030 and 43.320.040. WSR 01-06-024, § 208-586-140, filed 2/27/01, effective 3/30/01. Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, recodified as § 208-586-140, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 30.04.030, 30.04.070, 30.08.095, 33.04.025 and 43.320.040. WSR 99-10-024, § 419-14-140, filed 4/28/99, effective 6/25/99.

Chapter 208-590 Merger or acquisition of troubled associations.

Wash. Admin. Code § 208-590-010 Purpose.

The purpose of this chapter is to set forth the guidelines which allow for the interstate merger or acquisition of troubled savings and loan associations.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, amended and recodified as § 208-590-010, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.12.014. WSR 82-08-023 (Order 82-1), § 419-52-010, filed 3/30/82.

Wash. Admin. Code § 208-590-020 Merger or acquisition of a troubled foreign association by a domestic association.

Pursuant to RCW 33.12.012 and 33.12.014, a domestic savings and loan association may acquire or merge with a foreign association under the following circumstances:

(1) The regulator of the foreign association believes that a merger is necessary to prevent the failure of the foreign association;

(2) The regulator of the foreign association believes that no adequate merger candidates exist within the regulator's jurisdiction;

(3) The regulator of the foreign association believes that it is appropriate for the foreign association to be acquired by a domestic association; and

(4) The director believes that it is appropriate for the domestic association to acquire the foreign association.

Any acquisition made under this authority shall be conducted in the same manner so outlined in RCW 33.24.350 - 33.24.380.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, amended and recodified as § 208-590-020, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.12.014. WSR 82-08-023 (Order 82-1), § 419-52-020, filed 3/30/82.

Wash. Admin. Code § 208-590-030 Acquisition of a troubled domestic association by a foreign association.

Pursuant to RCW 33.12.012 and 33.12.014, and notwithstanding any other law to the contrary, a foreign savings and loan association may acquire a domestic association under the following circumstances:

(1) The director believes that a merger is necessary to prevent the failure of the domestic association;

(2) The director believes that no adequate merger candidates exist in Washington;

(3) The director believes that it is appropriate for the domestic association to be acquired by a foreign association; and

(4) The regulator of the foreign association believes that it is appropriate for the foreign association to acquire the domestic association.

Any acquisition made under this authority shall be subject to RCW 33.24.350 - 33.24.380.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, amended and recodified as § 208-590-030, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.12.014. WSR 82-08-023 (Order 82-1), § 419-52-030, filed 3/30/82.

Chapter 208-594 Savings and loan trust powers.

Wash. Admin. Code § 208-594-010 Definitions.

Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Agency" means the fiduciary relationship in which title to the property constituting the agency does not pass to the trust department but remains in the owner of the property, who is known as the principal, and in which the agent is charged with certain specific duties with respect to the property.

(2) "Agency coupled with an interest" means an agency in which the agent has a legal interest in the subject matter. Such an agency is not terminated automatically, as are other agencies, by the death of the principal but continue in effect until the agent can realize upon its legal interest.

(3) "Fiduciary powers" means the power to act in any fiduciary capacity authorized by the state of Washington including, but not limited to; trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, agent, custodian, escrow agent, corporate bond paying and transfer agent, escrow holder, managing agent, depositary, committee of estates of incompetents.

(4) "Managing agent" means the fiduciary relationship assumed by a trust department upon the creation of an account which names the association as agent and confers investment discretion upon the association.

(5) "Director" means the director of the department of financial institutions.

(6) "Trust business" means the business of doing any or all of the activities specified in RCW 30.08.150 (2) through (11).

(7) "Trust department" means that group or groups of officers and employees of a savings and loan association to whom are designated by the board of directors the performance of the fiduciary responsibilities of the association, whether or not the groups or groups are so named.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, amended and recodified as § 208-594-010, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.12.010(24). WSR 88-02-068 (Order 87-2), § 419-56-010, filed 1/6/88.

Wash. Admin. Code § 208-594-020 Administration of fiduciary powers.

(1)(a) The board of directors of the savings and loan association is responsible for the proper exercise of fiduciary powers by the trust department. All matters pertinent thereto, including the determination of policies, the investment and disposition of property held in a fiduciary capacity, and the direction and review of the actions of all officers, employees, and committees utilized by the savings and loan association in the exercise of its fiduciary powers, are the responsibility of the board. In discharging this responsibility, the board of directors may assign, by action duly entered in the minutes, the administration of such of the association's fiduciary powers as it may consider proper to assign to such director(s), officer(s), employee(s), or committee(s) as it may designate.

(b) No fiduciary account shall be accepted without the prior approval of the board, or of the director(s), officer(s), or committee(s) to whom the board may have designated the performance of that responsibility. A written record shall be made of such acceptances and of the relinquishment or closing out of all fiduciary accounts. Upon the acceptance of an account for which the trust company has investment responsibilities a prompt review of the assets shall be made. The board shall also ensure that at least once during every calendar year thereafter, and within fifteen months of the last review, all the assets held in or for each fiduciary account where the association has investment responsibilities are reviewed to determine the advisability of retaining or disposing of such assets.

(2) All officers and employees taking part in the operation of the trust department shall be adequately bonded.

(3) Every qualified fiduciary subject to this chapter and exercising fiduciary powers in this state shall designate, employ, or retain legal counsel who shall be readily available to pass upon fiduciary matters and to advise the savings and loan association and its trust department.

(4) The trust department may utilize personnel and facilities of other departments of the savings and loan association, and other departments of the savings and loan association may utilize the personnel and facilities of the trust department only to the extent not prohibited by law and as long as the separate identity of the trust department is preserved.

(5) Fiduciary records shall be kept separate and distinct from other records of the savings and loan association and maintained in compliance with the provisions of RCW 30.04.240. All fiduciary records shall be kept and retained for such time as to enable the fiduciary to furnish such information or reports with respect thereto as may be required by the director of the department of financial institutions.

(6) Every such fiduciary shall keep an adequate record of all pending litigation to which it is a party in connection with its exercise of fiduciary powers.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, amended and recodified as § 208-594-020, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.12.010(24). WSR 88-02-068 (Order 87-2), § 419-56-020, filed 1/6/88.

Wash. Admin. Code § 208-594-030 Application process.

Associations desiring to establish trust departments shall complete an application establishing the scope of the intended operation. Upon receiving an application from an association to engage in trust business pursuant to this chapter, the director may request such additional information as he deems necessary for the informed disposition of the application. If supplementary information is requested by the director, the application will not be complete until the supplementary information is supplied.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, amended and recodified as § 208-594-030, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.12.010(24). WSR 88-02-068 (Order 87-2), § 419-56-030, filed 1/6/88.

Wash. Admin. Code § 208-594-040 Director action on application.

After receiving an application from a savings and loan association to engage in trust business and after having considered it, the director shall grant, grant conditionally, grant in modified form, or deny the application and shall inform the applicant in writing of his action and of the reasons therefor. Any application not acted upon within six months after its receipt by the supervisor shall be deemed denied unless the director, in writing, informs the applicant that he is holding the application for further review.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, amended and recodified as § 208-594-040, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.12.010(24). WSR 88-02-068 (Order 87-2), § 419-56-040, filed 1/6/88.

Wash. Admin. Code § 208-594-050 Engagement in unauthorized trust business prohibited.

No savings and loan association shall engage in any trust business not authorized in advance by the director in accordance with this rule, unless the director informs an applicant in writing that it may engage in a trust business provisionally while he reviews the application. Failure of a savings and loan association to comply with the terms of this chapter may be grounds for supervisory action against the savings and loan, its directors, or officers.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, amended and recodified as § 208-594-050, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.12.010(24). WSR 88-02-068 (Order 87-2), § 419-56-050, filed 1/6/88.

Wash. Admin. Code § 208-594-060 Modification or revocation of investment practices previously authorized.

The director may find that a trust business previously authorized by him is no longer a safe and prudent practice for savings and loan associations generally to engage in, or has become inconsistent with applicable state or federal law, or has ceased to be a safe and prudent practice in one or more particular savings and loan associations in light of their financial condition or management. Upon such a finding, the director may in writing inform the board of directors of any or all of the associations engaging in such a trust business that the authority to engage in the activity has been revoked or modified. When the director so notifies any savings and loan association, its directors and officers shall forthwith take steps to cease the trust business (if authority to engage in the activity has been revoked) or to make such modifications as the director requires. The director may for cause shown grant a savings and loan association some definite period of time within in which to arrange its affairs to comply with the director's orders. Savings and loan associations which continue to engage in a trust business where their authority to do so has been revoked or modified will be treated as if the authority to engage in the practice had never been granted, and their actions may be grounds for supervisory action against the association, its directors, or officers.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, amended and recodified as § 208-594-060, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.12.010(24). WSR 88-02-068 (Order 87-2), § 419-56-060, filed 1/6/88.

Wash. Admin. Code § 208-594-070 Investigation fee for new trust applications.

The investigation fee charged under RCW 33.28.020 in connection with applications to establish a new savings and loan trust department shall be one thousand dollars. In the event the actual costs of the investigation conducted with respect to a particular application are less than the amount of the fee, such difference between the fee and the actual costs submitted shall be refunded, provided that in no event shall more than five hundred dollars be refunded. Expansion of the originally approved scope of trust business must also be approved by the director by additional application and fee. In the event that actual costs of processing additional applications are less than the amount of the fee, such difference between the fee and the actual cost shall be refunded, provided that in no event shall more than seven hundred dollars be refunded. For the purposes of this section, actual costs include travel and per diem expenses paid to division personnel in connection with the investigation.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, amended and recodified as § 208-594-070, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.12.010(24). WSR 88-02-068 (Order 87-2), § 419-56-070, filed 1/6/88.

Wash. Admin. Code § 208-594-080 Audit of the trust department.

A committee of directors, exclusive of any active officers of the savings and loan association shall at least once during each calendar year and within fifteen months of the last such audit, make suitable audits of the trust department or cause suitable audits to be made by auditors responsible only to the board of directors, and at such time shall ascertain whether the department has been administered in accordance with law, this rule, and sound fiduciary principles. The board of directors may elect, in lieu of such periodic audits, to adopt an adequate continuous audit system. A report of the audits and examination required under this section, together with the action taken thereon, shall be noted in the minutes of the board of directors.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, recodified as § 208-594-080, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.12.010(24). WSR 88-02-068 (Order 87-2), § 419-56-080, filed 1/6/88.

Wash. Admin. Code § 208-594-090 Examinations and fees.

The director shall have the power to examine the affairs of a trust department of a state-chartered savings and loan association under the same general powers as outlined in RCW 33.04.020. The report of examination of any trust department will be subject to the same restrictions as those of the parent association as outlined in RCW 33.04.110. Fees for such examinations will be charged on the same hourly basis as those for the parent association as established by administrative rule.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, amended and recodified as § 208-594-090, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.12.010(24). WSR 88-02-068 (Order 87-2), § 419-56-090, filed 1/6/88.

Chapter 208-598 Foreign association branch application procedures.

Wash. Admin. Code § 208-598-010 Application procedures.

RCW 33.32.030 provides for regulatory authority by the director over the activities of foreign associations within the state of Washington, and requires that such associations conduct their business in accordance with the appropriate statutes and under the requirements set forth by the director in various rules. In order to conduct the business of a savings and loan in Washington, a foreign association must formally apply for the approval of the supervisor. Procedures for application are as follows:

(1) The application must be filed with the supervisor at the offices of the Division of Banks in Olympia, Washington.

(2) The application shall be filed in duplicate and shall be accompanied by a filing fee of five thousand dollars. In the event the actual costs of investigating the application exceed this amount, such difference between the fee and the actual costs shall be paid by the applicant. For the purposes of this section, actual costs shall include but not be limited to travel and per diem expense paid to division personnel in connection with the investigation.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, amended and recodified as § 208-598-010, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.32.030. WSR 88-02-067 (Order 87-1), § 419-60-010, filed 1/6/88.

Wash. Admin. Code § 208-598-020 Information to be included in the application.

An application shall include at least the following information:

(1) Name, address, and telephone number of the applicant.

(2) Name, address, and telephone number of the person to be contacted concerning the application.

(3) A summary of the applicant's history, which should include as a minimum the date and place of incorporation, the date and nature of any mergers or acquisitions, and certified current copies of the applicant's articles of incorporation and bylaws.

(4) A description of the applicant's business and corporate structure, including a listing of all branches or similar offices, and each majority owned subsidiary, and the nature and extent of the business activities of each.

(5) A business plan describing the applicant's proposed business activities in this state.

(6) A copy of the independent auditor's report for the applicant's most recent fiscal year and comparative financial statements for the prior fiscal year.

(7) The name, address, professional experience, and financial statement of the chief executive officer and principal operating officers.

(8) The name, address, and principal occupation of each director of applicant, and completed biographical and financial statements on each.

(9) A copy of the last two examination reports prepared by the Office of Thrift Supervision, the last two state examination reports, any correspondence from the relevant regulator to the board of directors discussing each report, and the board's responses thereto.

(10) A statement as to the presence or absence of any supervisory agreement or regulatory order that may be in effect or may have been in effect in the last five years, and, if so, a copy of each such order or agreement.

(11) An opinion from the applicant's state regulatory agency which describes the conditions under which Washington associations may conduct business in such state.

(12) A statement of total shares outstanding and total number of stockholders if the applicant is a stock association. Additionally, provide a breakdown of stock ownership by officers and directors and any other entities owning five percent or more of the association's stock.

(13) A copy of the association's bond and its riders/attachments.

(14) Any additional information that may be required by the director or deemed appropriate by the applicant.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, amended and recodified as § 208-598-020, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.32.030. WSR 88-02-067 (Order 87-1), § 419-60-020, filed 1/6/88.

Wash. Admin. Code § 208-598-030 Approval to conduct the business of an association in Washington.

The information required by WAC 208-598-020 must demonstrate to the satisfaction of the director:

(1) That the applicant, the directors of the applicant, and the chief officers of the applicant are each of good character and sound financial standing.

(2) That the financial history and condition of the applicant are satisfactory.

(3) That the applicant's plan to conduct the business of an association in Washington affords a reasonable promise of success.

(4) That the state in which the home office of the applicant is located permits Washington associations to conduct the business of an association in such state in substantially the same manner as the applicant proposes in this state.

History

Statutory Authority: RCW 33.04.025 and 43.320.040. WSR 00-17-140, amended and recodified as § 208-598-030, filed 8/22/00, effective 9/22/00. Statutory Authority: RCW 33.32.030. WSR 88-02-067 (Order 87-1), § 419-60-030, filed 1/6/88.

Chapter 208-600 Mortgage lending and home ownership.

Wash. Admin. Code § 208-600-100 Reserved.

History

Statutory Authority: RCW 43.320.040, chapter 19.144 RCW. WSR 08-22-083, § 208-600-100, filed 11/4/08, effective 12/5/08.

Wash. Admin. Code § 208-600-200 Residential mortgage loan one page disclosure summary.

(1) Purpose and scope of rule. This rule is the result of legislation recommended by the Washington state task force on homeowner security. The legislation was enacted by the Washington state legislature, at chapter 108, Laws of 2008, and codified in chapter 19.144 RCW. The stated intent of the law is to enhance responsible mortgage lending, protect borrowers, and preserve access to credit in the residential real estate market. The law requires disclosure of certain material terms of residential mortgage loans. The law also provides the department of financial institutions (DFI) with the discretionary regulatory authority to require disclosure of additional information, to clarify material terms, and to otherwise protect borrowers as needed in the residential mortgage loan market. The law mandates the one page disclosure summary in RCW 19.144.020(2), and authorizes DFI, under RCW 19.144.020(3), to require additional disclosures for the purpose of protecting borrowers.

(2) Definitions. For the purposes of this section, the following definitions apply:

(a) "Application" means the same as in the Real Estate Settlement Procedures Act (RESPA), Regulation X, 24 C.F.R. Sec. 3500.2(b).

(b) "Business day" means any day of the week except Sunday and federally recognized bank holidays.

(c) "Closing" means the process of signing the loan documents and disbursing the loan funds under the following two scenarios:

(i) Where the borrower is provided a right of rescission under the Truth in Lending Act, closing occurs at the expiration of the rescission period; or

(ii) Where the borrower is not provided a right of rescission under the Truth in Lending Act, closing occurs at the time the loan documents are signed.

(d) "Discount points" or "points" refer to a fee paid by the borrower to the lender to reduce the interest rate. The points are expressed as a percent of the loan amount. The higher the points paid, the lower the interest rate.

(e) "Finance charge" means the same as in the Truth in Lending Act, Regulation Z, 12 C.F.R. Sec. 226.4 excluding prepaid finance charges.

(f) The "fully indexed rate" is:

(i) The current value of the rate index used by a particular adjustable rate mortgage (ARM) at the time a residential mortgage loan is made; plus

(ii) A margin applied to that ARM which may vary from one transaction to another but stays the same throughout the life of that particular ARM.

(g) The "maximum interest rate" is the highest interest rate allowed under the loan agreement. It is not the default rate.

(h) "Reduced documentation" or "stated income" loan means a loan for which the lender may charge more because the borrower does not provide full documentation of income or assets.

(i) "Residential mortgage loan" means an extension of credit secured by residential real property located in this state upon which is constructed or intended to be constructed, a single-family dwelling or multiple-family dwelling of four or less units. It does not include a reverse mortgage or a borrower credit transaction that is secured by rental property. It does not include a bridge loan. It does not include loans to individuals making or acquiring a residential mortgage loan solely with his or her own funds for his or her own investment. For purposes of this subsection, a "bridge loan" is any temporary loan, having a maturity of one year or less, for the purpose of acquisition or construction of a dwelling intended to become the borrower's principal dwelling.

For purposes of this definition, residential mortgage loan means a loan used to purchase an owner-occupied, primary residence, or second home.

For purposes of this definition, a residential mortgage loan does not include an extension of credit secured by residential real property located in this state for business, commercial, or agricultural purposes, or an extension of credit secured by residential real property located in this state for the primary purpose of financing income or investment property.

For purposes of this definition, a residential mortgage loan does not include an extension of credit secured by residential real property located in this state for an open or closed-end home equity line of credit (HELOC).

(3) Do I have to provide borrowers with a disclosure summary in addition to all other required disclosures at loan application? Yes. State law now requires a clear, brief one page summary to help borrowers understand their loan terms. See RCW 19.144.020.

(4) What information must be provided in the disclosure summary? The disclosure summary must provide at a minimum the following material terms:

(a) Loan fees that are charged and retained by the broker or lender (for example, processing, underwriting, or document preparation fees). These fees go on the form under "Other Fees."

(b) Discount points the borrower will pay to reduce the interest rate.

(d) Broker fee or lender's origination fee.

(e) Broker yield spread premium, expressed as a dollar amount.

(f) Whether the loan contains a prepayment penalty.

(g) Whether the loan contains a balloon payment.

(h) Whether the property taxes and property insurance are included (escrowed) in the loan payment.

(i) Amount of the initial loan payment.

(j) Amount of the fully indexed loan payment.

(k) Amount of the maximum loan payment.

(l) Whether the loan cost or rate is based on reduced documentation.

(m) Principal amount of the loan.

(n) The date the loan resets to a higher interest rate.

(o) Whether the interest rate is locked.

(5) How must I provide the disclosure summary to the borrower? The disclosure summary must be provided on one page separate from any other documents and must use clear, simple, plain language terms that are reasonably understandable to the average person.

(6) When must I provide the disclosure summary?

(a) You must provide the initial disclosure summary to the borrower within three business days following your receipt of a complete loan application.

(b) You must redisclose material loan terms within three days of a significant change, or at least three days before closing, whichever is earlier.

(c) For purposes of this disclosure, "provide" includes sending the disclosure to the borrower's address via the United States Postal Service or other common carrier within the statutory time frames.

(7) Can I provide the disclosure summary electronically? Yes. You may provide the disclosure summary in electronic form, in a manner consistent with the procedure for delivery of electronic disclosure under Regulation Z of the Truth in Lending Act, 12 C.F.R. Part 226, currently in effect, which implements the E-Sign Act of 2000, 15 U.S.C. Sec. 7001 et seq.

(8) What type of change in a material term triggers redisclosure? You must redisclose any significant change in a material term. A "significant change" is any change which results in an increase in the borrower's loan amount or fees as follows:

(a) Any increase in the principal loan amount by five percent or more from the most recently disclosed loan amount;

(b) Any increase in the interest rate greater than one-eighth of one percent;

(d) Any increase in the broker's yield spread premium, the loan origination fee, discount point fees, or any other fees considered finance charges under the Truth in Lending Act, by five hundred dollars or more;

(e) A "significant change" also means any change in the following:

(i) Whether the loan contains a prepayment penalty;

(ii) Whether the loan contains a balloon payment;

(iii) Whether the property taxes and property insurance are included (escrowed) in the loan payment;

(iv) Whether the loan cost or rate is based on reduced documentation.

(9) Will the department create a form I can use? Yes. The department of financial institutions will make a model form available to you. However, you may choose to use a form that you design, as long as it is clear, accurate, contains all of the material terms, uses simple language, and fits on one page.

(10) Do I have to provide borrowers with the disclosure summary if their loan application is denied within three days of being taken? No. If the borrower's loan application is canceled, withdrawn, or denied within three days of being taken, you do not have to provide the disclosure summary.

History

Statutory Authority: RCW 43.320.040, chapter 19.144 RCW. WSR 08-22-083, § 208-600-200, filed 11/4/08, effective 12/5/08.

Wash. Admin. Code § 208-600-300 Reserved.

History

Statutory Authority: RCW 43.320.040, chapter 19.144 RCW. WSR 08-22-083, § 208-600-300, filed 11/4/08, effective 12/5/08.

Wash. Admin. Code § 208-600-400 Reserved.

History

Statutory Authority: RCW 43.320.040, chapter 19.144 RCW. WSR 08-22-083, § 208-600-400, filed 11/4/08, effective 12/5/08.

Wash. Admin. Code § 208-600-500 Reserved.

History

Statutory Authority: RCW 43.320.040, chapter 19.144 RCW. WSR 08-22-083, § 208-600-500, filed 11/4/08, effective 12/5/08.

Wash. Admin. Code § 208-600-600 Reserved.

History

Statutory Authority: RCW 43.320.040, chapter 19.144 RCW. WSR 08-22-083, § 208-600-600, filed 11/4/08, effective 12/5/08.

Wash. Admin. Code § 208-600-700 Reserved.

History

Statutory Authority: RCW 43.320.040, chapter 19.144 RCW. WSR 08-22-083, § 208-600-700, filed 11/4/08, effective 12/5/08.

Wash. Admin. Code § 208-600-800 Reserved.

History

Statutory Authority: RCW 43.320.040, chapter 19.144 RCW. WSR 08-22-083, § 208-600-800, filed 11/4/08, effective 12/5/08.

Wash. Admin. Code § 208-600-900 Reserved.

History

Statutory Authority: RCW 43.320.040, chapter 19.144 RCW. WSR 08-22-083, § 208-600-900, filed 11/4/08, effective 12/5/08.

Chapter 208-620 Washington Consumer Loan Act.

Wash. Admin. Code § 208-620-010 Definitions.

The definitions set forth in this section apply throughout this chapter unless the context clearly requires a different meaning.

(1) "Act" means the Consumer Loan Act, chapter 31.04 RCW.

(2) "Advertise, advertising, and advertising material" means any form of sales or promotional materials used in connection with the business. Advertising material includes, but is not limited to, newspapers, magazines, leaflets, flyers, direct mail, indoor or outdoor signs or displays, point-of-sale literature or educational materials, other printed materials; radio, television, public address system, or other audio broadcasts; internet pages, social media, instant messages, or electronic bulletin boards.

(3) "Annual percentage rate" has the same meaning as defined in Regulation Z, 12 C.F.R. Part 1026, implementing the Truth in Lending Act.

(4) "Application" means the submission of a borrower's financial information in anticipation of a credit decision relating to a residential mortgage loan, which includes the borrower's name, monthly income, Social Security number to obtain a credit report, the property address, an estimate of the value of the property, and the mortgage loan amount sought. An application may be submitted in writing or electronically and includes a written record of an oral application. If the submission does not state or identify a specific property, the submission is an application for a prequalification and not an application for a residential mortgage loan under this part. The subsequent addition of an identified property to the submission converts the submission to an application for a residential mortgage loan.

(5) "Bank Secrecy Act" means the Bank Secrecy Act (BSA), 31 U.S.C. 1051 et seq. and 31 C.F.R. Part 103.

(6) "Bond substitute" means unimpaired capital, surplus and qualified long-term subordinated debt.

(7) "Business day" means Monday through Friday excluding federally recognized bank holidays.

(8) "Commercial context" or "commercial purpose" means actions taken for the purpose of obtaining anything of value for oneself, or for an entity or individual for which the individual acts, rather than exclusively for public, charitable, or family purposes.

(9) "Common ownership" exists if an entity or entities possess an ownership or equity interest of five percent or more in another entity.

(10) "Creditor" has the same meaning as in the Truth in Lending Act, 15 U.S.C. 1602(f) and Regulation Z, 12 C.F.R. Part 1026.

(11) "Depository Institutions Deregulatory and Monetary Control Act" means the Depository Institutions Deregulatory and Monetary Control Act of 1980 (DIDMCA), 12 U.S.C. Sec. 1735f-7a.

(12) "Dwelling" means the same as in Regulation Z implementing the Truth in Lending Act which is a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile or manufactured home, and trailer, if it is used as a residence. See 12 C.F.R. Sec. 1026.2.

(13) "Equal Credit Opportunity Act" means the Equal Credit Opportunity Act (ECOA), 15 U.S.C. Sec. 1691 and Regulation B, 12 C.F.R. Part 1002.

(14) "Fair Credit Reporting Act" means the Fair Credit Reporting Act (FCRA), 15 U.S.C. Sec. 1681 et seq.

(15) "Fair Debt Collection Practices Act" means the Fair Debt Collection Practices Act, 15 U.S.C. Sec. 1692, 12 C.F.R. Part 1006.

(16) "Federal Trade Commission Act" means the Federal Trade Commission Act, 15 U.S.C. Sec. 45(a).

(17) "Filing" means filing, recording, releasing or reconveying mortgages, deeds of trust, security agreements or other documents, or transferring certificates of title to vehicles.

(18) "Gramm-Leach-Bliley Act (GLBA)" means the Financial Modernization Act of 1999, 15 U.S.C. Sec. 6801-6809, and the GLBA-mandated Federal Trade Commission (FTC) privacy rules, at 16 C.F.R. Parts 313-314.

(19) "Higher education institution" means a private, nonprofit educational institution, the main campus of which is permanently situated in the state, which is open to residents of the state, which neither restricts entry on racial or religious grounds, which provides programs of education beyond high school leading at least to the baccalaureate degree, and which is accredited by the Northwest Association of Schools and Colleges or by an accrediting association recognized by the council for higher education. RCW 28B.07.020(4).

(20) "Home Mortgage Disclosure Act" means the Home Mortgage Disclosure Act (HMDA), 12 U.S.C. Secs. 2801 through 2810 and 12 C.F.R. Part 1003 (formerly Part 203).

(21) "Immediate family member" means a spouse, child, sibling, parent, grandparent, or grandchild. This includes stepparents, stepchildren, stepsiblings, and adoptive relationships.

(22) "Lender" means any person that extends money to a borrower with the expectation of being repaid.

(23) "License number" means your NMLS unique identifier displayed as prescribed by the director. Some examples of the way you may display your license number are: NMLS ID 12345, NMLS 12345, NMLS #12345, MB-12345, or MLO-12345.

(24) "Licensed location" means a main office or branch office, including an individual loan originator's residence, where the licensee conducts business under the act with Washington residents or Washington residential real estate and the licensee has obtained a main or branch license through NMLS for that location.

(25) "Live check" means a loan solicited through the mail in the form of a check, which, when endorsed by the payee, binds the payee to the terms of the loan agreement contained on the check.

(26) "Loan originator" means the same as mortgage loan originator.

(27) "Loan originator's residence" means a loan originator's primary or secondary residence located in the United States.

(28) "Long-term subordinated debt" means for the purposes required in RCW 31.04.045 outstanding promissory notes or other evidence of debt with initial maturity of at least seven years and remaining maturity of at least two years.

(29) "Material litigation" means proceedings that differ from the ordinary routine litigation incidental to the business. Litigation is ordinary routine litigation if it ordinarily results from the business and does not deviate from the normal business litigation. Litigation involving five percent of the licensee's assets or litigation involving the government would constitute material litigation.

(30) "NMLS" means the Nationwide Multistate Licensing System and Registry, Nationwide Mortgage Licensing System, NMLSR, or such other name or acronym as may be assigned to the multistate system developed by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators and owned and operated by the state regulatory registry, LLC, or any successor or affiliated entity, for the licensing and registration of persons in the mortgage and other financial services industries.

(31) "Out-of-state licensee" means a licensee that does not maintain a physical presence within the state, or a licensee that maintains headquarters or books and records outside Washington.

(32) "Principal amount" means the loan amount advanced to or for the direct benefit of the borrower.

(33) "Principal balance" means the principal amount plus any allowable origination fee.

(34) "RCW" means the Revised Code of Washington.

(35) "Real estate brokerage activity" means any activity that involves offering or providing real estate brokerage services to the public, including (a) acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property; (b) bringing together parties interested in the sale, purchase, lease, rental, or exchange of real property; (c) negotiating, on behalf of any party, any portion of a contract relating to the sale, purchase, lease, rental, or exchange of real property, other than in connection with providing financing with respect to such a transaction; (d) engaging in any activity for which a person engaged in the activity is required to be registered or licensed as a real estate agent or real estate broker under any applicable law; and (e) offering to engage in any activity, or act in any capacity, described in (a) through (d) of this subsection.

(36) "Real Estate Settlement Procedures Act" means the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. Secs. 2601 et seq., and Regulation X, 12 C.F.R. Part 1024.

(37) "Records" mean books, accounts, papers, records and files, no matter in what format they are kept, which are used in conducting business under the act.

(38) "Referring a delinquent loan to foreclosure" means taking any step in furtherance of foreclosure. Examples include, but are not limited to: Sending a referral to a foreclosure trustee or attorney inside or outside of the servicing entity requesting they begin the foreclosure process; making a record in written or electronic form that flags, comments, blocks, suspends or in any way indicates in the electronic record of a mortgage loan that foreclosure has begun; any such marking of an electronic record that impairs the record in a way that payments will not be applied or will be routed into a suspense account.

(39) "State" means the state of Washington.

(40) "Student education loan borrower" means:

(a) Any resident of this state who has received or agreed to pay a student education loan; or

(b) Any person who shares responsibility with such resident for repaying the student education loan.

(41) "Student education loan servicing" or "service a student education loan" means:

(a) Receiving any scheduled periodic payments from a student education loan borrower pursuant to the terms of a student education loan;

(b) Applying the payments of principal and interest and such other payments with respect to the amounts received from a student education loan borrower, as may be required pursuant to the terms of a student education loan;

(c) Working with the student education loan borrower to collect data, or collecting data, to make decisions to modify the loan; or

(d) Performing other administrative services with respect to a student education loan including collection activities. "Student education loan servicing" does not include third-party student education loan modification services.

(42) "Subsidiary" means a person that is controlled by another.

(43) "Table funding" means a settlement at which a mortgage loan is funded by a contemporaneous advance of loan funds and an assignment of the loan to the person advancing the funds.

(44) "Telemarketing and Consumer Fraud and Abuse Act" means the Telemarketing and Consumer Fraud and Abuse Act, 15 U.S.C. Sec. 6101 to 6108.

(45) "Telemarketing Sales Rule" means the rules promulgated in 16 C.F.R. Part 310.

(46) "Truth in Lending Act" means the Truth in Lending Act (TILA), 15 U.S.C. Secs. 1601 et seq., and Regulation Z, 12 C.F.R. Part 1026.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 22-24-048, § 208-620-010, filed 11/30/22, effective 12/31/22
WSR 18-24-013, § 208-620-010, filed 11/27/18, effective 1/1/19
WSR 18-16-024, § 208-620-010, filed 7/24/18, effective 9/1/18. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-010, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-010, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-010, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-010, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-010, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 78. WSR 09-01-159, § 208-620-010, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-010, filed 1/27/06, effective 2/27/06. Statutory Authority: RCW 43.320.040, 31.04.045, [31.04].105, [31.04].145, [31.04].155 and [31.04].165. WSR 96-04-013, § 208-620-010, filed 1/26/96, effective 2/26/96.

Wash. Admin. Code § 208-620-011 How does the department interpret certain definitions in RCW 31.04.015?

(1) "Borrower" means an individual who consults with or retains a licensee or person subject to this chapter in an effort to obtain or seek information about obtaining a loan for personal, family, or household use, or a residential mortgage loan modification, regardless of whether the individual actually obtains a loan or residential mortgage loan modification. "Borrower" also includes a "student education loan borrower."

(2) "Director" means the director of the department of financial institutions or his or her designated representative.

(3) "Educational institution" means:

(a) An entity that offers educational credentials, instruction, or services prerequisite to or indicative of an academic or professional degree beyond the secondary level;

(b) Any location where an entity is offering postsecondary education in any form or manner for the purpose of instructing, training, or preparing persons for any vocation or profession; and

(c) Any establishment licensed under chapter 18.16 RCW that offers curriculums of instruction in the practice of cosmetology, hair design, barbering, esthetics, master esthetics, manicuring, or instructor-trainee.

(4) "Federal banking agencies" means the Board of Governors of the Federal Reserve System, Comptroller of the Currency, National Credit Union Administration, Federal Deposit Insurance Corporation, and Consumer Financial Protection Bureau.

(5) "Individual servicing a residential mortgage loan" means a person who on behalf of a lender or servicer licensed by this state, or a lender or servicer exempt from licensing, who collects or receives payments including payments of principal, interest, escrow amounts, and other amounts due, on existing obligations due and owing to the licensed or exempt lender or servicer for a residential mortgage loan when the borrower is in default, or in reasonably foreseeable likelihood of default, working with the borrower and the licensed lender or servicer, collects data and makes decisions necessary to modify either temporarily or permanently certain terms of those obligations, or otherwise finalizing collection through the foreclosure process.

For purposes of this definition "on behalf of a lender or servicer" means that the individual person is employed by the lender or servicer and does not receive any compensation or gain directly or indirectly from the borrower for performing the described activities.

(6) "License" means a license issued under the authority of this chapter with respect to a single place of business.

(7) "Loan processor" or "underwriter" means an individual who performs clerical or support duties as an employee (not as an independent contractor) of a person licensed or exempt from licensing and at the direction of and subject to the supervision and instruction of an individual licensed, or exempt from licensing, under this chapter. A residential mortgage loan processor or underwriter engaged as an independent contractor by a licensee must hold a mortgage loan originator license.

(8) "Mortgage loan originator" or "loan originator" means an individual who for direct or indirect compensation or gain or in the expectation of direct or indirect compensation or gain:

(a) Takes a residential mortgage loan application; or

(b) Offers or negotiates terms of a residential mortgage loan, including short sale transactions. An individual "offers or negotiates terms of a residential mortgage loan" if the individual:

(i) Presents for consideration by a borrower or prospective borrower particular residential mortgage loan terms; or

(ii) Communicates directly or indirectly with a borrower, or prospective borrower for the purpose of reaching a mutual understanding about prospective residential mortgage loan terms.

Mortgage loan originator also includes an individual who for compensation or gain performs residential mortgage loan modification services or holds himself or herself out as being able to perform residential mortgage loan modification services.

Mortgage loan originator also includes an individual who holds himself or herself out as being able to perform any of the activities described in this definition. For purposes of this definition, a person "holds themselves out" by advertising or otherwise informing the public that the person engages in any of the activities of a loan originator, including the use of business cards, stationery, brochures, rate lists or other promotional items.

Mortgage loan originator does not include any individual who performs purely administrative or clerical tasks and does not include a person or entity solely involved in extensions of credit relating to timeshare plans, as that term is defined in 11 U.S.C. Sec. 101(53D).

For the purposes of this definition, administrative or clerical tasks mean the receipt, collection, and distribution of information common for the processing of a loan in the mortgage industry and communication with a consumer to obtain information necessary for the processing of a residential mortgage loan. An individual who holds himself or herself out to the public as able to obtain a loan is not performing administrative or clerical tasks.

Mortgage loan originator does not include a person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with applicable state law to conduct those activities, unless the person or entity is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of such a lender, mortgage broker, or other mortgage loan originator. See the definition of real estate brokerage activity in this subsection.

This definition does not apply to employees of a housing counseling agency approved by the United States Department of Housing and Urban Development unless the employees of a housing counseling agency are required under federal law to be individually licensed as mortgage loan originators.

(9) "Residential mortgage loan modification services" means activities conducted for compensation or gain by persons not engaged in servicing the borrower's existing residential mortgage loan. The activities may include negotiating, attempting to negotiate, arranging, attempting to arrange, or otherwise offering to perform residential mortgage loan modification services. The activities may also include the collection of data for submission to another person performing mortgage loan modification services or to a residential mortgage loan servicer.

(10) "S.A.F.E. Act" means the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, Title V of the Housing and Economic Recovery Act of 2008 (HERA), Public Law No. 110-289, effective July 30, 2008; and Regulation G, 12 C.F.R. Part 1007; and Regulation H, 12 C.F.R. Part 1008.

(11) "Service" or "servicing a loan" means, with respect to residential mortgage loans, the following:

(a) Regulated activities.

(i) Collecting or attempting to collect payments on existing obligations due and owing to the lender or investor, including payments of principal, interest, escrow amounts, and other amounts due;

(ii) Collecting fees due to the servicer for the servicing activities;

(iii) Working with the borrower to collect data and make decisions necessary to modify certain terms of those obligations either temporarily or permanently; or

(iv) Otherwise finalizing collection through the foreclosure process.

(b) Regulated persons.

(i) "Servicer." Persons directly engaged in servicing.

(ii) "Master servicer." Persons responsible for ongoing servicing administration either by directly servicing or through servicing agreements with licensed or exempt subservicers. Except that the director may issue a license waiver to a master servicer servicing or administrating the servicing of fewer than twenty-five loans.

(iii) "Subservicer." Persons directly servicing pursuant to a servicing agreement with a master servicer.

(i) "Investor." Persons holding securities or other types of instruments backed by pools of residential mortgage loans. Investors are not servicers, master servicers, or subservicers.

(ii) "Note buyers." Persons who purchase mortgage loans without servicing rights and who are not servicers, master servicers, or subservicers.

(12) "Simple interest method" means the method of computing interest payable on a loan by applying the rate of interest specified in the note or its periodic equivalent to the unpaid balance of the principal amount outstanding for the time outstanding. Interest may not be compounded or payable in advance.

(a) Each payment must be applied as directed in the loan documents. No more than forty-five days of prepaid interest may be collected at the time of the loan closing.

(b) The prohibition on compounding interest does not apply to reverse mortgage loans made in compliance with the Washington State Reverse Mortgage Act within this chapter.

(13) "Student education loan" means:

(a) Any loan solely for personal, family, or household use to finance postsecondary education and costs of attendance at an educational institution, or any subsequent loan to refinance the former; and

(b) Any loan to refinance a payment plan or accounts receivable with a higher education institution if the student is not enrolled in the higher education institution.

(14) "Student education loan servicer" does not include the following when engaged in the activity of collecting student education loans in default:

(a) Collection agencies licensed in Washington under chapter 19.16 RCW; and

(b) An attorney licensed in Washington collecting student education loans in default as part of providing legal services. This attorney exclusion may be extended to the attorney's bona fide legal practice, but is otherwise an individual exclusion and may not be extended to a separate business entity.

History

Statutory Authority: RCW 43.320.040, and 31.04.165. WSR 18-24-013, § 208-620-011, filed 11/27/18, effective 1/1/19
WSR 18-16-024, § 208-620-011, filed 7/24/18, effective 9/1/18. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-011, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-011, filed 11/22/13, effective 1/1/14.

Wash. Admin. Code § 208-620-104 Who is exempt from licensing as a consumer loan company?

(1) See RCW 31.04.025 (2)(a), (b), (d), (g) through (i), and (k) through (m).

(2) Under RCW 31.04.025 (2)(c), entities conducting transactions under chapter 63.14 RCW (Retail installment sales of goods and services); however, the entity is not exempt if the transactions are an extension of credit to purchase merchandise certificates, coupons, open or closed loop stored value, or any other item issued and redeemable by a retail seller other than the entity extending the credit.

(3) Under RCW 31.04.025 (2)(e), any person making a loan primarily for business, commercial, or agricultural purposes unless the loan is secured by a lien on the borrower's primary dwelling.

(4) Under RCW 31.04.025 (2)(f), a person selling property they own, that does not contain a dwelling, when the property serves as security for the financing. The exemption is not available to individuals subject to the federal S.A.F.E. Act or any person in the business of constructing or acting as a contractor for the construction of residential dwellings. See also WAC 208-620-232.

(5) Under RCW 31.04.025 (2)(j), a nonprofit housing organization seeking exemption must meet the following standards:

(a) Has the status of a tax-exempt organization under Section 501 (c)(3) of the Internal Revenue Code of 1986;

(b) Promotes affordable housing or provides home ownership education, or similar services;

(d) Receives funding and revenue and charges fees in a manner that does not incentivize it or its employees to act other than in the best interests of its clients;

(e) Compensates its employees in a manner that does not incentivize employees to act other than in the best interests of its clients;

(f) Provides or identifies for the borrower residential mortgage loans with terms favorable to the borrower and comparable to mortgage loans and housing assistance provided under government housing assistance programs; and

(g) Meets other standards as prescribed by the director.

(6) Under RCW 31.04.025(3), individuals who make loans or extend credit, secured or unsecured, to immediate family members.

(7) Under RCW 31.04.025(3), individuals who extend credit on the sale of their primary dwelling.

(8) Investors. See WAC 208-620-011(5).

(9) Note buyers. See WAC 208-620-011(5).

(10) Under RCW 31.04.420:

(a) Trade, technical, vocational, or apprentice programs that teach skills related to a specific job, and postsecondary schools that service their own student education loans;

(b) Persons servicing five or fewer student education loans;

(d) The United States or any department or agency thereof, to the extent it is servicing student education loans that it originated;

(e) Any state, county, city, or any department or agency thereof, but only to the extent it is servicing student education loans that it originated; and

(f) Persons providing third-party student education loan modification services. See RCW 31.04.015(38).

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-24-013, § 208-620-104, filed 11/27/18, effective 1/1/19
WSR 18-16-024, § 208-620-104, filed 7/24/18, effective 9/1/18. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-104, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-104, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-104, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-104, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-105 Who is exempt from licensing as a mortgage loan originator under this act?

The following are exempt from licensing as a mortgage loan originator:

(1) Registered mortgage loan originators or any individual required to be registered while employed by a covered financial institution as defined in regulation G, 12 C.F.R. Sec. 1007.102;

(2) Any individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member of the individual;

(3) Any individual who offers or negotiates terms of a residential mortgage loan secured by a dwelling that served as the individual's residence;

(4) A Washington licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney's representation of the client, unless the attorney is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker, or other mortgage loan originator;

(5) Individuals who do not take residential mortgage loan applications or negotiate the terms of residential mortgage loans for compensation or gain or in the expectation of compensation or gain; and

(6)(a) An employee of a bona fide nonprofit organization who acts as a loan originator only with respect to his or her work duties to the bona fide nonprofit organization, and who acts as a loan originator only with respect to residential mortgage loans with terms that are favorable to the borrower.

(b) Terms favorable to the borrower are terms consistent with loan origination in a public or charitable context, rather than a commercial context.

(7) Individuals employed by a licensed residential mortgage loan servicing company engaging in activities related to servicing, unless licensing is required by federal law or regulation.

(8) See also WAC 208-620-232.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-105, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-105, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-105, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-105, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-105, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-230 Do I need a consumer loan license to lend money, extend credit, service or modify the terms of residential mortgage loans, or service student education loans?

(1) Yes. If you do not qualify for an exemption under RCW 31.04.025 or 31.04.420, you must hold a license to:

(a) Be located in Washington and lend money, extend credit, service or modify residential mortgage loans, or service student education loans;

(b) Be located outside Washington and lend money or extend credit to Washington residents, service or modify residential mortgage loans on Washington real estate, or service student education loans for Washington residents;

(c) From any location solicit or advertise by any means to Washington residents including but not limited to mail, brochure, telephone, print, radio, television, internet, or any other electronic means;

(d) From any location conduct business under the act with Washington residents by mail or internet;

(e) Hold yourself out as able to conduct any of the activities in (a) through (d) of this subsection.

(2) If you violate subsection (1) of this section, on nonresidential loans, you must refund to the borrower the interest and nonthird-party fees charged in the transaction. On residential mortgage loans, you must refund to the borrower nonthird-party fees charged in the transaction.

(3) See also WAC 208-620-232 for residential mortgage loans.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-24-013, § 208-620-230, filed 11/27/18, effective 1/1/19
WSR 13-24-024, § 208-620-230, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-230, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 78. WSR 09-01-159, § 208-620-230, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-230, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-231 Who must have a consumer loan license to service residential mortgage loans secured by Washington residential real estate or obligating Washington residents?

(1) Persons servicing loans they originated.

(2) Persons servicing loans purchased post closing.

(3) Persons servicing loans owned by other persons.

(4) See also WAC 208-620-011(5) and 208-620-104.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-16-024, § 208-620-231, filed 7/24/18, effective 9/1/18. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-231, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-231, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-231, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-620-232 Can I make a small number of residential mortgage loans without being licensed at the company level?

Yes. Pursuant to RCW 31.04.025(3) you may be eligible to make five or fewer residential mortgage loans during a calendar year without holding a company level license. You must apply for and obtain the license waiver for each transaction. If you are eligible for and receive the license waiver, you must comply with certain conditions including the following:

(1) If you do not provide the borrower with a compliant federal disclosure of the loan terms and conditions and cost of financing, you must provide the buyer with a disclosure prescribed by the director.

(2) You must comply with the state's usury rate limit. See chapter 19.52 RCW.

(3) You must follow Washington law if you pursue a foreclosure.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 19-21-157, § 208-620-232, filed 10/22/19, effective 11/24/19. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-232, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-232, filed 11/22/13, effective 1/1/14.

Wash. Admin. Code § 208-620-234 Must a company that provides loan processing or underwriting services on residential mortgage loans be licensed under the Consumer Loan Act?

Yes. (1) The company must license at the company level and must employ at least one licensed mortgage loan originator. Loan processors and underwriters are subject to the individual licensing requirements of the S.A.F.E. Act, 12 C.F.R. Part 1008 (Regulation H) if not supervised by an individual licensed as a mortgage loan originator under S.A.F.E. A company level license is required to provide the sponsorship for the supervising licensed mortgage loan originator.

(2) Alternatively, the company may license under the Mortgage Broker Practices Act, chapter 19.146 RCW.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-234, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-234, filed 11/22/13, effective 1/1/14.

Wash. Admin. Code § 208-620-235 When making loans, is there a maximum rate of interest allowed under the act?

Yes. The rate of interest specified in the note must not exceed twenty-five percent per annum.

History

Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-235, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-235, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 78. WSR 09-01-159, § 208-620-235, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-235, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-250 Is my company required to have a licensed location in the state of Washington?

(1) No. You are not required to maintain a physical presence in this state to hold a license but any location doing business under the act, wherever located, must be licensed, except those locations consistent with subsection (2) of this section. Your company's main office (headquarters), wherever located, must have a license.

(2) If you employ mortgage loan originators, those licensed loan originators must work from a licensed location or from the loan originator's residence pursuant to WAC 208-620-660.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 22-24-048, § 208-620-250, filed 11/30/22, effective 12/31/22
WSR 13-24-024, § 208-620-250, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-250, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-250, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-251 Are there any additional requirements for out-of-state licensees?

(1) Keeping records out-of-state. You must keep your books and records location information updated in the NMLS and provide the director with access to the books and records.

(2) Service on out-of-state licensee. An out-of-state licensee's registered agent in Washington is the licensee's agent for service of process, notice, or demand.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 22-24-048, § 208-620-251, filed 11/30/22, effective 12/31/22
WSR 18-16-024, § 208-620-251, filed 7/24/18, effective 9/1/18
WSR 13-24-024, § 208-620-251, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-251, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-620-260 If I am licensed under the Consumer Loan Act, can I broker residential mortgage loans in the state of Washington?

Yes. You may broker residential mortgage loans under the Consumer Loan Act. Brokered loans are subject to the annual assessment. See WAC 208-620-441.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-16-024, § 208-620-260, filed 7/24/18, effective 9/1/18
WSR 13-24-024, § 208-620-260, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-260, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-260, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-260, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040. WSR 08-15-125, § 208-620-260, filed 7/22/08, effective 8/22/08. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-260, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-271 Do I need a license to assist a homeowner with a residential mortgage loan modification?

Yes. Persons providing third-party loan modification services for compensation or gain must be licensed under this chapter, or under chapter 19.146 RCW. See also WAC 208-620-552 and 208-620-568.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-271, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-271, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-271, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-271, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-271, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-280 How do I apply for a consumer loan license?

(1) Your application consists of an online filing through the NMLS and Washington specific requirements provided directly to DFI. You must pay an application fee through the NMLS system.

(2) Upon application and periodically upon license renewal, each officer, director, and owner applicant must provide information concerning:

(a) Identity, including fingerprints for submission to the Washington state patrol, the federal bureau of investigation, the nationwide mortgage licensing system and registry, or any governmental agency or entity authorized to receive this information for a state and national criminal history background check;

(b) Personal history;

(d) Business record; and

(e) Other pertinent facts, as the director may reasonably require.

(3) Each principal, officer and director of the entity that is applying for a license is deemed responsible for the information submitted as part of the application.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-280, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-280, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-280, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-281 What will happen if my license application is incomplete?

The department will only process complete applications. If your application is incomplete your file will be marked "pending-deficient" in the NMLS. The department will either identify each deficiency or respond that there are multiple deficiencies and ask you to contact the department. You are responsible for reviewing your record and responding to each issue.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-281, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-281, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-282 How do I withdraw my application for a license?

You may withdraw the application through the NMLS. You will not receive a refund of the NMLS application fee but you may receive a partial refund of your licensing fee if the fee exceeds the department's actual cost to investigate the license application.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-282, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-282, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-284 What are my rights if the director denies my application for a license?

You have the right to request an administrative hearing pursuant to the Administrative Procedure Act, chapter 34.05 RCW. To request a hearing, you must notify the department within twenty days from the date of the director's notice to you that your license application has been denied. See WAC 208-620-615.

History

Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-284, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-290 What fees must I pay for my application for a consumer loan license?

(1) NMLS fees. You must pay the NMLS system fee when you submit your application.

(2) DFI fees. You must pay $95.55 per hour for review and investigation of the following:

(a) New consumer loan company license;

(b) New branch office license;

(d) Opinions rendered regarding interpretations of statutes and rules.

(3) Licenses. You must pay $106.71 for issuance of the following licenses:

(a) New or replacement main office licenses; or

(b) New or replacement branch licenses.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-290, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-290, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-290, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-300 If I want to operate my business from more than one location, do I have to license each location?

Yes. You must submit a branch office application through the NMLS for each branch office, residential mortgage loan servicing location, student education loan servicing location, or direct solicitation location. You may not operate from a location until a license is granted for that location. However, a branch license is not required for a loan originator to conduct activities under the act from the loan originator's residence pursuant to WAC 208-620-660.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 22-24-048, § 208-620-300, filed 11/30/22, effective 12/31/22
WSR 18-24-013, § 208-620-300, filed 11/27/18, effective 1/1/19. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-300, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-300, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-300, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-300, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-301 If I make residential mortgage loans and employ managers, must they license individually as mortgage loan originators?

(1) Your managers, including branch managers, must license individually as mortgage loan originators if they conduct any one of the following activities:

(a) Take residential mortgage loan applications, negotiate the terms or conditions of residential mortgage loans, or hold themselves out as being able to conduct these activities;

(b) Supervise your loan processor or underwriting employees; or

(2) Specifically:

(a) Any manager or any person who takes a residential mortgage loan application in Washington, negotiates the terms or conditions of a residential mortgage loan on Washington property, or holds themselves out as being able to conduct those activities, must have a Washington mortgage loan originator license. Washington licensed loan originators must work from a licensed location or the loan originator's residence pursuant to WAC 208-620-660.

(b) Any manager who directly supervises loan processor or underwriting employees must hold a mortgage loan originator license. The loan originator license can be from any state. Washington licensed loan originators must work from a licensed location or the loan originator's residence pursuant to WAC 208-620-660.

(c) Any manager who directly supervises Washington licensed mortgage loan originators must themselves hold a Washington loan originator license. Washington licensed loan originators must work from a licensed location or the loan originator's residence pursuant to WAC 208-620-660.

(3) As to subsection (1)(a) and (b) of this section, licensure is for the day-to-day operational supervisors.

(4) Each licensed manager must prepare and maintain written supervisory plan for the employees they supervise. The details of the plan must include the number of employees supervised and their physical location, how the supervisor will adequately supervise the employees if an employee is not in the same location as the supervisor, and the type and volume of work performed by the supervised employees. Supervisory plans must be maintained as part of the business books and records.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 22-24-048, § 208-620-301, filed 11/30/22, effective 12/31/22
WSR 19-21-157, § 208-620-301, filed 10/22/19, effective 11/24/19. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-301, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-301, filed 11/22/13, effective 1/1/14.

Wash. Admin. Code § 208-620-310 Is it necessary to license an office that is only providing underwriting and other back-office services?

A location that is solely providing loan processing or underwriting or other back-office services on Washington loans and has only incidental contact with the borrower after an application has been taken, is not required to be licensed. Back office services do not include loan servicing.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 22-24-048, § 208-620-310, filed 11/30/22, effective 12/31/22. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-310, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-310, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-310, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-310, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-320 What is the amount of the surety bond required for my consumer loan license?

(1) Surety bond amounts are based on the volume of your activity from prior years. If there is no prior year volume, the surety bond amount required at application is thirty thousand dollars. For purposes of this section, references to loan origination volume mean closed loans.

(2) Nonresidential loan origination. If you originate nonresidential loans the surety bond amount is based on the annual dollar amount of loans you originate. See the following chart:

| 1. | Zero to twenty million in loans originated: | $30,000 | | --- | --- | --- | | 2. | Twenty million to forty million: | $50,000 | | 3. | Forty million to fifty million: | $100,000 | | 4. | Fifty million and above: | $150,000 |

(3) Residential mortgage loans.

(a) Origination. If you only originate residential mortgage loans, the surety bond amount is based on the annual dollar amount of residential mortgage loans you originate. Use the chart in subsection (2) of this section for the bond amount.

(b) Servicing. If you only service residential mortgage loans, a bond requirement may only arise if you elect a surety bond in lieu of the required net worth in WAC 208-620-322, or you sponsor a Washington mortgage loan originator.

(c) Origination and servicing. If you originate and service residential mortgage loans, your surety bond amount will be based on your origination volumes. See the table in subsection (2) of this section.

(d) Brokering. If you only broker residential mortgage loans, your surety bond amount will be based on the total annual principal amount of the loans brokered. See the table in subsection (2) of this section.

(4) Combined nonresidential and residential loan origination. If you originate both nonresidential and residential loans, your bond amount will be based on the combined origination volume. See the table in subsection (2) of this section.

(5) Third-party residential loan modification services. If you only offer third-party residential mortgage loan modification services, your bond amount is thirty thousand dollars.

(6) Student education loan servicing. If you only service student education loans, the surety bond amount is thirty thousand dollars.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-24-013, § 208-620-320, filed 11/27/18, effective 1/1/19. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165, and 31.04.300. WSR 17-01-124, § 208-620-320, filed 12/20/16, effective 1/1/18. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-320, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-320, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-320, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-320, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 78. WSR 09-01-159, § 208-620-320, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040. WSR 08-15-125, § 208-620-320, filed 7/22/08, effective 8/22/08. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-320, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-321 What are the capital requirements for a nondepository residential mortgage loan servicer applicant and licensee servicing loans guaranteed by one or more government sponsored entity (GSE) and/or government corporation?

(1)(a) An applicant or licensee operating as an approved servicer by one or more government sponsored or government corporation entities must maintain liquidity (to include operating reserves) and tangible net worth that meet the standards set by the entity. If approved by more than one entity, the applicant or licensee must meet the highest standard of the entities for which they are approved. Tangible net worth does not include money held in borrower escrow accounts.

Examples of government sponsored entities are Freddie Mac, Fannie Mae, the Federal Home Loan Bank System, and the Federal Agricultural Mortgage Corporation. Ginnie Mae is an example of a government corporation.

(b) Applicants or licensees with a combined portfolio will be subject to the standards in (a) of this subsection.

For example, if your portfolio contains loans from one or more GSE or government corporations and loans not insured by any GSE or government corporation, your capital requirements must meet the highest standard of the GSE or government corporations.

(c) An applicant or licensee with a portfolio of loans not subject to any government sponsored or government corporation entity must comply with WAC 208-620-322.

(2) The standards described in subsection (1)(a) of this section are set by the GSE and/or government corporation financial eligibility requirements for servicing residential mortgage loans.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165, and 31.04.300. WSR 17-01-124, § 208-620-321, filed 12/20/16, effective 1/1/18.

Wash. Admin. Code § 208-620-322 What are the capital requirements for a nondepository residential mortgage loan servicer applicant or licensee servicing loans not guaranteed by a government sponsored entity (GSE) and/or government corporation?

(1)(a) An applicant or licensee servicing residential mortgage loans not including any GSE or government corporation loans must maintain a minimum tangible net worth, based on its nationwide servicing portfolio, as follows:

| 0-199 loans | | $100,000 | | | --- | --- | --- | --- | | 200-299 loans | | $200,000 | | | 300-399 loans | | $300,000 | | | 400-499 loans | | $400,000 | | | 500-599 loans | | $500,000 | | | 600-699 loans | | $600,000 | | | 700-799 loans | | $700,000 | | | 800-899 loans | | $800,000 | | | 900-999 loans | | $900,000 | | | 1,000 plus loans | | $1,000,000 | |

(b) Alternatively the applicant or licensee may maintain a one million dollar surety bond in lieu of tangible net worth.

(c) In addition, the applicant or licensee must maintain liquidity (to include operating reserves) of .00035 times the unpaid principal balance of the portfolio.

(2) An applicant or licensee servicing twenty-five or fewer Washington residential mortgage accounts may apply to the director to waive or adjust one or more of these capital requirements. In considering such a request the director will consider whether the licensee has a positive net worth and adequate operating reserves. For purposes of this section, "operating reserves" are funds set aside in anticipation of future payments or obligations and are included in liquidity.

(3) Licensees must annually or more frequently report, as prescribed by the director, on liquidity (including operating reserves) and tangible net worth.

(4) Any licensee that does not maintain the standards in this section is subject to action by the director including that authority in RCW 31.04.165(4).

(5) The following definitions apply to this section:

(a) Tangible net worth means total equity minus receivables due from affiliated entities, minus goodwill and other intangible assets, and minus the carrying value of pledged assets net of the associated liabilities of the pledged assets.

(b) Liquidity means unrestricted cash and cash equivalents, investment grade securities that are available for sale or held for trade, and unused/available portion of committed servicing advance lines.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-24-013, § 208-620-322, filed 11/27/18, effective 1/1/19. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165, and 31.04.300. WSR 17-01-124, § 208-620-322, filed 12/20/16, effective 1/1/18.

Wash. Admin. Code § 208-620-324 What are the capital requirements for a student education loan servicer?

(1)(a) An applicant or licensee servicing student education loans must maintain a minimum tangible net worth of two hundred fifty thousand dollars.

(b) In addition, the applicant or licensee must maintain liquidity (to include operating reserves) of .00035 times the unpaid principal balance of the nationwide portfolio.

(2) An applicant or licensee servicing student education loans for Washington state borrowers may apply to the director to waive or adjust the capital requirements. In considering such a request, among other things, the director will consider the number of loans being serviced and whether the applicant or licensee has a positive net worth and adequate operating reserves. For purposes of this section, "operating reserves" are funds set aside in anticipation of future payments or obligations and are included in liquidity.

(3) Licensees servicing student education loans must annually or more frequently report, as prescribed by the director, on liquidity (including operating reserves) and tangible net worth.

(4) Any licensee servicing student education loans that does not maintain the standards in this section is subject to action by the director, including that authority in RCW 31.04.165(4).

(5) The following definitions apply to this section:

(b) Liquidity means unrestricted cash and cash equivalents, investment grade securities that are available for sale or held for trade, and the unused/available portion of committed servicing advance lines (funding facilities).

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-24-013, § 208-620-324, filed 11/27/18, effective 1/1/19.

Wash. Admin. Code § 208-620-327 How often will my bond amount change?

Your bond amount may change annually depending on your volume of Washington activity. By March 1st of each year, you must determine your required bond amount and provide DFI with proof of having an adequate bond.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-24-013, § 208-620-327, filed 11/27/18, effective 1/1/19. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-327, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-327, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-328 For purposes of the annual assessment and surety bond calculation, how often must I report my Washington activity?

You must report your volume of activity as directed and on the form prescribed by the director.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-24-013, § 208-620-328, filed 11/27/18, effective 1/1/19. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-328, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 12-18-047, § 208-620-328, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-328, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-328, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-330 Does the surety bond need to reflect coverage for licensee and its W-2 employees and independent contractors?

Yes. The surety bond must cover both the licensee and all employees and independent contractors working for the licensee.

History

Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 78. WSR 09-01-159, § 208-620-330, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-330, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-340 Do I have any alternative to maintaining a surety bond?

With the director's approval, you may use a bond substitute, as defined in WAC 208-620-010, that meets the following requirements:

(1) Your company must be a Washington business corporation.

(2) Your company must maintain unimpaired capital in an amount so that the aggregate sum of the company's debt, including outstanding promissory notes or other evidences of debt, does not at any time exceed three times the amount of its bond substitute.

(3) You may exclude long-term subordinated debt, as defined in WAC 208-620-010, for purposes of calculating the bond substitute only if any claim by the subordinate debtholder on the company's assets is junior to claims by the state or a consumer under the act. You must file with the director a subordination agreement in favor of the state.

(4) You must not consider bad debts and uncollectible judgments as assets for purposes of calculating the bond substitute. A bad debt is any debt owed to you upon which any payment is six months or more past due. An uncollectible judgment is any judgment which is more than two years old and which has not been paid.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-340, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-340, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-340, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-341 If I originate residential mortgage loans and my company relies on the bond substitute, must my licensed mortgage loan originators obtain an individual bond?

Yes. They must each obtain individual bonds based on their mortgage loan origination volume. See WAC 208-620-710 (3)(i).

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-341, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-341, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-341, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-350 If I qualify to use a bond substitute in lieu of a surety bond, what documentation do I have to provide to the department?

(1) Semiannual financial statements required. A licensee that maintains a bond substitute must submit semiannually to the director year-to-date financial statements prepared in accordance with generally accepted accounting principles, including at a minimum a statement of assets and liabilities and a profit and loss statement.

(2) More frequent financial reporting. The director may require that financial reports be submitted more frequently if past financial reports have been prepared incorrectly or were misleading or if there is substantial risk that the licensee will violate the bond substitute standard.

(3) Additional information to be filed. The director may require other documents, agreements and information deemed necessary to properly evaluate and ensure that the licensee remains in compliance with this section.

(4) Failure to file financial statements as required. The director may require a licensee that fails to file its financial statements under subsection (1) of this section to obtain a surety bond within thirty days of that failure.

History

Statutory Authority: RCW 43.320.040. WSR 08-15-125, § 208-620-350, filed 7/22/08, effective 8/22/08. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-350, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-360 What if I use a bond substitute and my unimpaired capital falls below the minimum?

A company that does not maintain a sufficient bond substitute must notify the director within ten days of the decrease in unimpaired capital. The department will then direct you to obtain and file a surety bond in the amount required by WAC 208-620-320. You must comply within twenty days. If you obtain a surety bond under this section you must maintain the surety bond for five years after the date of noncompliance. During this five-year period, the director will not accept a bond substitute.

History

Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-360, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040. WSR 08-15-125, § 208-620-360, filed 7/22/08, effective 8/22/08. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-360, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-370 What are the grounds for denying or conditioning my consumer loan company license application?

The director may deny or condition approval of a license application if you or any principal, officer, or board director of the applicant:

(1) Fails to pay a fee due the department or the NMLS;

(2) Fails to demonstrate financial responsibility, experience, character, and general fitness to operate a business honestly, fairly, and efficiently within the purposes of the Consumer Loan Act. The director may find that the person has failed to make the demonstration if, among other things:

(a) Is or has been subject to an injunction or an administrative action issued pursuant to the Consumer Loan Act, the Consumer Protection Act, the Mortgage Broker Practices Act, the Insurance Code, the Securities Act, or similar laws in this or another state; or

(b) Is reported to have a history of unpaid debts as reported by an independent credit report issued by a recognized credit reporting agency; or

(c) Is the subject of a criminal felony indictment, or a criminal gross misdemeanor charge involving dishonesty or financial misconduct (RCW 31.04.055 (1)(d)); or

(d) Is insolvent in the sense that the value of the applicant's or licensee's liabilities exceeds its assets or in the sense that the applicant or licensee cannot meet its obligations as they mature; or

(e) Has had a license to conduct lending, residential mortgage loan servicing, to provide settlement services associated with lending or residential mortgage loan servicing, or student education loan servicing revoked or suspended by this state, another state, or by the federal government within five years of the date of submittal of a complete application for a license (see RCW 31.04.093 (6)(c)).

(3) Has misrepresented, omitted or concealed a material fact from the department or has misrepresented a material fact to the department;

(4) Has been found to have committed an act of misrepresentation or fraud in any aspect of providing financial services;

(5) Has failed to complete its application as defined in WAC 208-620-280, within a reasonable time after being notified that the department considers the file abandoned for failure to provide requested information or documentation;

(6) Fails to maintain a bond or bond alternative that is compliant with the act.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-24-013, § 208-620-370, filed 11/27/18, effective 1/1/19
WSR 13-24-024, § 208-620-370, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-370, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-370, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-370, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-371 May I employ someone to work with Washington residents or Washington property who has been convicted of a gross misdemeanor or felony, or who has had a financial services-related license revoked or suspended?

No. (1) Pursuant to RCW 31.04.093(6), the director may prohibit any officer, principal, or employee from participating in the affairs of any licensee if that officer, principal, or employee has been convicted of or pled guilty or nolo contendere to:

(a) A gross misdemeanor involving dishonesty or financial misconduct; or

(b) A felony in a domestic, foreign, or military court:

(i) During the seven-year period preceding the date of the proposed employment; or

(ii) At any time preceding the date of the proposed employment, if the felony involved an act of fraud, dishonesty, breach of trust, or money laundering.

(2) For purposes of this section, "participating in the affairs of any licensee" means an officer, principal, or employee or independent contractor who will or does originate loans, supervise employees or independent contractors, or manage the loan production or other activities of the licensee.

(3) Additionally, the director may prohibit participation in the affairs of the licensee by any officer, principal, or employee or independent contractor, or person subject to the act, who has had a license to provide financial services revoked or suspended in this state or any state.

(4) The department considers it to be a deceptive practice in violation of RCW 31.04.027(2) for any licensee to employ an officer, principal, or employee or independent contractor to conduct any of the activities described in subsection (3) of this section without first conducting a background check.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-24-013, § 208-620-371, filed 11/27/18, effective 1/1/19. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-371, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-371, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-371, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-371, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-372 Am I responsible for the actions of my employees and independent contractors?

Yes. You are responsible for any conduct violating the act or these rules by any person you employ, or engage as an independent contractor, to work in the business covered by your license.

History

Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-372, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-373 What happens to residential mortgage loans in the pipeline if a mortgage loan originator leaves my company?

Loan files belong to the company. Existing loan applications must be processed by another licensed loan originator in the company. At the borrower's written request, the loan must be transferred to another licensed entity within five days of the borrower's request. You may pay the original loan originator for the work he or she performed prior to leaving.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-373, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-373, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-373, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-374 What action must I take in the NMLS if I fire a residential mortgage loan originator or if a residential mortgage loan originator quits?

You must file a relationship termination through the NMLS within ten days of firing someone or the person quitting.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-374, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-374, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-374, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-378 Knowledge of the law and rules.

You are responsible for ensuring that your employees and mortgage loan originators have a sufficient understanding of the act and the rules.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 12-18-047, § 208-620-378, filed 8/29/12, effective 11/1/12.

Wash. Admin. Code § 208-620-400 Can I share an office with another business?

(1) You may conduct your business in a licensed location in which other persons are engaged in business.

(2) If you originate residential mortgage loans, you must comply with RESPA, 12 C.F.R. Sec. 1024.14, including the required disclosures and prohibitions on referral fees if:

(a) The licensee has effective control over the person sharing space; or

(b) The person sharing space has effective control over the licensee; or

(d) The licensee is a corporation related to another corporation as parent to subsidiary and one refers business incident to or a part of a real estate settlement service to the other.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-400, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 12-18-047, § 208-620-400, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040. WSR 08-15-125, § 208-620-400, filed 7/22/08, effective 8/22/08. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-400, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-420 May I transact my company business in a name other than the name on my company license?

(1) You may only transact business using the name on the license or as further described in this section.

(2) You may apply to the department to add a trade or doing business as (DBA) name to your main office license but you may not use the DBA alone to transact business. DBA names will only be attached to the main office license. Branch offices cannot have DBAs attached to the branch office license. The director may deny an application for a proposed DBA name if the proposed DBA name is similar to a currently existing licensee name.

(3) If you transact business using a DBA you must use either the main office license number or main office name as entered in the NMLS with the DBA. See also WAC 208-620-620, 208-620-621 and 208-620-622.

(4) Reserved.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-420, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-420, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-420, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-420, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-425 May I transfer or assign my license?

No. A license is given to a specific entity with specific individuals at a specific location. If twenty percent or more of the business is transferred or sold to another person, the licensee and the proposed new licensee(s) must apply to the department for a license. See also WAC 208-620-490.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-425, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040. WSR 08-15-125, § 208-620-425, filed 7/22/08, effective 8/22/08. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-425, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-430 What are my annual filing requirements as a consumer loan licensee?

Each year you are required to file two annual reports on forms provided by the department. You must also pay a fee (assessment) based on your activities during the reporting year. The reports and the assessment fee must be provided to the department on March 1st of each year or within thirty days of ceasing Washington operations (the due date).

(1) Annual reports and assessment fee on activity. You must provide the annual reports (annual assessment report and consolidated annual report) and the assessment fee by the due date.

(2) Late penalties. If you fail to submit the required annual reports and assessment fee by the due date you are subject to a penalty of fifty dollars for each item for each day of delay. For example, if the department receives the two annual reports and assessment fee on March 4th, you would have to pay an additional four hundred fifty dollars as a late penalty. If the items are filed with the department more than thirty days after ceasing Washington operations, the late penalty will accrue at the same rate. The maximum late penalty that will be assessed is five thousand dollars per reporting year. More penalties may be assessed if the department must make a bond claim to collect the amounts due. See subsection (3) of this section.

(3) Failure to file.

(a) If you fail to pay the annual assessment fee or file the annual reports by the due date the director may file a claim against your surety bond for failing to comply with the Consumer Loan Act. The department may make a claim for the late penalties under subsection (2) of this section and the greater of:

(i) The assessment fee paid the previous year;

(ii) The average annual assessment fee you paid in the previous two years; or

(iii) Fifteen hundred dollars.

(b) Your license will expire if you fail to pay the annual assessment fee and file the annual reports by the due date. The department will provide you with notice of the pending expiration and you can stop the pending expiration by paying the assessment fee and providing the reports. If the department does not receive the assessment fee and reports within fifteen days from the date the department provides you with the notice, your license will expire. The notice warning you of the pending expiration is presumed received by you three days after the department mails it via first class mail to the last address of record with the department. You are responsible for updating your address of record with the department. Notice of the pending expiration is valid even if it is sent to an address of record that is incorrect due to your failure to provide an updated address.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-430, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-430, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-430, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-430, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040. WSR 08-15-125, § 208-620-430, filed 7/22/08, effective 8/22/08. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-430, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-431 What are my quarterly call report filing requirements?

You are required to file accurate and complete call reports on the dates and in a form prescribed by the NMLS (see RCW 31.04.277).

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-24-013, § 208-620-431, filed 11/27/18, effective 1/1/19
WSR 13-24-024, § 208-620-431, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-431, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-431, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-440 How do I calculate the annual assessment for my nonmortgage activity in Washington?

(1) Calculation of the annual assessment for loans made, brokered or purchased. The annual assessment is based on the "adjusted total loan value" as defined in subsection (2) of this section. The amount of the annual assessment is determined by multiplying the adjusted total loan value of the loans in the year being assessed by .000180271.

(2) All loans counted in assessment calculation. The "adjusted total loan value" is the sum of:

(a) The principal loan balance on Washington loans in your loan portfolio on December 31 of the prior year; plus

(b) The total principal loan amount of all Washington loans you made during the assessment year.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-16-024, § 208-620-440, filed 7/24/18, effective 9/1/18
WSR 13-24-024, § 208-620-440, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-440, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-440, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040. WSR 08-15-125, § 208-620-440, filed 7/22/08, effective 8/22/08. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-440, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-441 How do I calculate the annual assessment for my residential mortgage activity in Washington?

(1)(a) Calculation of the annual assessment for loans made, brokered or purchased. The annual assessment is based on the "adjusted total loan value" as defined in subsection (2) of this section. The amount of the annual assessment is determined by multiplying the adjusted total loan value of the loans in the year being assessed by .000180271.

(b) Calculation of the annual assessment for residential mortgage loans serviced. Master servicers must report their MSR volume but will not be assessed for residential mortgage loan servicing conducted by a subservicer licensed under this chapter pursuant to a servicing agreement. Each licensee will pay an amount based on the total annual volume of Washington residential mortgage loans serviced during the reporting year minus the adjusted total loan value of the loans in the year being assessed, multiplied by .00000746624. The minimum amount assessed will be five hundred dollars and the maximum amount assessed to any licensee will not exceed one hundred thousand dollars.

(2) All loans counted in assessment calculation. The "adjusted total loan value" is the sum of:

(a) The principal loan balance on Washington loans in your loan portfolio on December 31st of the prior year; plus

(b) The total principal loan amount of all Washington loans you made, brokered, or purchased during the assessment year.

(3) Reverse mortgages. Each reporting year, you will report and be assessed on:

(a)(i) The dollar amount of advances made at origination: You will be assessed pursuant to the formula in subsection (1)(a) of this section.

(ii) The dollar amount of advances made during servicing: You will be assessed at the millage identified in subsection (1)(b) of this section; and

(b) The dollar amount of accrued interest: You will be assessed at the millage identified in subsection (1)(b) of this section.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-16-024, § 208-620-441, filed 7/24/18, effective 9/1/18.

Wash. Admin. Code § 208-620-442 How do I calculate the annual assessment for my student education loan servicing activity in Washington?

Pursuant to RCW 31.04.400, your annual assessment is an amount sufficient to cover the costs of the department's administration of the program, and to fund the student achievement council's student loan advocate. For purposes of this section, "portfolio" means all student education loan servicing accounts, including those held for investment.

(1) Calculation of the annual assessment for student education loans serviced. The amount of the annual assessment is determined by multiplying the adjusted total loan volume of the loans in the year being assessed by .0000384616.

(2) All loans counted in assessment calculation. The "adjusted total loan volume" is the sum of:

(a) The principal loan balance of Washington student education loans in your portfolio on December 31st of the prior year; plus

(b) The total principal loan balance of Washington student education loans added to your portfolio during the assessment year.

(3) A licensee servicing student education loans for Washington state borrowers may apply to the director to waive or adjust the annual assessment amount.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 19-21-157, § 208-620-442, filed 10/22/19, effective 11/24/19
WSR 18-24-013, § 208-620-442, filed 11/27/18, effective 1/1/19.

Wash. Admin. Code § 208-620-460 Must I file my annual reports even if I go out of business during the year?

(1) If you cease operation during the year, you must file the annual reports and pay the annual assessment required in WAC 208-620-430 within thirty days of closure.

(2) Failure to file within thirty days of closure will trigger the bond claim process as described in WAC 208-620-430(3), or other action. See also WAC 208-620-499.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-460, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-460, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040. WSR 08-15-125, § 208-620-460, filed 7/22/08, effective 8/22/08. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-460, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-480 What are my reporting responsibilities if my company files for bankruptcy?

(1) Chapter 7 bankruptcy. A licensee that files for chapter 7 bankruptcy must notify the director within ten days, surrender its license(s) and deliver the consolidated annual report and worksheet for the period in business that year within sixty days of filing bankruptcy.

(2) Chapter 11 bankruptcy. A licensee that files for chapter 11 bankruptcy must notify the director within ten days.

History

Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-480, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-490 What are my reporting responsibilities when something of significance happens to my business?

(1) Prior notification required. You must amend your NMLS record at least ten days prior to a change of your:

(a) Principal place of business or any of branch offices;

(b) Name or legal status (e.g., from sole proprietor to corporation, etc.);

(d) Ownership control of ten percent or more; or

(e) Addition of a control person.

(2) NMLS update within ten days. You must amend your NMLS record and upload supporting documents, if applicable, within ten days after an occurrence of any of the following:

(a) A change in mailing address, telephone number, fax number, or email address;

(b) A change in the name and mailing address of your registered agent if you are located outside the state;

(d) Termination of sponsorship of a loan originator;

(e) A change in primary company contact or primary consumer complaint contact;

(f) A change in your response to a disclosure question within NMLS or if your answer does not change but another event has occurred that requires disclosure and uploading of explanatory documentation; or

(g) Any change in the information provided to the director in your original application.

(3) Written notice to the department within ten days. You must notify the department in writing within ten days after an occurrence of any of the following:

(a) A cancellation or expiration of your Washington state business license;

(b) A change in standing with the state of Washington secretary of state, including the resignation or change of the registered agent;

(d) Receipt of notification of cancellation of your surety bond;

(e) Receipt of notification of a claim against your bond;

(f) For student education loan servicers servicing for the federal government, the occurrence of any event that alters the condition of the business to the extent it would no longer qualify for a federal contract;

(g) Notification of termination from servicing student education loans for the federal government, if applicable;

(h) Notification from a GSE of a breach of contract, waiver, or nonperformance if the reason for the notification remains unresolved for more than ninety days;

(i) Notification from the federal government of a breach of contract, waiver, nonperformance if the reason for the notification remains unresolved for more than ninety days; or

(j) Your capital falling below the required government sponsored entity (GSE) minimum capital requirements, if applicable.

(4) NMLS update within twenty days. You must amend your NMLS record within twenty days after the occurrence of any of the following developments:

(a) Receipt of notification of license revocation procedures against your license in any state;

(b) The filing of a felony indictment or information related to lending or brokering activities against you or any officer, board director, or principal or an indictment or information involving dishonesty against you or any officer, board director, or principal;

(c) Conviction of you or any officer, director, or principal for a felony, or a gross misdemeanor involving lending, brokering or financial misconduct;

(d) See WAC 208-620-499 for the requirements when you close your business.

(5) Written notice to the department within thirty days. You must notify the department in writing within thirty days after an occurrence of any of the following:

(a) A data breach. This notification requirement may change based on directives or recommendations from law enforcement. See also WAC 208-620-573;

(b) Actions by employees discovered, known, or reasonably should have known. This includes illegal, fraudulent, or any other act that could subject the company to a violation described in RCW 31.04.027.

(6) Student education loan servicers. In addition to keeping records in compliance with the act, servicers of student education loans must also collect, maintain, and report to the department specific information about the student education loans in their portfolio. Such information includes, but is not limited to, and as applicable: Loan volume; default, refinance, and modification information; loan type (subsidized or unsubsidized, Stafford or Direct, PLUS, etc.) information; and collection practices.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 19-21-157, § 208-620-490, filed 10/22/19, effective 11/24/19
WSR 18-24-013, § 208-620-490, filed 11/27/18, effective 1/1/19
WSR 18-16-024, § 208-620-490, filed 7/24/18, effective 9/1/18. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-490, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-490, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-490, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-490, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-499 What are my reporting requirements if I want to close my company or surrender my license?

If you cease doing business in Washington you must do the following:

(1) Submit a surrender request through the NMLS within ten days of closing the company or surrendering the license; and

(2) File the final closure form, annual reports, worksheet, and submit any fees owed as required in WAC 208-620-430. Failure to file these reports within thirty days of closure will trigger the bond claim process as described in WAC 208-620-430(3), or other action.

(3) If your license has expired or you are otherwise locked out of the NMLS database, you must provide the documents described in subsection (2) of this section directly to the department.

(4) If you are a residential mortgage loan servicer, you must provide the department with a description of the disposition of your servicing volume, including the name of the purchaser and the specific notice to consumers about the sale of their servicing.

Any Washington loans in your portfolio and activity under the act remain subject to the director's authority including investigation and examination, and the fees associated with those activities.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-16-024, § 208-620-499, filed 7/24/18, effective 9/1/18
WSR 13-24-024, § 208-620-499, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-499, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-499, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-500 What are my reporting requirements if I want to close one or more of my branch offices?

If you close a branch office, you must submit a surrender request through the NMLS at least ten days prior to the branch closing.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-500, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-500, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040. WSR 08-15-125, § 208-620-500, filed 7/22/08, effective 8/22/08. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-500, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-505 In addition to the Consumer Loan Act, what other laws do I have to comply with?

You must ensure you are in compliance with all federal and state laws, regulations and programs that apply to lending or brokering loans, servicing residential mortgage loans, including applicable reverse mortgage, or servicing student education loans including, but not limited to, the Truth in Lending Act, the Equal Credit Opportunity Act, the Home Mortgage Disclosure Act, the Bank Secrecy Act, the Real Estate Settlement Procedures Act, the Gramm-Leach-Bliley Act, the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, the Federal Trade Commission Act, the Telemarketing and Consumer Fraud and Abuse Act, the Washington State Fair Housing Act, the S.A.F.E. Act, the Federal Trade Commission Telemarketing Sales Rule, and the Mortgage Acts and Practices – Advertising statute, Regulation N, 12 C.F.R. Part 1014.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-24-013, § 208-620-505, filed 11/27/18, effective 1/1/19. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-505, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 12-18-047, § 208-620-505, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-505, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-505, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-506 Must my underwriting analysis of a borrower's residential mortgage loan application include a determination of the borrower's ability to repay the loan?

Yes. To ensure that underwriting standards are consistent with prudent lending practices, the underwriting standards should include, at a minimum, an analysis of the borrower's ability to repay the obligation. The analysis of a borrower's repayment capacity must include the debt to income ratio; the assets, net worth, or equity; and any prepayment penalty clauses. If the residential mortgage loan is underwritten to the guidelines of Fannie Mae, Freddie Mac, FHA, VA, or USDA and you have met the underwriting standards of an ability to repay analysis for those loans types, you are in compliance with this section.

History

Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-506, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-507 What elements of an ability to repay analysis must be part of my underwriting policy of a conventional residential mortgage loan?

(1) Your underwriting policy must include:

• A procedure for evaluating and documenting a borrower's ability to repay.

• Standards used to evaluate the borrower's ability to repay by final maturity at the fully indexed rate.

• A policy that provides the assumption of a fully amortizing repayment schedule in determining the borrower's ability to repay.

• An evaluation of any negative amortization on a borrower's ability to repay.

• Standards for verifying the borrower's income, current employment and reasonably expected future income.

• Standards for verifying the borrower's assets, net worth or equity in the subject property.

• Standards for an acceptable range for the borrower's debt to income ratio based on the loan type (conventional, reduced documentation, stated income).

• Demonstration that the debt to income ratio includes all of the borrower's contractual obligations, or that an allowance has been made within the ratio to take into account ancillary borrower contractual obligations (utility, cell phone contracts, etc.).

• Standards for counseling borrowers on the impact of their decision to accept a mortgage with an adjustable rate, balloon payment, or other alternative product or feature.

• Standards on the substitution of a credit score in place of income, assets, or net worth.

• Standards for due diligence of third-party originators including prerelationship review, verifications of borrower information, responsibility for initial RESPA compliance, responsibility for adverse action notice compliance, and postclosing reviews.

• Procedures for notifying borrowers about prepayment penalties.

(2) You must demonstrate consistent and uniform application of the elements in subsection (1) of this section in your in-house compliance and audit departments.

History

Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-507, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-510 What are my disclosure obligations to consumers?

Some types of loans may not be covered by the integrated TILA-RESPA rule. Examples include: Reverse mortgages and HELOCs. Creditors originating these types of mortgages must continue to use, as applicable, the federal Good Faith Estimate, HUD-1, and Truth in Lending disclosures. Creditors are not prohibited from using the integrated TILA-RESPA disclosures. However, they cannot replace the required federal Good Faith Estimate, HUD-1, and Truth in Lending disclosures.

(1) Content requirements. In addition to complying with the applicable disclosure requirements in the federal and state statutes referred to in WAC 208-620-505 if the loan will be secured by a lien on real property, you must also provide the borrower or potential borrower an estimate of the annual percentage rate on the loan and a disclosure of whether or not the loan contains a prepayment penalty within three business days of receipt of a loan application.

(2) Proof of delivery. The licensee must be able to prove that the disclosures under subsection (1) of this section were provided within the required time frames. For purposes of determining the timeliness of the required early disclosures, the department may use the date of the credit report or may use the date of an application received from a broker. In most cases, proof of mailing is sufficient evidence of delivery. If the licensee has an established system of disclosure tracking that includes a disclosure and correspondence log, checklists, and a reasonable system for determining if a borrower did receive the documents, the licensee will be presumed to be in compliance.

(3) Residential mortgage loans—Rate locks. Within three business days of receipt of a residential mortgage loan application you must provide the borrower with the following disclosure about the interest rate:

(a) If a rate lock agreement has not been entered into, you must disclose to the borrower that the disclosed interest rate and terms are subject to change. Compliance with the federal good faith estimate or loan estimate is considered compliance.

(b) If a rate lock agreement has been entered into, you must disclose to the borrower whether the rate lock agreement is guaranteed and if so, if guaranteed by a company other than your company, you must provide the name of that company, whether and under what conditions any rate lock fees are refundable to the borrower, and:

(i) The number of days in the rate lock period;

(ii) The date of the rate lock and expiration date of the rate lock;

(iii) The rate of interest locked;

(iv) Any other terms and conditions of the rate lock agreement; and

(v) The date the rate lock agreement was provided to the borrower.

(c) If the borrower wants to lock the rate after the initial disclosure, you must provide a rate lock agreement within three business days of the rate lock date that includes the items from (b) of this subsection.

(d) Prior to closing, you must disclose payment of a rate lock as a cost in Block 2 of the federal good faith estimate or in "Loan Cost" on the loan estimate. At closing, you must disclose payment of a rate lock in section 800 "Items Payable" on a HUD-1 or in "Loan Cost" on the closing disclosure.

(e) You may rely on a broker's rate lock agreement if it complies with this subsection.

(4) Residential mortgage loans—Loans brokered to other creditors. Within three business days following receipt of a residential mortgage loan application you must provide to each borrower or potential borrower:

(b) An estimate of the annual percentage rate on the loan and a disclosure of whether or not the loan contains a prepayment penalty;

(c) A good faith estimate or loan estimate that conforms with RESPA, Regulation X, 12 C.F.R. Part 1024 and TILA, Regulation Z, 12 C.F.R. Part 1026;

(d) A rate lock disclosure containing the following:

(i) If a rate lock agreement has been entered into, you must disclose to the borrower whether the rate lock agreement is guaranteed and if so, the name of the company providing the guarantee, whether and under what conditions any rate lock fees are refundable to the borrower, and:

(A) The number of days in the rate lock period;

(B) The date of the rate lock and the expiration date of the rate lock;

(D) The date the rate lock was provided to the borrower; and

(E) Any other terms and conditions of the rate lock agreement.

(ii) If the borrower wants to lock the rate after the initial disclosure, you must provide a rate lock agreement within three business days of the rate lock date. The rate lock agreement must include the items from (d) of this subsection.

(e) Prior to closing, you must disclose payment of a rate lock as a cost in Block 2 of the federal good faith estimate or in "Loan Cost" on the loan estimate. At closing, you must disclose payment of a rate lock in section 800 "Items Payable" on a HUD-1 or in "Loan Cost" on the closing disclosure.

(f) You may rely on a lender's rate lock agreement if it is in compliance with this subsection.

(5) Are there additional disclosure requirements related to interest rate locks? Yes. You must provide the borrower a new rate lock agreement within three business days of a change in the locked interest rate. The new rate lock agreement must include all the terms required under subsection (3)(b) of this section. Changes to a locked interest rate can occur only if the borrower requests the change or for valid reasons such as changes in loan to value, credit scores, or other loan factors directly affecting pricing. Lock extensions and relocks are also valid reasons for changes to a previously locked interest rate. You may rely on a lender's rate lock agreement if it is in compliance with this subsection.

(6) Residential mortgage loans—Shared appreciation mortgages (SAM) or mortgages with shared appreciation provisions. Within three business days following receipt of a loan application for a shared appreciation mortgage, or a mortgage with a shared appreciation provision, in addition to the disclosures required by federal law or by this chapter, you must provide each borrower with a written disclosure containing at a minimum the following:

(a) The percentage of shared equity or shared appreciation you will receive (or a formula for determining it);

(b) The value the borrower will receive for sharing his or her equity or appreciation;

(d) The conditions that may cause the lender to terminate the mortgage or shared appreciation provision early;

(e) The procedure for including qualifying major home improvements in the home's basis (if any);

(f) Whether a prepayment penalty applies or other conditions applicable, if a borrower wishes to repay the loan early, including but not limited to, any date certain after which the borrower can repay the loan by paying back the lender's funds plus accrued equity; and

(g) The date on which the SAM terminates and the equity or appreciation becomes payable if no triggering event occurs.

(7) Residential mortgage loan modifications. You must immediately inform the borrower in writing if the owner of the loan requires additional information from the borrower, or if it becomes apparent that a residential mortgage loan modification is not possible.

(8) Student education loans.

(a) All loans. In addition to the applicable disclosures required for all consumer loans made by a licensee, the licensee making a loan to a service member must disclose to the service members their rights under state and federal service member laws and regulations.

(b) Refinance loans. In addition to the applicable disclosures required for all consumer loans made by a licensee, for all consumer loans made by a licensee that are a refinance of a federal student education loan, the licensee must provide to the borrower a clear and conspicuous disclosure that some repayment and forgiveness options available under federal student education loan programs, including without limitation, income-driven repayment plans, economic hardship deferments, or public service loan forgiveness, will no longer be available to the borrower if he or she chooses to refinance federal student education loans with one or more consumer loans.

(9) Each licensee must maintain in its files sufficient information to show compliance with state and federal law.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 22-24-048, § 208-620-510, filed 11/30/22, effective 12/31/22
WSR 19-21-157, § 208-620-510, filed 10/22/19, effective 11/24/19
WSR 18-24-013, § 208-620-510, filed 11/27/18, effective 1/1/19. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-510, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-510, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-510, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-510, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-510, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-510, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-511 What is the disclosure required under RCW 19.144.020 for residential mortgage loans?

(1) You must provide the borrower with a clear, brief one page summary to help borrowers understand their loan terms. The disclosure summary must be provided on one page separate from any other documents and must use clear, simple, plain language terms that are reasonably understandable to the average person.

(2) You must provide the initial disclosure summary to the borrower within three business days following your receipt of a complete loan application.

(3) You must redisclose material loan terms within three days of a significant change, or at least three days before closing, whichever is earlier.

(4) You may provide the disclosure summary in electronic form, in a manner consistent with the procedure for delivery of electronic disclosure under Regulation Z of the Truth in Lending Act, 12 C.F.R. Part 1026, currently in effect, which implements the E-Sign Act of 2000, 15 U.S.C. Sec. 7001 et seq.

(5) The department has developed model forms that comply with this provision. See the department's website. See also RCW 19.144.020 and WAC 208-600-200.

(6) Disclosure in compliance with the Real Estate Settlement Procedures Act, Regulation X, 12 C.F.R. Part 1024 and Truth in Lending Act, Regulation Z, 12 C.F.R. Part 1026 is considered compliance with the disclosure requirements of this section.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-511, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 12-18-047, § 208-620-511, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-511, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 78. WSR 09-01-159, § 208-620-511, filed 12/23/08, effective 1/23/09.

Wash. Admin. Code § 208-620-513 In a residential mortgage loan transaction, what are my disclosure obligations to the company that brokered the loan to me?

You must provide copies of any disclosures you provided to the borrower, following the initial disclosures, within ten business days of providing the disclosures to the borrower.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-513, filed 11/22/13, effective 1/1/14.

Wash. Admin. Code § 208-620-515 What authority do I have after my license has been issued?

Once your license has been issued you may:

(1) Lend money with a note rate that does not exceed twenty-five percent per annum as determined by the simple interest method of calculating interest owed. This applies only to nonmortgage loans, junior lien mortgage loans, and to lenders that are not "creditors" under the Depository Institutions Deregulatory and Monetary Control Act when making first lien mortgage loans. The requirement for the simple interest method of calculating interest does not apply to reverse mortgages.

(2) Make open-end loans as authorized in RCW 31.04.115 provided that:

(a) The annual fee allowed in RCW 31.04.115(3) may not exceed fifty dollars; and

(b) The annual fee must be charged in advance as a lump sum. It must not be charged monthly and must not be financed.

(3) In accordance with Title 48 RCW, sell insurance covering real and personal property, covering the life or disability or both of the borrower, covering the involuntary unemployment of the borrower, or other insurance products approved by the Washington state office of the insurance commissioner.

(4) Service residential mortgage loans. See also WAC 208-620-320, 208-620-325, 208-620-550, 208-620-551, and 208-620-900.

(5) Provide third-party loan modification services for residential mortgage loans. See also WAC 208-620-320, 208-620-325, 208-620-545, 208-620-550, and 208-620-552.

(6) Service student education loans.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-24-013, § 208-620-515, filed 11/27/18, effective 1/1/19. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-515, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 12-18-047, § 208-620-515, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-515, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-515, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040. WSR 08-15-125, § 208-620-515, filed 7/22/08, effective 8/22/08. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-515, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-520 What are the records I must maintain and for how long must I maintain them?

Unless otherwise indicated in this section, and as applicable, you must maintain the following records for a minimum of three years after making the final entry, or the period of time required by federal law, whichever is longer:

(1) General records. Each licensee must maintain electronic or hard copy books, accounts, records, papers, documents, files, and other information relevant to making loans or servicing residential mortgage loans.

(2) Advertising records. These records include newspaper and print advertising, scripts of radio and television advertising, telemarketing scripts, all direct mail advertising, and any electronic advertising distributed by facsimile computer, or other electronic or wireless network.

(3) Other specific records. The records required under subsection (1) of this section include, but are not limited to:

(a) All loan agreements or notes and all addendums, riders, or other documents that supplement the final loan agreements;

(b) All forms of loan applications, written or electronic (the Fannie Mae 1003 is an example);

(d) The last rate sheet, or other supporting rate information, if there was a change in rates, terms, or conditions prior to settlement, if applicable;

(e) Rate lock agreements and the supporting rate sheets or other rate supporting document, if applicable;

(f) All written disclosures required by the act and federal laws and regulations. Some examples of federal law disclosures include, but are not limited to: The good faith estimate or loan estimate or other Truth in Lending Act disclosures, Equal Credit Opportunity Act disclosures, and affiliated business arrangement and other disclosures under RESPA;

(g) Documents and records of compensation paid to employees and independent contractors;

(h) An accounting of all funds received in connection with loans with supporting data;

(i) Settlement statements (for example, the final HUD-1, HUD-1A or federal closing disclosure);

(j) Broker loan document requests (may also be known as loan document request or demand statements) that include any prepayment penalties, terms, fees, rates, yield spread premium, loan type and terms;

(k) Records of any fees refunded to applicants for loans that did not close;

(l) All file correspondence and logs, including recorded communications with borrowers if communications with borrowers are recorded;

(m) All mortgage broker contracts with lenders and all other correspondence with the lenders;

(n) All documents used to support the underwriting approval, if applicable; and

(o) All documents that evidence a financial commitment made to protect a rate of interest during a rate lock period.

(4) Residential mortgage loan servicing documents.

(a) You must maintain servicing agreements as part of your records.

(b) You must maintain all notices from GSEs, if applicable, that relate specifically to your loan servicing activities. This includes, but is not limited to, notices of noncompliance with the servicing agreement.

(c) If you record telephone conversations, you must maintain the recorded telephone conversations with consumers for three years after the date of the call or longer if required by another law.

(5) Abandoned records. If you do not maintain your records as required, you are responsible for the costs of collection, storage, conversion to electronic format or proper destruction of the records.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 19-21-157, § 208-620-520, filed 10/22/19, effective 11/24/19
WSR 18-24-013, § 208-620-520, filed 11/27/18, effective 1/1/19
WSR 18-16-024, § 208-620-520, filed 7/24/18, effective 9/1/18. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-520, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-520, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-520, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-520, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-520, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-520, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-530 Can I maintain my records electronically?

Yes. (1) You may maintain records electronically if you also maintain the electronic display equipment and make it available upon request to the director or his or her representatives for purposes of examination or investigation.

(2) The hardware or software needed to display the record must also be maintained during the required retention period under WAC 208-620-520(1).

(3) You must provide records in hard copy upon request of the director.

(4) If you use a cloud service for records maintenance, the servers underlying that service must be located in the United States or its territories.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-16-024, § 208-620-530, filed 7/24/18, effective 9/1/18
WSR 13-24-024, § 208-620-530, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-530, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-530, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-531 Must I have a business resumption plan?

Yes. You must have written policies and procedures in place that detail your response to any event that results in damage to or destruction of your records. You must maintain the policies and procedures as part of your books and records.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-531, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-531, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-620-532 Records disposal.

Licensees must have written policies and procedures for the destruction of records, including electronic records, when the retention period ends. The destruction of records must be accomplished so that the information cannot be reconstructed or read. The destruction of consumer credit report information must also comply with the federal disposal rule at 16 C.F.R. Part 682.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-532, filed 3/30/16, effective 4/30/16.

Wash. Admin. Code § 208-620-540 Do I need to account separately for payments from borrowers for third-party service providers?

Yes. You must separately account for all deposits and disbursements made by or for borrowers for third-party service providers. You must not use those funds for your benefit or for the benefit of any person not entitled to such benefit.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-540, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-540, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-545 Must I provide a written agreement when I provide third-party residential mortgage loan modification services?

Yes. You must provide a written agreement as prescribed by the director when providing residential mortgage modification services. You must provide a copy of the signed agreement to the consumer and you must keep a copy as part of your books and records.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-545, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-545, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-545, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-620-550 What business practices are prohibited?

In addition to RCW 31.04.027, the following constitute an "unfair or deceptive" act or practice:

(1) Failure to provide the exact pay-off amount as of a certain date within seven business days after being requested in writing to do so by a borrower of record or their authorized representative. Student education loan servicers must comply with this subsection or an applicable federal program requirement;

(2) Failure to record a borrower's payment as received on the day it is delivered to any of the licensee's locations during its regular working hours. If you are in compliance with the United States Department of Education contractual requirements, you are not subject to this subsection;

(3) Collecting more than forty-five days of prepaid interest at the time of loan closing;

(4) Soliciting or entering into a contract with a borrower that provides in substance that the licensee may earn a fee or commission through its "best efforts" to obtain a loan even though no loan is actually obtained for the borrower;

(5) Engaging in unfair or deceptive advertising practices. Unfair advertising may include advertising that offends public policy, or causes substantial injury to consumers or to competition in the marketplace. See also WAC 208-620-630;

(6) Negligently making any false statement or knowingly and willfully making any omission of material fact in connection with any reports filed with the department by a licensee or in connection with any application, examination or investigation conducted by the department;

(7) Making any payment, directly or indirectly, or withholding or threatening to withhold any payment, to any appraiser of a property, for the purposes of influencing the independent judgment of the appraiser with respect to the value of the property;

(8) Leaving blanks on a loan origination document that is signed by the borrower or providing the borrower with loan origination documents with blanks;

(9) Failing to clearly disclose to a borrower whether the payment advertised or offered for a real estate loan includes amounts for taxes, insurance or other products sold to the borrower;

(10) Purchasing insurance on an asset secured by a loan without first attempting to contact the borrower by mailing one or more notices to the last known address of the borrower, unless mail has been previously returned as undeliverable from the address, in order to verify that the asset is not otherwise insured;

(11) Willfully filing a lien on property without a legal basis to do so;

(12) Coercing, intimidating, or threatening borrowers in any way with the intent of forcing them to complete a loan transaction;

(13) Failing to reconvey title to collateral, if any, within sixty business days when the loan is paid in full;

(14) Failing to timely and completely comply with any directive, subpoena, or order issued by the department;

(15) Negligently delaying the closing of a residential mortgage loan which results in increased interest, costs, fees, or charges payable by the borrower;

(16) Negligently delaying the refinance or modification of a student education loan which results in increased interest, costs, fees, or other charges payable by the borrower or which results in the proposed refinancing or modification becoming unavailable, or both;

(17) Steering a borrower to a residential mortgage loan with less favorable terms than they qualify for in order to increase the compensation paid to the company or mortgage loan originator. An example is counseling, or directing a borrower to accept a residential mortgage loan product with a risk grade less favorable than the risk grade the borrower would qualify for based on the licensee or other regulated person's then current underwriting guidelines, prudently applied, considering the information available to the licensee or other regulated person, including the information provided by the borrower;

(18) Failing to indicate on all residential mortgage loan applications, initial and revised, the company's unique identifier, the loan originator's unique identifier, and the date the application was taken or revised;

(19) Receiving compensation or anything of value from any party for assisting in real estate "flopping." Flopping occurs during some short sales where the value of the property is misrepresented to the lender who then authorizes the sale of the property for less than market value. The property is then resold at market value or near market value for a profit. The failure to disclose the true value of the property to the lender constitutes fraud and is a violation of this chapter;

(20) Receiving compensation for making the loan and for brokering the loan in the same transaction;

(21) Charging a fee in a residential mortgage loan transaction that is more than the fees allowed by the state or federal agency overseeing the specific type of loan transaction. Examples include, but are not limited to, loans insured or guaranteed by the Veterans Administration, Home Equity Conversion Mortgages insured by HUD, and loans offered through the United States Department of Agriculture Rural Development;

(22) Making, in any manner, any false or deceptive statement or representation with regard to the rates, points, or other financing terms or conditions for a residential mortgage loan. An example is advertising a discounted rate without clearly and conspicuously disclosing in the advertisement the cost of the discount to the borrower and that the rate is discounted;

(23) Servicing a usurious loan;

(24) Misrepresenting a residential mortgage loan as a business purpose loan.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 19-21-157, § 208-620-550, filed 10/22/19, effective 11/24/19
WSR 18-24-013, § 208-620-550, filed 11/27/18, effective 1/1/19
WSR 18-16-024, § 208-620-550, filed 7/24/18, effective 9/1/18. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-550, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-550, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-550, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-550, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-550, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040. WSR 08-15-125, § 208-620-550, filed 7/22/08, effective 8/22/08. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-550, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-551 Residential mortgage loan servicers—What business practices are prohibited?

(1) In addition to being subject to RCW 31.04.027, you are prohibited from requiring or encouraging a borrower to:

(a) Waive his or her legal defenses, counterclaims, and other legal rights against the servicer for future acts;

(b) Waive his or her right to contest a future foreclosure;

(d) Agree to pay charges not enumerated in any agreement between the borrower and the lender, servicer, or owner of the loan; or

(e) Cease communication with the lender or investor.

(2) As to force placed insurance you are prohibited from:

(a) Purchasing insurance on a property secured by a loan you service without providing two prior written notices to the homeowner's last known address seeking verification of existing insurance coverage. The notices must state:

(i) How the homeowner provides proof there is insurance coverage in place;

(ii) That without proof of insurance the servicer may obtain coverage at the homeowner's expense, that such coverage may only protect the mortgage holder, and that the cost of the coverage may be higher than that the homeowner may be able to obtain privately;

(iii) That the homeowner may request the servicer to set up an escrow account to advance insurance payments and that upon establishment of an escrow account the servicer may charge the borrower the amount of the insurance payments advanced on the borrower's behalf respecting the mortgaged property including a cushion amount (see WAC 208-620-900 (4)(b));

(iv) The second written notice must be sent thirty days after the first written notice.

(b) Failing to advance payments to a property insurer regardless of the homeowner making a payment to the servicer when the homeowner has an escrow account for the payment of insurance.

(c) Purchasing force placed insurance at a price that is not commercially reasonable. You must terminate force placed insurance within thirty days of receiving evidence from the homeowner of the existence of coverage. You must refund to the homeowner all premiums for force placed insurance collected during any period of time for which the homeowner's private insurance was in place.

(3) You are additionally prohibited from:

(a) Knowingly misapplying or recklessly applying loan payments to the outstanding balance of a loan.

(b) Knowingly misapplying or recklessly applying payments to escrow accounts.

(d) Knowingly or recklessly providing inaccurate information to a credit bureau, thereby harming a borrower's creditworthiness.

(e) Knowingly or recklessly facilitating the illegal foreclosure of real property collateral.

(4) You are prohibited from referring a delinquent mortgage to foreclosure if you have received the homeowner's loan modification application and you have not evaluated the homeowner for all available loan modifications.

(5) You are prohibited from using any funds in a suspense account to pay your own fees for servicing.

(6) You are prohibited from pursuing any collection activities while a complete loan modification application is being reviewed or while the borrower is making payments pursuant to a trial or permanent modification. This prohibition includes activities conducted by others on your behalf.

(7) You are prohibited from collecting private mortgage insurance beyond the date for which private mortgage insurance is no longer required.

(8) You are prohibited from failing to service the loan pursuant to the loan terms and conditions unless agreed to in writing by the borrower.

(9) You are prohibited from knowingly or recklessly improperly onboarding a residential mortgage loan into your loan servicing system.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-16-024, § 208-620-551, filed 7/24/18, effective 9/1/18
WSR 13-24-024, § 208-620-551, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-551, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-551, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-620-552 Third-party residential loan modification service providers—What business practices are prohibited?

In addition to RCW 31.04.027, you are prohibited from:

(1) Collecting an advance fee.

(2) Charging total fees in excess of usual and customary charges, or total fees that are not reasonable in light of the service provided when providing residential mortgage loan modification services.

(3) Failing to provide a written agreement as prescribed by the director when providing residential mortgage modification services. See also WAC 208-620-545.

(4) As a condition to providing loan modification services requiring or encouraging a borrower to:

(a) Waive his or her legal defenses, counterclaims, and other legal rights against the servicer for future acts;

(b) Waive his or her right to contest a future foreclosure;

(d) Agree to pay charges not enumerated in any agreement between the borrower and the lender, servicer, or owner of the loan; or

(e) Cease communication with the lender, investor, or loan servicer or stop or delay making regularly scheduled payments on an existing mortgage unless a mortgage loan modification is completely negotiated and executed with the lender or investor and the modification agreement itself provides for a cessation or delay in making regularly scheduled payments; or

(f) Enter into any contract or agreement to purchase a borrower's property.

(5) You are further prohibited from failing in a timely manner to:

(a) Communicate with or on behalf of the borrower;

(b) Act on any reasonable request from or take any reasonable action on behalf of a borrower.

(6) Engaging in false or misleading advertising. In addition to WAC 208-620-630, examples of false or misleading advertising include:

(a) Advertising which includes a "guarantee" unless there is a bona fide guarantee which will benefit a borrower.

(b) Advertising which makes it appear that a licensee has a special relationship with lenders when no such relationship exists.

(7) Leading a borrower to believe that the borrower's credit record will not be negatively affected by a mortgage loan modification when the licensee has reason to believe that the borrower's credit record may be negatively affected by the mortgage loan modification.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-552, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-552, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-552, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-620-553 Conducting residential mortgage loan servicing activities in the United States or outside the United States.

(1) You are prohibited from conducting the following activities from any location outside the United States or its territories:

(a) Receiving payments and maintaining the payment records;

(b) Collection activities;

(d) Receipt of data from or disbursement of data to borrowers.

(2) The following activities may be conducted from a location outside the United States or its territories:

(a) Data entry;

(b) Document review;

(d) Records searches;

(e) Credit dispute analysis; or

(f) Escrow account analysis.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-16-024, § 208-620-553, filed 7/24/18, effective 9/1/18.

Wash. Admin. Code § 208-620-554 Conducting student education loan servicing activities in the United States or outside the United States.

(1) You are prohibited from conducting the following activities from any location outside the United States or its territories:

(a) Receiving payments and maintaining the payment records;

(b) Collection activities;

(d) Receipt of data from or disbursement of data to borrowers.

(2) The following activities may be conducted from a location outside the United States or its territories:

(a) Data entry;

(b) Document review;

(d) Records searches; or

(e) Credit dispute analysis.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 19-21-157, § 208-620-554, filed 10/22/19, effective 11/24/19.

Wash. Admin. Code § 208-620-555 Allowable loan fees and timing of collection.

(1) This subsection applies to junior lien mortgages, and first lien mortgages originated by noncreditors, as defined in the Truth in Lending Act, 15 U.S.C. 1601 and Regulation Z, 12 C.F.R. 1026.

(a) Origination fees. You may charge a nonrefundable, prepaid, loan origination fee not to exceed four percent of the first twenty thousand dollars and two percent thereafter of the principal amount of the loan advanced to or for the direct benefit of the borrower, which fee may be included in the principal balance of the loan.

(b) Brokering fees. When agreed to in writing by the borrower, a fee to a mortgage broker that is not owned by the licensee or under common ownership with the licensee and that performed services in connection with the origination of the loan. A licensee may not receive compensation as a mortgage broker in connection with any loan made by the licensee.

(c) Third-party fees. The only third-party fees you may collect from the borrower before a loan is closed is the actual cost of the credit report and appraisal. You may collect from the borrower reimbursement for fees you actually and properly incurred in connection with the appraisal of property by a qualified, independent, professional, third-party appraiser selected by the borrower and approved by the lender or in the absence of borrower selection, selected by the lender. You must provide a copy of the appraisal to the borrower even if you do not receive reimbursement for the cost of the appraisal.

(d) On adjustable rate residential mortgage loans you may include a prepayment penalty or fee as long as the penalty or fee expires at least sixty days prior to the initial reset period.

(2) Nonmortgage loans. You may charge a nonrefundable, prepaid, loan origination fee not to exceed four percent of the first twenty thousand dollars and two percent thereafter of the principal amount of the loan advanced to or for the direct benefit of the borrower, which fee may be included in the principal balance of the loan.

(3) All loans.

(a)(i) Insurance fees. You may include the premiums for credit and noncredit insurance in the principal amount of the loan, provided that purchase of the insurance is not required to obtain a loan and that this fact is disclosed to the borrower in writing and the borrower's confirmation is obtained by signature on the disclosure form.

(ii) You may only sell single premium credit insurance to a borrower at the inception of coverage if the sale is in compliance with chapter 48.18 RCW.

(b) Third-party fees.

(i) When agreed to in writing by the borrower, you may collect from the borrower at closing reimbursement for fees you paid to third-party service providers who provided goods or services in connection with the preparation of the borrower's loan. Such third-party service providers include, but are not limited to, credit reporting agencies, title companies, appraisers, structural and pest inspectors, and escrow companies. The actual cost of such fees may be included in the amount of the loan. The only third-party fees you may collect from the borrower before a loan is closed is the actual cost of the credit report and appraisal.

(ii) You must not charge or collect any fee to be paid to a third-party service provider, as defined in WAC 208-620-010, in excess of the actual costs paid or to be paid.

(iii) You may use a borrower's credit card information for payment of the credit report or appraisal when paid directly to the third-party service provider.

(iv) You may charge a rate lock fee when agreed to in writing by the borrower. If the borrower breaks the rate agreement, you may keep the fee if you are making the loan, and you have either paid a third party for the interest rate lock or can demonstrate you have otherwise made a financial commitment to protect the rate during the lock period. The fee may not be retained if the borrower rescinds the loan under Regulation Z, if the borrower does not qualify for a loan, or if the loan is denied based on the property appraisal. See also WAC 208-620-510(3).

(c) Late payment penalties. If the loan terms and conditions agreed to by the borrower do not otherwise dictate, you may charge a maximum of ten percent of the installment payment amount on accounts that are delinquent ten days or more.

(d) Attorneys' fees. You may charge reasonable attorneys' fees when a debt is referred for collection to an attorney who is not your salaried employee, actual expenses, and costs incurred in connection with the collection of a delinquent debt, a repossession, or a foreclosure.

(e) Discount points.

(i) You must not collect a fee from the borrower for lowering the interest rate unless the interest rate is actually reduced.

(ii) You must be able to show a definitive mathematical relationship between discount points paid and the interest rate obtained via a rate sheet or pricing engine that was in effect when the interest rate was locked.

(iii) Any applicable residential mortgage loan program add-on fees must be disclosed as part of the discount points.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 19-21-157, § 208-620-555, filed 10/22/19, effective 11/24/19. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-555, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-555, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-555, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-555, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-556 What fees must I refund to the borrower if I provide services subject to the act but do not have a license?

(1) With residential mortgage loans you must refund any nonthird-party fees (not interest) that inured to your benefit.

(2) With nonresidential mortgage loans you must refund interest and nonthird-party fees that inured to your benefit.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-556, filed 11/22/13, effective 1/1/14.

Wash. Admin. Code § 208-620-560 Restricted or conditional loan fees.

This section applies to nonmortgage loans, junior lien mortgages, and first lien mortgages originated by noncreditors, as defined in the Truth in Lending Act, 15 U.S.C. 1601 and Regulation Z, 12 C.F.R. 1026.

(1) Filing fees. You must not charge or collect any funds from the borrower for the cost of filing, as defined in WAC 208-620-010, or for any other fees paid or to be paid to public officials, unless such charges are paid or are to be paid within one hundred eighty days by the licensee to public officials or other third parties for such filing. Any fee you collect for releasing or reconveying the security for the obligation must be paid to an unrelated third party unless you can demonstrate activities you conducted to facilitate the reconveyance.

(2) Dishonored check fees. You may charge or collect twenty-five dollars or the actual amount charged by the financial institution for a check, draft, ACH, or other transfer if returned unpaid or denied by the financial institution drawn upon. Only one fee may be collected with respect to a particular check, draft, ACH, or other transfer even if it has been returned or denied more than once.

(3) Fees on existing loans. If you make a new loan or increases a credit line within one hundred twenty days after originating a previous loan or credit line to the same borrower, the origination fee on the new loan or increased credit line must be limited as follows:

(a) You must only charge an origination fee on that part of the new loan not used to pay the amount due on the previous loan;

(b) You must only charge an origination fee on the difference between the amount of the existing credit line and the increased credit line;

(c) The limits in (a) and (b) of this subsection do not apply if you refund the origination fee on the existing loan or credit line;

(d) The limits in (a) and (b) of this subsection do not apply if you can demonstrate a net tangible benefit to the borrower for the new loan or credit line increase. For purposes of this subsection a net tangible benefit may be demonstrated by a lower monthly payment, or a decrease in the interest rate. Any net tangible benefit analysis must include the fees or charges for the new loan or credit line increase.

(4) Administrative fees. You must not collect a document preparation fee, a processing fee, an administrative fee, an application fee, or a courier fee unless paid to an unrelated third party and agreed to in writing in advance by the borrower.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 19-21-157, § 208-620-560, filed 10/22/19, effective 11/24/19
WSR 13-24-024, § 208-620-560, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-560, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-560, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 78. WSR 09-01-159, § 208-620-560, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-560, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-561 What fees can I collect on VA loans?

Reserved.

History

Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-561, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-563 Prohibited fees on certain loans.

(1) Underwriting fee. You must not collect an underwriting fee.

(2) Prepayment penalty or fee. You must not collect a prepayment penalty unless on an adjustable rate mortgage as long as the prepayment penalty or fee expires at least sixty days prior to the initial reset period.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 19-21-157, § 208-620-563, filed 10/22/19, effective 11/24/19.

Wash. Admin. Code § 208-620-565 What fees am I allowed to charge or receive when acting as a residential mortgage loan broker under the act?

(1) A broker's fee not to exceed four percent of the first twenty thousand dollars and two percent thereafter of the principal amount of the loan advanced to or for the direct benefit of the borrower, which fee may be included in the principal balance of the loan.

(2) A processing fee when paid to an independent third-party processor.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-565, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-565, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-565, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 78. WSR 09-01-159, § 208-620-565, filed 12/23/08, effective 1/23/09.

Wash. Admin. Code § 208-620-566 What fees am I not allowed to charge or receive when brokering residential mortgage loans under the act?

(1) Fees for discount points;

(2) An underwriting fee; or

(3) Applicable fees in WAC 208-620-560(6).

History

Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-566, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-567 What fees can I charge when servicing residential mortgage loans under the act?

(1) You may charge servicing fees authorized by the loan documents, by the act, or by the borrower. Examples include, but are not limited to, late fees as authorized by the loan documents, insufficient check fees as authorized by the loan documents or as allowed under WAC 208-620-560(2), and wire transfer fees for wire transfers requested by the borrower.

(2) You may only charge a fee for a default related service that is usual and customary or reasonable in light of the service provided.

(3) You may not charge a consumer for fees you paid to third parties in excess of the fee you paid to the third party.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-16-024, § 208-620-567, filed 7/24/18, effective 9/1/18
WSR 13-24-024, § 208-620-567, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-567, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-620-568 What fees am I not allowed to charge when providing third-party residential mortgage loan modification services under the act?

You must not charge total fees in excess of usual and customary charges, or total fees that are not reasonable in light of the service provided.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 12-18-047, § 208-620-568, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-568, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-620-569 What fees can I charge the student education loan borrower when servicing student education loans?

(1) You may charge servicing fees authorized by the loan documents, by the act, or by the borrower. Examples include, but are not limited to, late fees as authorized by the loan documents, insufficient fund fees as authorized by the loan documents or as allowed under WAC 208-620-560(2), and wire transfer fees for wire transfers requested by the borrower.

(2) You may only charge a fee for a default related service that is usual and customary or reasonable in light of the service provided.

(3) You may not charge a consumer for fees you paid to third parties in excess of the fee you paid to the third party.

(4) Fees which are not timely charged to a borrower's account pursuant to RCW 31.04.405 must be waived, or if already collected, must be returned to the borrower within fifteen calendar days.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-24-013, § 208-620-569, filed 11/27/18, effective 1/1/19.

Wash. Admin. Code § 208-620-570 What are the grounds for suspending or revoking a consumer loan company license?

The director may suspend or revoke a license if the licensee, or any principal, officer, or board director of the licensee:

(1) Failing to pay. Fails to pay a fee due the department;

(2) Injunction or administrative action. Is or has been subject to an injunction or a civil or administrative action issued pursuant to the Consumer Loan Act, the Consumer Protection Act, the Mortgage Broker Practices Act or similar laws of this state or another state;

(3) Substantial unpaid debt. Has accumulated substantial unpaid debt;

(4) Violation of lending laws. Has been found in violation of another state's lending laws, securities laws, real estate laws or insurance laws resulting in substantial license limitations or significant fines, restitution, or both;

(5) Criminal charges. The person is the subject of a criminal felony charge, or a criminal misdemeanor charge involving dishonesty or financial misconduct;

(6) Bond canceled. Has had its surety bond canceled or revoked for cause;

(7) Deterioration of business. Has allowed the licensed consumer loan business to deteriorate into a condition which would result in denial of a new application for a license;

(8) Aiding unlicensed practice. Has aided or abetted an unlicensed person to practice in violation of the Consumer Loan Act or the Mortgage Broker Practices Act;

(9) Incompetence resulting in injury. Has demonstrated incompetence or negligence that results in financial harm to a person or that creates an unreasonable risk that a person may be harmed;

(10) Insolvency. Is insolvent in the sense that the value of the licensee's liabilities exceeds its assets or in the sense that the applicant or licensee cannot meet its obligations as they mature;

(11) Failure to comply. Has failed to comply with an order, directive, subpoena, or requirement of the director, or his or her designee, or with an assurance of discontinuance entered into with the director, or his or her designee;

(12) Misrepresentation or fraud. Has performed an act of misrepresentation or fraud in any aspect of the conduct of the lending or brokering business or profession;

(13) Failure to cooperate. Has failed to cooperate with the director, or his or her designee, including without limitation by:

(a) Not furnishing records requested by the director for purposes of conducting a lawful investigation for disciplinary actions or denial, suspension, or revocation of a license; or

(b) Not furnishing records requested by the director for purposes of conducting a lawful investigation into a complaint against the licensee filed with the department, or providing a full and complete written explanation of the circumstances of the complaint upon request by the director;

(14) Interference with investigation. Has interfered with a lawful investigation or disciplinary proceeding by willful misrepresentation of facts before the director or the director's designee, or by the use of threats or harassment against a client, witness, employee of the licensee, or representative of the director for the purpose of preventing them from discovering evidence for, or providing evidence in, any disciplinary proceeding or other legal action;

(15) Reserved.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-570, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-570, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-570, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-570, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-571 Information security program required by the federal Safeguards Rule implementing the Gramm-Leach-Bliley Act.

(1) Generally, applicants and licensees must have a written program appropriate to the company's size and complexity, the activity conducted, and the sensitivity of information at issue. The program must ensure the information's security and confidentiality, protect against anticipated threats or hazards to the security or integrity of the information, and protect against unauthorized access to or use of the information.

(2) Specifically, at a minimum the plan described in subsection (1) of this section must:

(a) Designate an employee or employees to coordinate the information security program;

(b) Identify and assess the risks to customer information;

(c) Design and implement information safeguards to control the risks identified in the risk assessment and regularly monitor and test the safeguards;

(d) Select service providers that can maintain appropriate safeguards and oversee their handling of customer information; and

(e) At least annually evaluate and adjust the program in light of relevant circumstances, including changes in business or operations, or the results of testing and monitoring the effectiveness of the implemented safeguards.

(3) The information security plan must be maintained as part of your books and records.

(4) For more information access the FTC website on the Safeguards Rule at: https://www.ftc.gov/tips-advice/business-center/guidance/financial-institutions-customer-information-complying and see 16 C.F.R. 314.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-571, filed 3/30/16, effective 4/30/16.

Wash. Admin. Code § 208-620-572 Consumer financial information privacy under the Gramm-Leach-Bliley Act (GLBA) and Regulation P.

(1) Licensees must comply with GLBA, as amended, and Regulation P. Unless subject to an exception under GLBA, as amended, licensees must at a minimum:

(a) Provide customers with initial and annual notices regarding their privacy policies. These notices describe whether and how the licensee shares consumers' nonpublic personal information, including personally identifiable financial information, with other entities; and

(b) If licensees share certain customer information with particular types of third parties, the institutions are also required to provide notice to their customers and an opportunity to opt out of the sharing. If a licensee limits its types of sharing to those which do not trigger opt-out rights, it may provide a "simplified" annual privacy notice to its customers that does not include opt-out information. If a licensee's compliant privacy policy has not changed, additional notices may not be required.

(2) See GLBA, as amended, and Regulation P at 12 C.F.R. Part 1016 for the required details.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-572, filed 3/30/16, effective 4/30/16.

Wash. Admin. Code § 208-620-573 Notice to consumers of data breach.

If the licensee's data is compromised, the licensee may be subject to chapter 19.255 RCW and may have to provide notices to consumers whose information was acquired. Under certain circumstances notice of the breach may also be required to the attorney general's office.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-573, filed 3/30/16, effective 4/30/16.

Wash. Admin. Code § 208-620-580 As a licensee, will my business be subject to periodic examinations?

(1) Licensees can expect to be visited periodically by the department's examiners. The director or designee may examine, wherever located, the records used in the business of every licensee and of every person who is engaged in the consumer loan business, whether the person acts or claims to act as principal or agent, or under or without the authority of this chapter. For that purpose the director or designee shall have free access, at reasonable times during business hours, to the offices and places of business and all books and records of the business.

(2) When directed to do so during an examination licensees must provide information on the characteristics of loan originations in a format prescribed by the director.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-580, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-580, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-580, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-585 Compliance management system (CMS).

Your CMS must contain, at a minimum, the following functionalities:

(1) Board and management oversight; and

(2) Compliance program, which includes:

(a) Policies and procedures;

(b) Training;

(d) Consumer complaint response.

For the details of each component, see the Supervision and Examination Manual from the Consumer Financial Protection Bureau (CFPB) at the following link: https://www.consumerfinance.gov/policy-compliance/guidance/supervision-examinations/. The CMS-specific procedures can be used by an entity to self-assess the effectiveness of its CMS.

Your CMS must be maintained as part of your books and records.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-16-024, § 208-620-585, filed 7/24/18, effective 9/1/18.

Wash. Admin. Code § 208-620-590 How much will I be charged for my examinations and when will the payment be due?

(1) You will be charged $69.01 per hour for examinations of your records.

(2) If the examination occurs outside of Washington, you will be charged the hourly rate plus travel costs.

(3) You must pay examination costs within thirty days after receiving the invoice to avoid having to pay accrued interest.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-590, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-590, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-590, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-600 How often will the department visit my business to examine my records?

There is no set schedule to examine each licensee. Licensees will be examined on a flexible schedule based upon the potential risk of the business to the public.

History

Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-600, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-601 What assistance may the department seek in conducting an investigation or examination of my business?

In order to carry out the purposes of RCW 31.04.145, the director may:

(1) Retain attorneys, accountants, or other professionals and specialists as examiners, auditors, or investigators to conduct or assist in the conduct of examinations or investigations;

(2) Enter into agreements or relationships with other government officials or regulatory associations in order to improve efficiencies and reduce regulatory burden by sharing resources, standardized or uniform methods or procedures, and documents, records, information, or evidence obtained under this section;

(3) Use, hire, contract, or employ public or privately available analytical systems, methods, or software to examine or investigate the licensee, individual, or person subject to this act;

(4) Accept and rely on examination or investigation reports made by other government officials, within or without this state;

(5) Accept audit reports made by an independent certified public accountant for the licensee, individual, or person subject to this act in the course of that part of the examination covering the same general subject matter as the audit and may incorporate the audit report in the report of the examination, report of investigation, or other writing of the director; or

(6) Assess the licensee, individual, or person subject to this act the cost of the services in this subsection.

History

Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-601, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-610 What authority does the department have to investigate violations of the Consumer Loan Act?

(1) The director may enforce all laws and rules relating to the licensing and regulation of licensees and persons subject to this chapter.

(2) The director may impose fines of up to one hundred dollars per day, per violation, upon the licensee, its employees or loan originators, or other persons subject to this chapter for any violation of this chapter or for failure to comply with any order or subpoena issued by the director under this chapter.

(3) Each day's continuance of the violation is a separate and distinct offense.

(4) Testimony. The director or designees may require the attendance of and examine under oath all persons whose testimony may be required about the loans or the business or the subject matter of any investigation, examination, or hearing.

(5) Production of records or copies. The director or designee may require the production of books, accounts, papers, records, files, and any other information deemed relevant to the inquiry. The director may require the production of original books, accounts, papers, records, files, and other information; may require that such original books, accounts, papers, records, files, and other information be copied; or may make copies himself or herself or by designee of such original books, accounts, papers, records, files, or other information.

(6) Subpoena authority. If a licensee or person does not attend and testify, or does not produce the requested books, accounts, papers, records, files, or other information, then the director or designated persons may issue a subpoena or subpoena duces tecum requiring attendance or compelling production of the books, accounts, papers, records, files, or other information.

(7) The director may collect an investigation fee. Licensees will be charged sixty-nine dollars and one cent per hour for the investigation.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-610, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-610, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-610, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-610, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-611 What federal guidance has the director adopted for use by the department in determining if a violation under RCW 31.04.027 has occurred?

The director has adopted:

(1) The Conference of State Bank Supervisors and American Association of Residential Mortgage Regulators "Guidance on Nontraditional Mortgage Product Risks" (released November 14, 2006); and

(2) The Conference of State Bank Supervisors, American Association of Residential Mortgage Regulators, and National Association of Consumer Credit Administrators "Statement on Subprime Mortgage Lending," effective July 10, 2007 (published in the Federal Register at Vol. 72, No. 131).

History

Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 78. WSR 09-01-159, § 208-620-611, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040. WSR 08-15-125, § 208-620-611, filed 7/22/08, effective 8/22/08.

Wash. Admin. Code § 208-620-612 What must I do to comply with the federal guidelines on nontraditional mortgage loan product risks and statement on subprime lending?

You must adopt written policies and procedures implementing the federal guidelines. The policies and procedures must be maintained as a part of your books and records and must be made available to the department upon request.

History

Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 78. WSR 09-01-159, § 208-620-612, filed 12/23/08, effective 1/23/09.

Wash. Admin. Code § 208-620-613 When I develop policies and procedures to implement the federal guidelines on applicable conventional residential mortgage loans, what topics must be included?

The policies and procedures must include, at a minimum, underwriting standards, risk management, consumer protection, and control systems. If you only broker residential mortgage loans under your CLA license, your policies and procedures must comply with WAC 208-660-500. For purposes of this section, the definition of "subprime" and "subprime loans" is taken from the 2001 Interagency Expanded Guidance for Subprime Lending Programs (an attachment to SR 01-4 (GEN), January 31, 2001, by the Board of Governors of the Federal Reserve System, Division of Banking, Supervision and Regulation).

(1) Underwriting standards. To ensure that underwriting standards are consistent with prudent lending practices, the underwriting standards should include, at a minimum, an analysis of borrower characteristics, loan product attributes, and the borrower's ability to repay the obligation.

(a) Analysis of borrower characteristics. The analysis must include tolerances for combining borrowers with certain characteristics with certain nontraditional loan products.

The criteria or range of reasonable tolerances should consider the characteristics listed in the 2001 Interagency Expanded Guidance for Subprime Lending Programs.

(b) Loan product attributes. Products with the following attributes, when combined with the borrower characteristics above result in higher risk. The risks are increased if borrowers are not adequately informed of the product features and risks.

• Low initial payments based on a fixed introductory rate that expires after a short time and then adjusts to a variable index rate plus a margin. Because initial and subsequent monthly payments are based on these low introductory rates, a wide initial spread means that borrowers are more likely to experience negative amortization, severe payment shock, and an earlier than scheduled recasting of monthly payments. Loans made to subprime borrowers must not contain any provisions that may lead to negative amortization.

• Very high or no limits on how much the payment amount or the interest rate may increase.

• Limited or no documentation of the borrower's income. Stated income is only acceptable if there are mitigating factors that clearly minimize the need for direct verification of repayment capacity. Licensees generally must be able to readily document income using recent W-2 statements, pay stubs, or tax returns. An exception to this is when the loan product underwriting itself contemplates reduced documentation (for example, FHA loans).

• Substantial prepayment penalties or prepayment penalties that extend beyond sixty days prior to the date the interest rate will reset.

• Simultaneous second lien loans. When features are layered, mitigating factors should be present to support the underwriting decision and the borrower's repayment capacity.

(c) Ability to repay. For all nontraditional mortgage loan products, the analysis of a borrower's repayment capacity must include an evaluation of their ability to repay the debt by final maturity at the fully indexed rate, assuming a fully amortizing repayment schedule. In addition, for prime borrowers qualifying for loan products that permit negative amortization, the repayment analysis must be based on the initial loan amount plus any balance increase that may accrue from the negative amortization provision. The analysis should avoid over reliance on credit scores as a substitute for income verification. The higher a loan's credit risk, either from borrower characteristics or loan features, the more important it is to verify the borrower's income, assets, and outstanding liabilities.

(2) Risk management. The scope of the risk management activities should be determined by the volume of nontraditional mortgages originated or used as investment. Licensees that target subprime borrowers through tailored marketing, underwriting standards, and risk selection must ensure that such programs do not feature terms that could become predatory or abusive. Policy topics should include, at a minimum:

(a) Acceptable product attributes;

(b) Production, sales and securitization practices;

(c) Limits on risk layering. When features are layered, licensees should demonstrate that mitigating factors support the underwriting decision and the borrower's repayment capacity. Mitigating factors could include higher credit scores, lower LTV and DTI ratios, significant liquid assets, mortgage insurance, or other credit enhancements;

(d) Growth and volume limits by loan type;

(e) Performance measures. Incentive programs should not produce high concentrations of nontraditional products. Design performance measures and reporting systems that provide early warning for increased risk;

(f) Management reporting and quality control. Focus on the high risk lending activities. Monitor and document compliance with underwriting standards. Quality control should include regular audits of nontraditional loan products. Perform due diligence in establishing and maintaining relationships with third party originators. Third party originations must meet the underwriting standards. Document and respond in writing to all complaints. Take immediate remedial action which could include more thorough application reviews, more frequent reunderwriting, or terminating the third party originator;

(g) Secondary market activity. The risk management practices should be commensurate with the nature and volume of activity and should include contingency planning for response to reduced demand in the secondary market. Establish a policy on repurchase practices.

(3) Consumer protection.

• Promotional materials and other product descriptions must provide information about the costs, terms, features, and risks of nontraditional mortgages that can assist consumers in their product selection decisions.

• Licensees must apprise borrowers of potential increases in payment obligations. The information should describe when structural payment changes will occur and what the new payment would be or how it was calculated.

• If negative amortization is possible under the terms of a nontraditional mortgage product, borrowers must be advised of the potential for increasing principal balances and decreasing home equity as a consequence of the borrower making minimum payments.

• Borrowers must be alerted to the fact that the loan has a prepayment penalty and the amount of the penalty.

• Borrowers must be made aware of any pricing premium based on reduced documentation.

• Monthly statements must provide information that enables borrowers to make informed payment choices, including an explanation of each payment option available and the impact of that choice on loan balances. For example, the monthly payment statement must contain an explanation, if applicable, next to the minimum payment amount that making this payment would result in an increase to the borrower's principal loan balance.

(4) Control standards. Actual practices must be consistent with the written policies and procedures. Employees must be trained in the policies and procedures and performance monitored for compliance. Incentive programs should not produce high concentrations of nontraditional products. Performance measures and reporting systems should be designed to provide early warning of increased risk.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 12-18-047, § 208-620-613, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-613, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 78. WSR 09-01-159, § 208-620-613, filed 12/23/08, effective 1/23/09.

Wash. Admin. Code § 208-620-614 What Washington law protects my rights when my license is suspended or revoked?

The Administrative Procedure Act, chapter 34.05 RCW, governs the proceedings for license application denials, cease and desist orders, license suspension or revocation, the imposition of civil penalties or other remedies ordered by the department, and any appeals or reviews of those actions.

History

Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-614, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-615 Application of the Administrative Procedure Act.

(1) What are my rights when the department begins an administrative enforcement action against me? Under the Administrative Procedure Act (APA), chapter 34.05 RCW, you have the right to request a hearing on the agency's action. Hearings are conducted as either formal adjudicative proceedings or may, under certain circumstances, be handled as a brief adjudicative proceeding (BAP).

(2) What must I do when I want to request a hearing? When you are notified of administrative charges filed against you, you are also notified of your right to request a hearing. At that time, the department will also notify you as to whether the hearing will be conducted as a brief adjudicative proceeding. You are required to notify the department, in writing, within twenty days from the date of the director's notice to you notifying you of the enforcement action against you. This notice must be received by the department by the 20th day following service of the charges on you.

(3) What is a brief adjudicative proceeding? Under the APA, a brief adjudicative proceeding is a hearing that is less formal in nature and typically resolves the charges quickly. The department provides a BAP for violations of the act in which the facts are undisputed and under circumstances where the parties may present their case without the need for witnesses. Typical matters to be heard in a BAP include, but are not limited to, license denials or revocations based on certain undisputed facts, including criminal convictions or misrepresentations on an application.

(4) May I request a brief adjudicative proceeding in response to an administrative enforcement action? Yes, but only if the matter has been designated by the department as one for which a BAP is available. The director adopts RCW 34.05.482 through 34.05.494 for the administration of brief adjudicative proceedings. Brief adjudicative proceedings may be limited to a determination of one or more of the following issues:

(a) Whether an applicant for a loan originator license meets the requirements of RCW 31.04.247;

(b) Whether an applicant for a consumer loan company license meets the requirements of RCW 31.04.045; and

(5) In a matter not listed in subsection (4) of this section, a brief adjudicative proceeding may be conducted at the discretion of the presiding officer when it appears that protection of the public interest does not require that the department provide notice and an opportunity to participate to persons other than the parties, and:

(a) Only legal issues exist; or

(b) Both parties have agreed to a brief proceeding. As used in this section, "persons other than the parties" does not include an attorney or representative for a party, or a witness for a party.

(6) How does the BAP work? Brief adjudicative proceedings are controlled by the provisions of RCW 34.05.482 through 34.05.494. The department will use the following procedure:

(a) Presiding officer. The director designates a presiding officer to conduct the brief adjudicative proceedings. The presiding officer must have department expertise in the subject matter, but must not have personally participated in the department's licensing application denial, or work in the department's division of consumer services, or such other division within the department delegated by the director to oversee implementation of the act and these rules.

(b) Preliminary records. The preliminary record for the brief adjudicative proceeding consists of the application and all associated documents including all documents relied upon by the department to deny the application and all correspondence between the applicant and the department regarding the application.

(c) Notice of hearing. The presiding officer will set the date, time, and place of the hearing, giving at least seven business days notice to the applicant.

(d) Written documents. The department's staff or representative and the applicant or their representative may present written documentation for consideration by the presiding officer. The presiding officer will designate the date and number of pages allowed for submission of written documents, including supporting exhibits.

(e) Oral argument. The presiding officer may exercise discretion on whether to allow oral argument.

(f) Witnesses. Live witness testimony will not be allowed. Witnesses providing testimony by sworn declaration or affidavit will be allowed at the discretion of the presiding officer.

(g) If, at the time of the hearing, the presiding officer determines that the alleged violations or evidence concerning the violations is such that a formal adjudicative proceeding is necessary, the presiding officer may immediately adjourn the hearing and direct that the matter be scheduled as a formal adjudicative proceeding.

(h) Initial order. The presiding officer must make a written initial order within ten business days of the final date for submission of materials, or oral argument, if any, to include a written statement describing the decision, the reasons for the decision, and describing the right to request review of the decision by the director. The initial order will become final twenty-one days after service on the applicant unless the applicant requests an administrative review or the department decides to review the matter.

History

Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-615, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-620 How do I have to identify my business when I advertise?

You must identify the business using your Washington consumer loan name as entered in the NMLS. You may also use an approved DBA name if you include the main office name as entered in the NMLS or license number. For use of URL addresses and web pages, see WAC 208-620-621 and 208-620-622.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 19-21-157, § 208-620-620, filed 10/22/19, effective 11/24/19. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-620, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-620, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-620, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-620, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-620, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-620, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-621 May I advertise over the internet using a URL address that is not my licensed business name?

Yes, provided that the URL address does not misrepresent the identity of your company or contain any misleading, deceptive, or otherwise prohibited language. URL addresses may be used as DBA names upon request to and approval from DFI. See also WAC 208-620-620 and 208-620-622.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 19-21-157, § 208-620-621, filed 10/22/19, effective 11/24/19. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-621, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-621, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-621, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-620-622 When advertising using the internet or any electronic form (including, but not limited to, text messages), is there specific content the advertisements must contain?

Yes. Companies, including branches, and loan originators must provide the following language, in addition to any other, on web pages, social media pages the licensee controls, or in any medium where the licensee holds themselves out as being able to provide the services:

(1) The company's name as entered in the NMLS, the company's license number, and a link to the company's NMLS consumer access website page must be displayed on the company's and any loan originator's primary landing page.

(2) If loan originators are named, their license numbers must closely follow the names. An example of closely following is: Your license name followed by your title (if you use one) followed by your license number. See the definition of license number for ways to display your license number. See WAC 208-620-710(26).

(3) If the company uses a DBA, the page must also contain the company's name as entered in the NMLS or license number.

(4) Compliance with other laws. Website content used to solicit Washington consumers must comply with all relevant Washington state and federal laws for specific services and products advertised on the website.

(5) Oversight. The company is responsible for content displayed on all electronic advertisements used to solicit Washington consumers.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 19-21-157, § 208-620-622, filed 10/22/19, effective 11/24/19. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-622, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-622, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-622, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-622, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-620-630 What are some of the advertising restrictions I must comply with?

(1) Licensees are prohibited from advertising with envelopes or stationery, or using images in an electronic format, that are designed to resemble a government mailing or other method of communication that suggest an affiliation that does not exist. Some examples of emblems or government-like names, language, or nonexistent affiliations that will violate the state and federal advertising laws include, but are not limited to:

(a) Characterizing products as "government loan programs," "government-supported loans," or other words that may mislead a consumer into believing that the government is guaranteeing, endorsing, or supporting the advertised loan product. Using the words "FHA loan," "VA loan," or words for other products that are in fact endorsed or sponsored by a federal, state, or local government entity is allowed.

(b) An official-looking emblem such as an eagle, the Statue of Liberty, or a crest or seal that resembles one used by any state or federal government agency.

(c) Envelopes or electronic communications designed to resemble official government communications, such as IRS or U.S. Treasury envelopes, or other government mailers or electronic communications.

(d) Warnings or notices citing government codes or form numbers not required by the U.S. Postmaster to be shown on the communication.

(e) The use of the term "official business," or similar language implying official or government business, without also including the name of the sender.

(f) Any suggestion or representation that the licensee is, or is affiliated with, a state or federal agency, municipality, bank, savings bank, trust company, savings and loan association, building and loan association, credit union, or other entity that it does not actually represent.

(2) When I am advertising interest rates, the act requires me to conspicuously disclose the annual percentage rate (APR) implied by the rate of interest. What does it mean to "conspicuously" disclose the APR? The required disclosures in your advertisement must be reasonably understandable. Consumers must be able to see, read, or hear, and understand the information. Many factors, including the size, duration, and location of the required disclosures, and the background or other information in the advertisement, can affect whether the information is clear and conspicuous. This requirement applies to all mandatory disclosures. The presentation of the disclosure of the APR must be at least equivalent to the presentation of any other rates disclosed in the advertisement.

(3) The act prohibits me from advertising an interest rate unless that rate is actually available at the time of the advertisement. How may I establish that an advertised interest rate was "actually available" at the time it was advertised? Whenever a specific interest rate is advertised, the licensee must retain a copy of supporting rate information, and the APR calculation for the advertised interest rate.

(4) Must I quote the annual percentage rate when discussing rates with a borrower? Yes. You must quote the annual percentage rate and other terms of the loan if you give an oral quote of an interest rate to the borrower. TILA's Regulation Z, 12 C.F.R., Part 226.26 provides guidance for using the annual percentage rate in oral disclosures.

(5) May a licensee advertise rates or fees as the "lowest" or "best"? No. Rates described as "lowest," "best," or other similar words cannot be proven to be actually available at the time they are advertised.

(6) May I solicit using advertising that suggests or represents that I am affiliated with a state or federal agency, municipality, federally insured financial institution, trust company, building and loan association, when I am not; or that I am an entity other than who I am? No. It is an unfair and deceptive act or practice and a violation of the act for you to suggest or represent that you are affiliated with a state or federal agency, municipality, federally insured financial institution, trust company, building and loan association, or other entity you do not actually represent; or to suggest or represent that you are any entity other than who you are.

(7) If I advertise using a borrower's current loan information, what must I disclose about that information? When an advertisement includes information about a borrower's current loan that you did not obtain from a solicitation, application, or loan, you must provide the borrower with the name of the source of the information.

(8) Is it a violation to advertise that services or items are "free" when the licensee has paid for the services or items? Yes. Advertising using the term "free," or any other similar term or phrase that implies there is no cost to the applicant is deceptive because you can recover the cost of the purportedly "free" service or item through the negotiation process. See the Federal Trade Commission's Guide Concerning Use of the Word "Free" and Similar Representations (16 C.F.R. Sec. 251.1(g) (2003)), available at https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/guide-concerning-use-word-free-similar.

(9) How can I advertise a discounted rate? You must clearly and conspicuously disclose in the advertisement at a minimum, the cost of the discount to the borrower and that the rate is discounted.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 19-21-157, § 208-620-630, filed 10/22/19, effective 11/24/19. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-630, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-630, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-630, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-630, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-630, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 78. WSR 09-01-159, § 208-620-630, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040. WSR 08-15-125, § 208-620-630, filed 7/22/08, effective 8/22/08. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-630, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-640 What are some of the federal laws I must comply with when I advertise any loan subject to the Consumer Loan Act?

You must comply with all the applicable advertising requirements under the federal statutes and regulations including, but not limited to, the Truth in Lending Act, the Real Estate Settlement Procedures Act, the Federal Trade Commission Act, the Telemarketing and Consumer Fraud and Abuse Act, Mortgage Acts and Practices – Advertising statute, Regulation N, 12 C.F.R. Part 1014, and the Equal Credit Opportunity Act.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-640, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-640, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040. WSR 08-15-125, § 208-620-640, filed 7/22/08, effective 8/22/08. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-640, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-650 Will the director waive fees charged under the Consumer Loan Act?

The director or designee may waive any or all of the fees and assessments under this chapter when he or she determines that:

(1) The financial services regulation account exceeds the projected minimum fund balance level approved by the office of financial management; and

(2) That the waiver is fiscally prudent.

History

Statutory Authority: RCW 43.320.040. WSR 08-15-125, § 208-620-650, filed 7/22/08, effective 8/22/08. Statutory Authority: RCW 31.04.165, 31.04.015, 31.04.045, 31.04.075, 31.04.085, 31.04.093, 31.04.102, 31.04.115, 31.04.145, 31.04.155, and 31.04.175. WSR 06-04-053, § 208-620-650, filed 1/27/06, effective 2/27/06.

Wash. Admin. Code § 208-620-660 What is required for a Washington licensed loan originator to work from their residence without licensing the residence as a branch location?

A licensed company may permit a sponsored and licensed loan originator to work from the loan originator's residence without licensing it as a branch location under RCW 31.04.075 and subject to the following conditions:

(1) The company must have written policies and procedures that include appropriate risk-based monitoring and oversight processes for the supervision of loan originators working from their residence without licensing it as a branch location. The loan originator must comply with the licensee's policies and procedures.

(2) Access to the company platforms and customer information must be in accordance with the licensee's comprehensive written information security plan, as required by WAC 208-620-571, which must include safeguards that protect borrower information.

(3) Communications that contain a customer's protected personal information must be in compliance with federal and state information security requirements, including the applicable provisions under the Gramm-Leach-Bliley Act and the Safeguards Rule. See WAC 208-620-571 and 208-620-572 for more information.

(4) The loan originator's residence may not be held out in any manner, directly or indirectly, as a licensed main or branch location unless it is licensed as a main or branch location. The following is not allowed at the loan originator's residence unless it is licensed as a main or branch location:

(a) Conducting in-person customer interactions;

(b) Storing physical records containing customer information;

(d) Advertising the location as a licensed main or branch office.

(5) The NMLS record of the loan originator must designate the licensed main office headquarters or a licensed branch office as their registered location.

(6) The loan originator must use their registered location from NMLS in the "loan originator information" section on residential mortgage loan applications.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 22-24-048, § 208-620-660, filed 11/30/22, effective 12/31/22.

Wash. Admin. Code § 208-620-700 Mortgage loan originator—General.

(1) May I work from any location when I am a licensed loan originator? No. You can only work from a licensed location unless you conduct activity under the act from your residence pursuant to WAC 208-620-660.

(2) May I transfer loan files to another licensed entity? No. Loan files are the property and responsibility of the company named on the loan application. Only the borrower may submit a written request to the company to transmit the borrower's selected information to another entity. The company must transmit the information within five business days after receiving the borrower's written request.

(3) May I act as a loan originator and a real estate agent in the same transaction or for the same borrower in different transactions? Yes, you may be both the loan originator and real estate broker or salesperson in the same transaction, or for the same borrower in different transactions. When either of these occur, you must provide to the borrower the following written disclosure:

| "THIS IS TO GIVE YOU NOTICE THAT I OR ONE OF MY ASSOCIATES HAVE/HAS ACTED AS A REAL ESTATE BROKER OR SALESPERSON REPRESENTING THE BUYER/SELLER IN THE SALE OF THIS PROPERTY TO YOU. I AM ALSO A LOAN ORIGINATOR AND WOULD LIKE TO PROVIDE MORTGAGE SERVICES TO YOU IN CONNECTION WITH YOUR LOAN TO PURCHASE THE PROPERTY. | | --- | | YOU ARE NOT REQUIRED TO USE ME AS A LOAN ORIGINATOR IN CONNECTION WITH THIS TRANSACTION. YOU ARE FREE TO COMPARISON SHOP AND TO SELECT ANY MORTGAGE BROKER OR LENDER OF YOUR CHOOSING." |

(4) As a loan originator, may I be paid directly by the borrower for my services? No. You may not be paid any compensation or fees directly by the borrower.

(5) May I charge the borrower a fee, commission, or other compensation for preparing, negotiating, or brokering a loan for the borrower? No. You may not charge the borrower a fee, commission, or compensation of any kind in connection with the preparation, negotiation, or brokering of a residential mortgage loan.

(6) May I bring a lawsuit against a borrower for the collection of compensation? No. Only the company may bring collection actions against borrowers to collect compensation.

(7) May I work as a licensed loan originator for a licensed consumer loan company located out of the state? Yes. You may originate loans for any company you are sponsored by as long as you work from a licensed location or your residence pursuant to WAC 208-620-660. See subsection (1) of this section.

(8) May I hire employees or independent contractors to assist me? No. Only the consumer loan company can hire employees or independent contractors to work for the company. This prohibition against loan originators hiring employees or independent contractors includes clerical or administrative personnel and loan processors and underwriters whose work is related to the consumer loan company's activities.

(9) Do loan processors and underwriters have to be licensed as loan originators? W-2 employee loan processors and underwriters are not required to have a loan originator license provided they work under the supervision and instruction of an individual licensed or exempt from licensing and do not hold themselves out as able to conduct the activities of a loan originator.

(10) May loan processors and underwriters work on files from an unlicensed location? A loan processor or underwriter may work on loan files from an unlicensed location under the following circumstances:

(a) The loan files are in electronic format and the loan processor or underwriter accesses the files directly from the licensee's main computer system. The loan processor or underwriter may not maintain any electronic files on any computer system other than the system belonging to the licensee;

(b) The loan processor or underwriter does not conduct any of the activities of a licensed loan originator;

(d) The loan processor or underwriter is not a licensed mortgage loan originator who supervises other loan processors or underwriters.

(11) May I work as a licensed loan originator in Washington if I do not have a physical location in Washington? Yes. You may originate loans from any licensed location or your residence pursuant to WAC 208-620-660, inside or outside of Washington, as long as the company that sponsors you is licensed to do business in Washington.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 22-24-048, § 208-620-700, filed 11/30/22, effective 12/31/22
WSR 19-21-157, § 208-620-700, filed 10/22/19, effective 11/24/19
WSR 13-24-024, § 208-620-700, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-700, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-700, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-710 Mortgage loan originator—Licensing.

(1) Must I have a license to act as a mortgage loan originator for a consumer loan company? Yes. You must not engage in the business of a mortgage loan originator without first obtaining and maintaining annually a license under this act. You must register with and maintain a valid unique identifier issued by the NMLS.

(2) How do I apply for a mortgage loan originator license? Your application consists of filing an online application through the NMLS and providing Washington specific requirements directly to DFI. You must pay an application fee and filing fee through the NMLS. In addition to supplying the application information, both you and the company intending to sponsor you must be in good standing with the department. See also WAC 208-620-715 Temporary authority to originate loans.

(3) What are the eligibility requirements to become a licensed mortgage loan originator?

(a) Be eighteen years or older.

(b) Demonstrate financial responsibility. For the purposes of this section, an applicant has not demonstrated financial responsibility when the applicant shows disregard in the management of his or her financial condition. A determination that an individual has shown disregard in the management of his or her financial condition may include, but is not limited to, an assessment of: Your credit report, current outstanding judgments, except judgments solely as a result of medical expenses; current outstanding tax liens or judgments or other government liens or filings; foreclosures within the last three years; or a pattern of seriously delinquent accounts within the past three years. Specifically, you are not eligible to receive a loan originator license if you have one hundred thousand dollars or more of tax liens against you at the time of application.

(c) Complete prelicensing education. You must complete prelicensing education before submitting an application. See WAC 208-620-720.

(d) Prove your identity. You must provide information to prove your identity.

(e) Pass a licensing test. You must take and pass the NMLS test that assesses your knowledge of the mortgage business and related regulations at the federal and state level. See WAC 208-620-725.

(f) Provide a bond.

(i) If you are employed by a company that is exempt from licensing, or uses a bond substitute, you must obtain and maintain an individual bond based on the volume of your mortgage loan origination activity. By March 1st of each year, you must determine your required bond amount and provide DFI with proof of having an adequate bond. The bond must be in the following amount:

| 1. | Zero to twenty million in loans originated: | $20,000 | | --- | --- | --- | | 2. | Twenty million to thirty million: | $30,000 | | 3. | Thirty million to forty million: | $40,000 | | 4. | Forty million and above: | $50,000 |

(ii) If you are employed by a company that is exempt and is a nonprofit housing organization making loans under housing programs that are funded in whole or in part by federal or state programs with the primary purpose of assisting low-income borrowers with purchasing or repairing housing or for the development of housing for low-income Washington state residents, the bond must be in the following amounts:

| 1. | Zero to fifty million in loans originated: | $10,000 | | --- | --- | --- | | 2. | Fifty +: | $20,000 |

(g) File a quarterly call report. Reserved.

(4) In addition to reviewing my application, what else will the department consider to determine if I qualify for a mortgage loan originator license?

(a) General fitness and prior compliance actions. The department will investigate your background to see that you demonstrate the experience, character, and general fitness that commands the confidence of the community and creates a belief that you will conduct business honestly and fairly within the purposes of the act. This investigation may include a review of the number and severity of complaints filed against you, or any person you were responsible for, and a review of any investigation or enforcement activity taken against you, or any person you were responsible for, in this state, or any jurisdiction.

(b) License suspensions or revocations. You are not eligible for a loan originator license if you have been found to be in violation of the act or the rules, or have had a license issued under the act or any similar state statute suspended or revoked.

(c) Criminal history. You are not eligible for a loan originator license if you have been convicted of a gross misdemeanor involving dishonesty or financial misconduct or has not been convicted of, or pled guilty or nolo contendere to a felony in a domestic, foreign, or military court:

(i) During the seven-year period preceding the date of the application for licensing and registration; or

(ii) At any time preceding the date of application, if the felony involved an act of fraud, dishonesty, breach of trust, or money laundering.

(5) What will happen if my loan originator license application is incomplete? After submitting your online application through the NMLS and filing the required information and documentation with the department, the department will notify you of any application deficiencies.

(6) How do I withdraw my application for a loan originator license?

(a) Once you have submitted the online application through NMLS you may withdraw the application through NMLS. You will not receive a refund of the NMLS filing fee or the amount the department uses to investigate your license application.

(b) The withdrawal of your license application will not affect any license suspension or revocation proceedings in progress at the time you withdraw your application through the NMLS.

(7) When will the department consider my loan originator license application to be abandoned? If you do not respond within fifteen days and as directed by the department, your loan originator license application is considered abandoned and you forfeit all fees paid. Failure to provide the requested information will not affect new applications filed after the abandonment. You may reapply by submitting a new application package and new application fee.

(8) What happens if the department denies my application for a loan originator license, and what are my rights if the license is denied? See WAC 208-620-615.

(9) May I transfer, sell, trade, assign, loan, share, or give my loan originator license to someone else? No. A loan originator license authorizes only the individual named on the license to conduct the business at the location listed on the license.

(10) How do I change information on my loan originator license? You must submit an amendment to your license through the NMLS. You may be charged a fee.

(11) What is an inactive loan originator license? When a licensed loan originator is not sponsored by a licensed or exempt entity, the license is inactive. When a person holds an inactive license, they may not conduct any of the activities of a loan originator, or hold themselves out as a licensed loan originator.

(12) When my loan originator license is inactive, am I subject to the director's enforcement authority? Yes. Your license is granted under specific authority of the director and under certain situations you may be subject to the director's authority even if you are not doing any activity covered by the act.

(13) When my loan originator license is inactive, must I continue to pay annual fees, and complete continuing education for that year? Yes. You must comply with all the annual licensing requirements or you will be unable to renew your inactive loan originator license.

(14) May I originate loans from a website when my license is inactive? No. You may not originate loans, or engage in any activity that requires a license under the act, while your license is inactive.

(15) How do I activate my loan originator license? The sponsoring company must submit a sponsorship request for your license through the NMLS. The department will notify you and the sponsoring company if approved.

(16) When may the department issue interim loan originator licenses? To prevent an undue delay, the director may issue interim loan originator licenses with a fixed expiration date. The license applicant must meet the minimum requirements to obtain a license under the S.A.F.E. Act to receive an interim license.

(17) When does my loan originator license expire? The loan originator license expires annually on December 31st. If the license is an interim license, it may expire in less than one year.

(18) How do I renew my loan originator license?

(a) Before the license expiration date you must renew your license through the NMLS. Renewal consists of:

(i) Paying the annual assessment fee; and

(ii) Meeting the continuing education requirement. You will not have a continuing education requirement in the year in which you complete the core twenty hours of prelicensing education. See WAC 208-620-730.

(b) The renewed license is valid until it expires, or is surrendered, suspended or revoked.

(19) If I let my loan originator license expire, must I apply to get a new license? If you complete all the requirements for renewal on or before the last day of February each year, you may renew an existing license. However, if you renew your license during this two-month period, in addition to paying the annual assessment on your license, you must pay an additional fifty percent of your annual assessment. See subsection (17) of this section for the license renewal requirements.

During this two-month period, your license is expired and you must not conduct any business under the act that requires a license.

If you fail to comply with the renewal request requirements, you must apply for a new license.

(20) If I let my loan originator license expire and then apply for a new loan originator license must I comply with the continuing education requirements from the prior license period? Yes. Before the department will consider your new loan originator application complete, you must provide proof of satisfying the continuing education requirements from the prior license period.

(21) May I still originate loans if my loan originator license has expired? No. Once your license has expired you may no longer conduct the business of a loan originator, or hold yourself out as a licensed loan originator, as defined in the act and these rules.

(22) May I surrender my loan originator's license? Yes. Only you may surrender your license before the license expires through the NMLS.

Surrendering your loan originator license does not change your civil or criminal liability, or your liability for any administrative actions arising from acts or omissions occurring before the license surrender.

(23) Must I display my loan originator license where I work as a loan originator? No. Neither you nor the company is required to display your loan originator license. However, evidence that you are licensed as a loan originator must be made available to anyone who requests it.

(24) Must I include my loan originator license number on any documents? You must include your license number closely following your name as entered in the NMLS on (a) through (d) of this subsection. An example of closely following is: Your name as entered in the NMLS followed by your title (if you use one) followed by your license number.

(a) Solicitations. This includes correspondence in any form. Correspondence that this not a solicitation does not have to include your license number.

(b) Business cards.

(d) Any state or federal form that requires your license number. See WAC 208-620-710(26).

(25) When must I disclose my loan originator license number? In the following situations you must disclose your loan originator license number and the name and license number of the company you are associated with:

(a) When asked by any party to a loan transaction, including third-party providers;

(b) When asked by any person you have solicited for business, even if the solicitation is not directly related to a mortgage transaction;

(d) When taking a residential mortgage loan application.

(26) May I conduct business and advertise under a name other than the name on my loan originator license? You must use the name on your license when you are conducting business and in your advertisements with the following exceptions:

Except, use of your middle name is not required. Except, you may use only your middle and last name. Except, you may use a nickname as your first name if it is registered in NMLS on your MU4 as an "other" name.

(27) As a licensed mortgage loan originator, what are my reporting responsibilities? You must notify the director through amendment to the NMLS and upload supporting documents, if applicable, within ten business days to a change of:

(a) Answers to the NMLS generated disclosure questions or if your answer does not change but another event has occurred that requires disclosure and uploading of explanatory documentation;

(b) Sponsorship status;

(d) Any change in the information supplied to the director in your original application; or

(e) A change to your response to a disclosure question within NMLS. You must upload any document that is the basis for your changed response.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 19-21-157, § 208-620-710, filed 10/22/19, effective 11/24/19. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-710, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-710, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-710, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-710, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-710, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-715 Temporary authority to originate loans.

(1) What is temporary authority to originate loans? Temporary authority to act as a loan originator permits qualified MLOs who are changing employment from a depository institution to a state-licensed mortgage company and qualified state-licensed MLOs seeking licensure in another state, to originate loans while completing any state-specific requirements for licensure. See WAC 208-620-730.

(2) Who is eligible for temporary authority? An MLO that is: (a) Employed and sponsored through NMLS by a state-licensed mortgage company; and (b) either: (i) Registered in NMLS as an MLO during the one year preceding the application submission; or (ii) licensed as an MLO during the thirty-day period preceding the date of application.

(3) How do I receive temporary authority?

(a) You must be employed and sponsored by a company licensed in Washington;

(b) You must file a license application pursuant to WAC 208-660-350 (1)(a) through (d); and

(c) You must not have any disqualifying criminal history, been subject to or served with a cease and desist order, or had an MLO license denied, revoked, or suspended in any jurisdiction.

(4) How long can I operate under temporary authority? Temporary authority begins on the date an eligible MLO submits a license application. It ends when the earliest of the following occurs: (a) The MLO withdraws the application; (b) the state denies or issues a notice of intent to deny the application; (c) the state grants the license; or (d) one hundred twenty days after the application submission if the application is listed on NMLS as incomplete.

(5) Can my license application be denied during the period of temporary authority? Yes. Your application can be denied at any time during the application review process.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 19-21-157, § 208-620-715, filed 10/22/19, effective 11/24/19.

Wash. Admin. Code § 208-620-720 Loan originator—Prelicensing education.

Must I complete prelicensing education in order to receive a loan originator license? Yes.

(1) You must complete at least twenty-two hours of prelicensing education approved by the NMLS. The prelicensing education must include:

(a) Three hours of federal law and regulations;

(b) Three hours of ethics, which includes instruction on fraud, consumer protection, and fair lending issues;

(d) At least four hours of training specifically related to Washington law.

(2) You will receive credit for having completed the SAFE required prelicensing education for every state once you have successfully completed the SAFE required prelicensing education requirements approved by the NMLS for any state.

(3) Must I take continuing education in the year I complete the prelicensing education? No. You will not have a continuing education requirement in the year in which you complete the core twenty hours of prelicensing education.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-720, filed 11/22/13, effective 1/1/14. Statutory Authority: Chapter 43.320 RCW and RCW 31.04.165. WSR 13-06-012, § 208-620-720, filed 2/25/13, effective 4/1/13. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-720, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-725 Mortgage loan originator—Testing.

Must I pass a test prior to becoming a loan originator? Yes.

(1) You must take and pass the NMLS sponsored loan originator test. The test has two parts; one on federal law and regulation and one on uniform state law and regulation. You must receive a score of seventy-five percent or higher to pass the test.

(2) Where may I find information about the loan originator test? The NMLS website will publish the names and contact information of approved testing providers.

(3) How much does the loan originator test cost? Testing costs are set by the test provider and the NMLS and may be modified from time to time. The NMLS website will publish the current testing fee with the testing provider contact information.

(4) How do I register to take the loan originator test? Register through the NMLS website.

(5) What topics may be covered in the loan originator test? At a minimum, the test topics will include ethics, federal and state law and regulation pertaining to mortgage origination, federal and state law and regulation on fraud, consumer protection, nontraditional mortgage products, and fair lending.

(6) After passing the loan originator test, will I have to take it again? If you fail to maintain a valid license for a period of five years or longer you must retake the test, not taking into account any time during which you were a registered mortgage loan originator.

(7) How soon after failing the loan originator test may I take it again? After taking and failing the test you must wait thirty days before taking it again. After failing three consecutive times, you must then wait at least six months before taking the test again.

History

Statutory Authority: Chapter 43.320 RCW and RCW 31.04.165. WSR 13-06-012, § 208-620-725, filed 2/25/13, effective 4/1/13. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 12-18-047, § 208-620-725, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-725, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-725, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-730 Loan originator—Continuing education.

(1) How many clock hours of loan originator continuing education must I have each year? You must complete a minimum of eight hours of continuing education approved by the NMLS which must include at least three hours of federal law and regulations; two hours of ethics (which must include instruction on fraud, consumer protection, and fair lending issues); and two hours of training related to lending standards for the nontraditional mortgage product marketplace. Additionally, the director may require at least one hour of continuing education on Washington law provided by and administered through an approved provider.

(2) As a loan originator, may I take the same approved course multiple times to meet my annual continuing education requirement? No. You may not take the same approved course in the same or successive years to meet the annual requirements for continuing education.

(3) If I teach an approved continuing education course may I use my course as credit toward my annual loan originator continuing education requirement? Yes. As an instructor of an approved continuing education course, you may receive credit for your annually required loan originator continuing education courses from the course(s) you teach. You will receive credit at the rate of one course taught equaling two continuing education course credits.

(4) If I accumulate more than the required loan originator continuing education course credits during a year, may I carry-over the excess credit to the next year? No. Continuing education credits only apply to the year in which they are taken.

(5) If I fail to complete the required continuing education, what happens to my loan originator license? When your license expires, the department will not renew it, and you cannot continue conducting any business under the act. See WAC 208-620-710 to renew your license if you miss the December 31st renewal deadline.

(6) How will I know which courses and providers satisfy the continuing education requirement? NMLS will publish information about approved continuing education providers on their website.

(7) How do I provide the department with proof of the continuing education courses I have completed? The course provider will report your continuing education to the NMLS and DFI will have access to that information.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 12-18-047, § 208-620-730, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-730, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-800 What definitions are applicable to proprietary reverse mortgage products under the act?

(1) Advance. A payment from the lender to the borrower.

(2) "FHA-approved reverse mortgage" means a "home equity conversion mortgage" or other reverse mortgage product guaranteed or insured by the federal department of Housing and Urban Development.

(3) "Owner-occupied residence" is the borrower's residence and includes a life estate property the legal title for which is held in the name of the borrower in a reverse mortgage transaction or in the name of a trust, provided the occupant of the property is the beneficiary of that trust.

(4) "Proprietary reverse mortgage loan" is any reverse mortgage loan product that is not a home equity conversion mortgage loan or other federally guaranteed or insured loan.

(5) "Reverse mortgage broker or lender" means a licensee under the Washington state Consumer Loan Act, chapter 31.04 RCW, or a person exempt from licensing pursuant to federal law.

(6) "Reverse mortgage loan" means a nonrecourse consumer credit obligation in which:

(a) A mortgage, deed of trust, or equivalent consensual security interest is created in the borrower's dwelling securing one or more advances;

(b) Any principal, interest, or shared appreciation or equity is due and payable, other than in the case of default, only after:

(i) The consumer dies;

(ii) The dwelling is transferred; or

(iii) The consumer ceases to occupy the dwelling as a dwelling; and

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-800, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-800, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-805 Does this part (WAC 208-620-800 through 208-620-850) apply to the FHA approved home equity conversion mortgage (HECM) product?

No. WAC 208-620-800 through 208-620-850 do not apply to the HECM product or to any federally administered reverse mortgage product.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 12-18-047, § 208-620-805, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-805, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-810 What requirements must I meet before offering or making proprietary reverse mortgages to Washington residents?

You must meet the following requirements before offering proprietary reverse mortgage loans to Washington residents:

(1) Obtain and maintain an irrevocable standby letter of credit in your favor in an amount necessary to fund all reverse mortgage loan requirements anticipated over the next twelve months for loans on your books plus those expected to be made over the next twelve months, or three million dollars, whichever is greater. The initial term of the letter of credit must be at least two years. The letter of credit must be from a financial institution approved by the director.

(a) The financial institution that provides the letter of credit required in subsection (1) of this section may not be affiliated with you.

(b) If you have had a rating of either 4A1 or 5A1 from Dun & Bradstreet credit services for three consecutive years you are exempt from the requirements in subsection (1) of this section.

(2) Maintain a minimum capital of ten million dollars.

You may rely on the capital of your parent to satisfy this requirement. However, for any year in which you rely on your parent's capital, you must provide to the director a certified financial statement of the parent showing a net worth of at least one hundred million dollars as of the close of its most recent fiscal year and a binding written commitment from the parent to you making a minimum of ten million dollars available to you as a capital contribution in connection with your reverse mortgage lending program.

(3) Subsections (1) and (2) of this section do not apply to you if you:

(a) Only originate proprietary reverse mortgage loans with full disbursement of the proceeds; or

(b) Only originate proprietary reverse mortgage loans that are sold into the secondary market to an investor with either a 4A1 or 5A1 rating from Dun & Bradstreet credit services. You must obtain a written commitment to purchase from the investor prior to the loan closing and must arrange for the delivery of the loans to the investor within ten days of the loan closing.

History

Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-810, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-820 What specific loan terms and conditions are allowed or required in the proprietary reverse mortgages I make to Washington residents?

(1) Loan prepayment.

(a) Prepayment, in whole or in part, or the refinancing of a reverse mortgage loan, must be permitted without penalty at any time during the term of the reverse mortgage loan. For the purposes of this subsection, penalty means an amount of money charged to the borrower in addition to any fees, payments, or other charges, not including interest, that would have otherwise been due upon the reverse mortgage being due and payable. However, when a reverse mortgage lender has paid or waived all of the usual fees or costs associated with a reverse mortgage loan, a prepayment penalty may be imposed, provided the penalty does not exceed the total amount of the usual fees or costs that were initially absorbed or waived by the reverse mortgage lender.

(b) You may not impose a prepayment penalty under this subsection if the prepayment is caused by the occurrence of the death of the borrower.

(c) If a prepayment penalty is imposed under the circumstances described in (a) of this subsection you must disclose the prepayment penalty to the borrower.

(2) Interest rate. A reverse mortgage loan may provide for a fixed or adjustable interest rate or combination thereof, including compound interest, and may also provide for interest that is contingent on the value of the property upon execution of the loan or at maturity, or on changes in value between closing and maturity.

(3) Late advances. A late advance is a scheduled monthly advance that you do not mail or electronically transfer to the borrower on or before the first business day of the month, or within five business days of the date you receive the borrower's request, or such other regularly scheduled contractual date.

(a) If you make a late advance you must pay a late charge of ten percent of the entire amount that should have been advanced to the borrower.

(b) For each additional day you fail to make the advance, you must pay interest on the late advance at the interest rate stated in the loan documents. If the loan documents provide for an adjustable interest rate, the rate in effect when the late charge first accrues is used. You must pay late charges from your funds and they may not be added to the unpaid principal balance of the borrower's loan or in any other way collected from the borrower.

(4) Loan acceleration. The reverse mortgage loan may become due and payable upon the occurrence of any one of the following events:

(a) The home securing the loan is sold or title to the home is otherwise transferred;

(b) All borrowers cease occupying the home as a principal residence, except as provided in subsection (5) of this section; or

(5) Repayment. Repayment of the reverse mortgage loan is subject to the following additional conditions:

(a) Temporary absences from the home not exceeding one hundred eighty consecutive days do not cause the mortgage to become due and payable;

(b) Extended absences from the home exceeding one hundred eighty consecutive days, but less than one year, do not cause the mortgage to become due and payable if the borrower has taken prior action that secures and protects the home in a satisfactory manner, as specified in the loan documents;

(c) Your right to collect reverse mortgage loan proceeds is subject to the applicable statute of limitations for written loan contracts. Notwithstanding any other provision of law, the statute of limitations commences on the date that the reverse mortgage loan becomes due and payable as provided in the loan agreement;

(d) If the borrower mortgaged one hundred percent of the full value of the house, the amount owed will be the lesser amount of:

(i) The fair market value of the house, minus the sale costs; or

(ii) The outstanding balance of the loan.

(e) If the borrower mortgaged less than one hundred percent of the full value of the house, the amount owed by the borrower must not be greater than the outstanding balance of the loan or the percentage of the fair market value (minus sale costs, as provided in the contract), whichever amount is less;

(f) The lender must enforce the debt only through the sale of the property and must not obtain a deficiency judgment against the borrower.

(6) Fee disclosure. Using conspicuous, bold sixteen-point or larger type, you must disclose in the loan agreement any interest rate or other fees to be charged during the period that commences on the date that the reverse mortgage loan becomes due and payable, and that ends when repayment in full is made.

(7) Deed of trust disclosure. The first page of any deed of trust securing a reverse mortgage loan must contain the following statement in sixteen-point boldface type: "This deed of trust secures a reverse mortgage loan."

(8) Ancillary products. You or any other party that participates in the origination of a reverse mortgage loan must not require an applicant for a reverse mortgage to purchase an annuity, insurance, or other financial product as a condition of obtaining a reverse mortgage loan. You or the broker of a reverse mortgage loan must not:

(a) Offer an annuity, insurance, or other financial product to the borrower prior to the closing of the reverse mortgage or before the expiration of the borrower's right to rescind the reverse mortgage agreement;

(b) Refer the borrower to anyone for the purchase of an annuity, insurance, or other financial product prior to the closing of the reverse mortgage or before the expiration of the borrower's right to rescind the reverse mortgage agreement;

(c) Provide marketing information or sales leads to anyone regarding the prospective borrower or receive any compensation for such an annuity, insurance, or other financial product sale or referral; or

(d) You or any other party that participates in the origination of a reverse mortgage loan must maintain safeguards, acceptable to the department of financial institutions, to ensure that you do not provide reverse mortgage borrowers with any other financial or insurance products and that individuals participating in the origination of a reverse mortgage loan have no ability or incentive to provide the borrower with any other financial or insurance product.

(9) Borrower counseling. Prior to accepting a final and complete application for a reverse mortgage loan or assessing any fees, you must refer the prospective borrower to an independent housing counseling agency approved by the federal department of Housing and Urban Development for counseling. The counseling must meet the standards and requirements established by the federal department of Housing and Urban Development for reverse mortgage counseling. You must provide the borrower with a list of at least five independent housing counseling agencies approved by the federal department of Housing and Urban Development, including at least two agencies that can provide counseling by telephone. Telephone counseling will only be used for counseling at the borrower's request. You must create and maintain a form that includes the borrower's signature for telephone counseling requests.

(10) Counseling certification. You must not accept a final and complete application for a reverse mortgage loan from a prospective applicant or assess any fees upon a prospective applicant without first receiving a certification from the applicant or the applicant's authorized representative that the applicant has received counseling from an agency as described in subsection (9) of this section. The certification must be signed by the borrower and the agency counselor, and must include the date of the counseling and the names, addresses, and telephone numbers of both the counselor and the borrower. Electronic facsimile copy of the housing counseling certification satisfies the requirements of this subsection. You must maintain the certification in an accurate, reproducible, and accessible format for the term of the reverse mortgage plus three years.

(11) Minimum age. You may not make a reverse mortgage loan to any Washington state resident unless that resident is a minimum of sixty years of age as of the date of execution of the loan.

(12) Advances. Except for the initial disbursement of moneys to the closing agent, you must issue advances directly to the borrower, or his or her legal representative, and not to an intermediary or third party.

(13) Rescission rights. The borrower in a proprietary reverse mortgage transaction has the same right to rescind the transaction as provided in the Truth in Lending Act, Regulation Z, 12 C.F.R. Part 1026.

(14) Property appraisals. Prior to execution of the loan and at the end of the loan term, you must obtain an independent appraisal of the property value, or use the current year's tax assessment valuation of the property. You must provide copies of these appraisals to the borrower within five days of the borrower's written request, provided the borrower has paid for the appraisal.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-820, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 12-18-047, § 208-620-820, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-820, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-825 What reverse mortgage program information must I submit to the director for approval before offering or making proprietary reverse mortgages?

(1) A description of all proprietary reverse mortgage products available to borrowers.

(2) A copy of each proprietary loan product contract.

(3) A copy of all disclosures provided to borrowers for all proprietary reverse mortgage products.

(4) A copy of the projected total cost of credit disclosure provided to borrowers. The projected total cost of credit disclosure must reflect at a minimum the following factors, as applicable:

(a) All costs and charges to the consumer;

(b) All advances to and for the benefit of the consumer;

(d) Any limitation on the consumer's liability (such as nonrecourse limits and equity conservation agreements);

(e) Each of the assumed annual appreciation rates for the dwelling:

(i) Zero percent;

(ii) Four percent;

(iii) Eight percent.

(f) Each of the following assumed loan periods:

(i) Two years;

(ii) The actuarial life expectancy of the consumer to become obligated on the reverse mortgage transaction (as of the consumer's most recent birthday). If there is more than one consumer, the period must be the actuarial life expectancy of the youngest consumer as of that consumer's most recent birthday.

(g) Reserved.

(5) Your complaint processing policies and procedures.

(6) A copy of all notes and mortgages used in proprietary reverse mortgage loan transactions.

(7) If third party originators are used, copies of all due diligence policies and procedures for their use and copies of all compensation and incentive policies and procedures.

(8) A copy of your underwriting policies.

(9) A description of your title search methods.

(10) A copy of your policy for paying subsequent liens.

(11) A copy of your appraisal practices.

(12) A copy of audited financial statements and unaudited balance sheet and income statement for the most recent end quarter for the last two years of audited financial statements. If you are relying on your parent company's capital to satisfy WAC 208-620-810(2), you must also include the parent company's last two years of audited financial statements and the most recent end quarter unaudited balance sheet and income statement.

(13) Copies of your residential mortgage loan servicing policies and procedures.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-16-024, § 208-620-825, filed 7/24/18, effective 9/1/18
WSR 12-18-047, § 208-620-825, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-825, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-830 What disclosures or statements must I provide to a borrower in a reverse mortgage transaction?

In addition to any disclosures required by federal law, you must provide, at a minimum, the following:

(1) Counseling disclosure. You must provide the following plain language statement in conspicuous bold sixteen-point type or larger, prior to receiving a complete and final loan application: "Important notice to reverse mortgage loan applicant: A reverse mortgage is a complex financial transaction that provides a means of using the equity you have built up in your home, or the value of your home, as a way to access home equity. If you decide to obtain a reverse mortgage loan, you will sign binding legal documents that will have important legal, tax, and financial implications for you and your estate. It is very important for you to understand the terms of the reverse mortgage and its effect. Before entering into this transaction, you are required by law to consult with an independent loan counselor. A list of approved counselors will be provided to you by the lender or broker. You may also want to discuss your decision with family members or others on whom you rely for financial advice."

(2) Loan statements. You or the loan servicer must provide an annual, or more frequent, disclosure statement to the borrower, providing details of the loan advances, balance, other terms, and the name and telephone number of the lender's employee or agent who has been specifically designated to respond to inquiries concerning reverse mortgage loans.

(3) Benefits and tax disclosure. You must provide the following statement prior to or simultaneously with receiving an initial loan application:

"If you receive advances under the terms of a reverse mortgage, you may lose your right to receive certain public funds, such as medicaid, and possibly others. Also, receiving advances under the terms of a reverse mortgage may have tax consequences for you. You may wish to obtain advice from a tax professional or an attorney before you decide on a reverse mortgage."

History

Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-830, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-660-830 (codified as 208-620-830), filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-835 Under what circumstances will the department determine that the making of a reverse mortgage was unsuitable for a particular borrower and therefore an unfair and deceptive practice in violation of RCW 31.04.027?

Examples of circumstances which might indicate that an offered reverse mortgage loan is unsuitable include reverse mortgage loans when the applicant:

(1) Does not intend to reside in the property on a long-term basis.

(2) Does not want nonborrower residents of the property to be displaced at the maturity of the loan because they will not be able to pay off the reverse mortgage loan.

(3) Will use the proceeds of the reverse mortgage loan to purchase a product, such as annuities or other investments, which are not appropriate for the borrower.

(4) Does not understand the terms and conditions of a reverse mortgage loan or what happens to the collateral when the reverse mortgage loan matures.

(5) Would receive disbursements from the reverse mortgage loan that are insufficient to meet the applicant's stated needs or is not enough to justify the initial cost of a reverse mortgage loan.

History

Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-835, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-620-850 What is the process I must follow to obtain the department's approval of my proprietary reverse mortgage product?

Contact the department for the specific process you must follow to obtain approval.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 19-21-157, § 208-620-850, filed 10/22/19, effective 11/24/19. Statutory Authority: RCW 43.320.040, 31.04.165, 2009 c 120, and 2009 c 149. WSR 09-24-090, § 208-620-850, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-620-900 Servicing residential mortgage loans—General requirement.

(1) Other applicable laws, regulations, and programs. A violation of an applicable state or federal law, regulation, or program is a violation of this act. In addition to complying with all other provisions of this act, you must comply with the following:

(a) Chapter 61.24 RCW and any other applicable state or federal law, regulation, and program.

(b) The federal Servicemembers Civil Relief Act.

(2) Servicing and ownership transfers or sales.

(a) When acquiring servicing rights from another servicer you must:

(i) Continue processing loan modification requests and honoring trial and permanent modifications;

(ii) Designate the homeowner as a third-party intended beneficiary in any subsequent contract for transfer or sale, unless doing so would violate another state law or GSE modification program requirements; and

(b) When transferring or selling the servicing of loans with pending modification requests or trial or permanent modifications you must:

(i) Inform the successor servicer if a loan modification is pending;

(ii) Obligate the successor servicer to accept and continue processing loan modification requests and to honor trial and permanent loan modification agreements; and

(iii) Designate the homeowner as a third-party intended beneficiary in any contract for transfer or sale, unless doing so would violate state law or GSE modification program requirements.

(3) Payment processing and fees.

(a) You must accept and credit all amounts received within one business day of receipt when the borrower has made the payment to the address where instructed, provided, that the borrower has provided sufficient information to credit the account. If you use the scheduled method of accounting, any regularly scheduled payment made prior to the scheduled due date must be credited no later than the due date. You must apply the payment as specified in the loan documents.

(b) You may enter into a written contract with the borrower whereby you hold funds of a certain type or sent by a certain method for a period of time until the funds are available before crediting them to the borrower's account.

(c) You must notify the borrower if a payment is received but not credited and instead placed in a suspense account. You must mail the notification to the borrower within ten business days by mail at the borrower's last known address. The notification must identify the reason the payment was not credited or treated as credited to the account, as well as any actions the borrower must take to make the residential mortgage loan current. If you provide monthly or more frequent statements that include this information you are not required to provide the information in a notice in addition to the monthly or more frequent statement. In the event of a conflict between this subsection (3)(c) or (d) of this section immediately following or both, and the requirements of an applicable bankruptcy court order, compliance with the bankruptcy court requirements are considered compliance with the subsections.

(d) When the suspense account contains enough money to make a full payment, you must apply that payment to the mortgage as of the date the full amount became available in the suspense account.

(e) You must assess any incurred fees to a borrower's account within forty-five days of the date on which the fee was incurred. You must clearly and conspicuously explain the fee in a statement mailed to the borrower at the borrower's last known address no more than thirty days after assessing the fee. If you provide monthly or more frequent statements that include this information you are not required to provide the information in a notice in addition to the monthly or more frequent statement.

(4) Contracting with other parties. You must adopt written policies and procedures for the oversight of third-party providers including, but not limited to, foreclosure trustees, foreclosure firms, subservicers, agents, subsidiaries, and affiliates. You must maintain the policies and procedures as part of your books and records and must provide them to the department when directed to do so.

(5) See also WAC 208-620-551.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-16-024, § 208-620-900, filed 7/24/18, effective 9/1/18. Statutory Authority: Chapter 43.320 RCW, RCW 31.04.165. WSR 16-08-026, § 208-620-900, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 13-24-024, § 208-620-900, filed 11/22/13, effective 1/1/14
WSR 12-18-047, § 208-620-900, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 31.04.165 and 2010 c 35. WSR 10-20-122, § 208-620-900, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-620-905 Servicing residential mortgage loans—Maintenance of the escrow account.

(1)(a) If you collect escrow amounts held for the borrower for payment of insurance, taxes, or other charges with respect to the property, you must collect and make all payments from the escrow account and, to the extent you have control, ensure that no late penalties are assessed or other negative consequences result for the borrower.

(b) At least annually, or upon the borrower's request, you must inform the borrower in writing of the amount of reserve required in an escrow account. The notice must also advise the borrower of any fees the borrower will incur for not maintaining the reserve amount or fees the borrower will incur if you advance escrow amounts on the borrower's behalf and then collect the amounts from the borrower.

(2) You may enter into a written agreement with the borrower whereby you are not required to make escrow payments unless funds are available in the escrow account. The agreement must include language that puts the borrower on notice that the borrower is responsible for the payment of the escrow amounts if a sufficient amount is not maintained in the escrow account.

(3) You must notify the borrower within ten business days of any change to the escrow account, other than the changes brought about by the borrower's regularly scheduled payment, that will change the borrower's escrow payment amount. Examples of changes requiring notification include, but are not limited to, hazard insurance premiums, a reduction in the required reserve amount for the account, or a change in the property's tax assessment.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-16-024, § 208-620-905, filed 7/24/18, effective 9/1/18.

Wash. Admin. Code § 208-620-920 Servicing residential mortgage loans—Borrower requests for information.

(1) You must make a reasonable attempt to comply with a borrower's request for information about the residential mortgage loan account, including a request for information about loss mitigation, and to respond to any dispute initiated by the borrower about the loan account. A reasonable attempt includes, but is not limited to:

(a) Maintaining written or electronic records of each written request for information involving the borrower's account until the residential mortgage loan is paid in full, sold, or otherwise satisfied;

(b) Providing a written statement to the borrower within thirty business days of receipt of a written request from the borrower, or by following the response timelines for any loss mitigation program. The borrower's request must include the name and account number, if any, of the borrower, a statement that the account is or may be in error, and sufficient detail regarding the information sought by the borrower to permit the servicer to comply.

(2) You must provide at a minimum the following information:

(a) Whether the account is current or, if the account is not current, an explanation of the default and the date the account went into default;

(b) The current balance due on the residential mortgage loan, including the principal due, the amount of funds, if any, held in a suspense account, the amount of the escrow balance known to the servicer, if any, and whether there are any escrow deficiencies or shortages known to the servicer;

(c) The identity, address, and other relevant information about the current holder, owner, or assignee of the residential mortgage loan; and

(d) The telephone number and mailing address of an individual servicer representative with the information and authority to answer questions and resolve disputes.

(3) You must promptly correct any errors and refund any fees assessed to the borrower resulting from an error you made.

(4) If the content of your response meets the requirements under RESPA for a response to a qualified written request, you will be deemed in compliance with the content requirements of this subsection. You must still comply with subsection (3) of this section.

(5) In addition to the statement described in subsection (1)(b) of this section, a borrower may request more detailed information from a servicer, and the servicer must provide the information within fifteen business days of receipt of a written request from the borrower. The request must include the name and account number, if any, of the borrower, a statement that the account is or may be in error, and provide sufficient detail to the servicer regarding information sought by the borrower. If requested by the borrower, this statement must also include:

(a) A copy of the original note, or if unavailable, an affidavit of lost note, with all endorsements; and

(b) A statement that identifies and itemizes all fees and charges assessed under the loan servicing transaction and provides a full payment history identifying in a clear and conspicuous manner all of the debits, credits, application of and disbursement of all payments received from or for the benefit of the borrower, and other activity on the residential mortgage loan including escrow account activity and suspense account activity, if any.

(c) The period of the account history shall cover at a minimum the two-year period prior to the date of the receipt of the request for information. If the servicer has not serviced the residential mortgage loan for the entire two-year time period, the servicer must provide the information going back to the date on which the servicer began servicing the home loan and identify the previous servicer, if known. If the servicer claims that any delinquent or outstanding sums are owed on the home loan prior to the two-year period or the period during which the servicer has serviced the residential mortgage loan, the servicer must provide an account history beginning with the month that the servicer claims any outstanding sums are owed on the residential mortgage loan up to the date of the request for the information.

(d) If the borrower requests this statement, you must provide it free of charge; but the borrower is only entitled to one free statement annually. If the borrower requests more than one statement annually, you may charge thirty dollars for the second and subsequent statements.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-16-024, § 208-620-920, filed 7/24/18, effective 9/1/18.

Wash. Admin. Code § 208-620-930 Servicing residential mortgage loans—Loss mitigation.

(1) The obligation to assign an individual servicer representative with the information and authority to answer questions and resolve disputes and to act as a single point of contact for the homeowner during loss mitigation attaches when the borrower requests loss mitigation. This individual servicer representative must have the authority and ability to perform the following duties:

(a) Explain loss mitigation options and requirements;

(b) Track documents submitted by the homeowner and documents provided to the homeowner;

(d) Ensure the homeowner is considered for all loss mitigation options; and

(e) Access individuals with the authority to delay or stop foreclosure proceedings.

(2) You must comply with all timelines and requirements for the federal HAMP or GSE modification programs if applicable, including denials and dual tracking prohibitions. For any modification program, you must:

(a) Develop an electronic system, or add to an existing system, the ability for borrowers to check the status of their loan modification, at no cost. The system must also allow communication from housing counselors. The system must be updated every ten business days.

(b) Review and make a determination on a borrower's completed loan modification application within thirty days of receipt.

(c) Provide in the loan modification denial notice the reasons for denial and an opportunity for the homeowner to rebut the denial within thirty days. If the denial is due to the terms of an agreement between you and an investor, you must provide the name of the investor and a summary of the reason for the denial. If the denial is based on a net present value (NPV) model, you must provide the data inputs used to determine the NPV. Any loan modification denials must be reviewed internally by an independent evaluation process within thirty days of the denial determination or the mailing of the notice of denial to the borrower, whichever occurs earlier. See subsection (3) of this section for additional requirements on borrower appeals.

(d) Review and consider any complete loan modification application before referring a delinquent loan to foreclosure.

(e) Give a homeowner ten business days from your notice to them to correct any deficiencies in their loan modification application.

(f) Stop the foreclosure from proceeding further if you receive a complete loan modification application. See (h) and (i) of this subsection.

(g) If the borrower accepts a loan modification verbally, in writing, or by making the first trial payment, you must suspend the foreclosure proceeding until such time as the borrower may fail to perform the terms of the loan modification.

(h) Review and consider a complete loan modification application if received prior to thirty-seven days before a scheduled foreclosure sale. If you offer the borrower a loan modification, you must delay a pending foreclosure sale to provide the borrower with fourteen days in which to accept or deny the loan modification offer. If the borrower accepts a loan modification, you must suspend the foreclosure proceeding until such time as the borrower may fail to perform the terms of the loan modification.

(i) Perform an expedited review of any complete loan modification application submitted between thirty-seven and fifteen days before the scheduled foreclosure sale. If you offer the borrower a loan modification, you must delay a pending foreclosure sale to provide the borrower with fourteen days in which to accept or deny the loan modification offer. If the borrower accepts a loan modification, you must suspend the foreclosure proceeding until such time as the borrower may fail to perform the terms of the loan modification.

(3) As to borrower appeals of loan modification denials you must:

(a) Give the borrower thirty days from your written notice of denial to request an appeal unless the denial is due to:

(i) An ineligible mortgage;

(ii) An ineligible property;

(iii) The borrower did not accept the offer; or

(iv) The loan was previously modified.

(b) Give the borrower the opportunity to obtain a full appraisal for purposes of contesting appraisal data used in a denial based on NPV.

(d) Provide the borrower with a description of any other loss mitigation option available if you uphold the denial.

(4) When a loan modification is granted, you must provide the borrower with a copy of the fully executed loan modification agreement within thirty days of receipt of the signed agreement from the borrower. A loan modification granted orally must be reduced to a written document with a summary of all of the terms and must be provided to the borrower within thirty days of approval of the loan modification.

(5) If a loan payment forbearance is granted, you must provide the borrower with, at a minimum, a confirming letter of approval. The letter must contain the essential terms of the forbearance and must contain the name and contact information of specialist who is the borrower's primary or contact with the company.

(6) You must maintain adequate staffing levels and systems to comply with this section, including staffing and systems to track and maintain loan modification documents submitted by homeowners.

(7) You must make public all necessary information to inform homeowners about and allow homeowners to apply for your proprietary first and second lien modifications.

(8) You must make public all necessary information to inform homeowners about your short sale requirements.

(9) You must allow a homeowner to apply for and receive a short sale determination before the homeowner puts a house on the market.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-16-024, § 208-620-930, filed 7/24/18, effective 9/1/18.

Wash. Admin. Code § 208-620-935 Servicing residential mortgage loans—Foreclosure.

(1) Before you refer a loan to foreclosure, you must document in the loan file evidence to substantiate the borrower's default and your right to foreclose. The file must also contain loan ownership information.

(2) If a borrower's property goes into foreclosure and the foreclosure sale occurs, you must notify the borrower within three business days of sale of the completion of the sale. You must mail the notification to the borrower's last known address provided to you.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-16-024, § 208-620-935, filed 7/24/18, effective 9/1/18.

Wash. Admin. Code § 208-620-950 Servicing student education loans—General requirements.

(2) Communications. If the student education loan borrower did not provide authorization for electronic communications during the origination process, you must provide the borrower with a specific, separate document seeking the borrower's authorization to receive all communications electronically. If the borrower responds affirmatively (agreeing), you must retain the borrower's agreement to receive electronic communications.

(3) Payment processing and fees.

(a) You must assess any incurred fees to a borrower's account within forty-five days of the date on which the fee was incurred. You must clearly and conspicuously explain the fee in a statement mailed to the borrower at the borrower's last known address no more than thirty days after assessing the fee. If you provide monthly or more frequent statements that include this information, you are not required to provide the information in a notice in addition to the monthly or more frequent statement. You may also provide the information via email if the borrower has assented to receive electronic communications.

(b) You must accept and credit, or treat as credited, all amounts received within one business day of receipt when the borrower has made the payment to the address where instructed, provided that the borrower has provided sufficient information to credit the account. If you use the scheduled method of accounting, any regularly scheduled payment made prior to the scheduled due date must be credited no later than the due date. You must apply the payment as specified in the loan documents. If you are in compliance with an applicable federal program, you are deemed in compliance with this subsection.

(c) You must notify the borrower if a payment is received but not credited, or treated as credited. You must mail the notification to the borrower within ten business days by mail at the borrower's last known address. The notification must identify the reason the payment was not credited or treated as credited to the account, as well as any actions the borrower must take to make the student education loan current. If you provide monthly or more frequent statements that include this information, you are not required to provide the information in a notice in addition to the monthly or more frequent statement. You may also provide the information via email if the borrower has assented to receive electronic communications.

(4) You must provide, free of charge on your website, information or links to information regarding repayment and loan forgiveness options that may be available to borrowers, as well as the availability of a student loan advocate to provide assistance. The requirement to provide information on the availability of a student loan advocate may be satisfied by language referring the student education loan borrower to their state's relevant authority. This information or these links shall be prominently placed and provided via written correspondence or email with the borrower at least once per calendar year. Alternatively, you may provide a toll-free telephone number where a student education loan borrower may speak to a single point of contact about loan repayment and loan forgiveness options.

(5) You must review all borrowers against the United States Department of Defense database monthly and apply the borrower entitlements based on that matching. You must keep a written policy and procedure for this practice as part of your books and records. If you are in compliance with an applicable federal requirement, you are deemed in compliance with this subsection.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 19-21-157, § 208-620-950, filed 10/22/19, effective 11/24/19
WSR 18-24-013, § 208-620-950, filed 11/27/18, effective 1/1/19.

Wash. Admin. Code § 208-620-960 Servicing student education loans—Requests for information.

(1) You must make a reasonable attempt to comply with a borrower's request for information about the student education loan account and to respond to any dispute initiated by the borrower about the loan account. A reasonable attempt includes, but is not limited to:

(a) Maintaining written or electronic records of each written request for information involving the borrower's account until the student education loan is paid in full, sold, or otherwise satisfied;

(b) Providing a written statement to the borrower within fifteen business days of receipt of a written request from the borrower. The borrower's request must include the name and account number, if any, of the borrower, a statement that the account is or may be in error, and sufficient detail regarding the information sought by the borrower to permit the servicer to comply. If you are in compliance with an applicable federal requirement, you are deemed in compliance with this subsection.

(2) You must provide, at a minimum, the following information to a borrower's request described in this section:

(a) Whether the account is current or, if the account is not current, an explanation of why the account is not current and the date the account became past due;

(b) The current balance due on the student education loan, including the principal due, the amount of funds, if any, held in a suspense account, if any, and whether there are any shortages known to the servicer;

(c) The identity, address, and other relevant information about the current holder, owner, or assignee of the student education loan; and

(d) The telephone number and mailing address of the servicer's business unit where the borrower will reach an individual with the information and authority to answer questions and resolve disputes.

(3) You must promptly correct any errors and refund any fees assessed to the borrower resulting from an error you made.

(4) If the borrower applies for or attempts to certify progress toward a discharge or refund of amounts paid on their federal student education loans with the United States Department of Education, you must provide explanations to the borrower on any decision made with respect to their application.

(5) Unless you are complying with an applicable federal requirement, in addition to the statement described in subsection (2) of this section, a borrower may request more detailed information from a servicer, and the servicer must provide the information within fifteen business days of receipt of a written request from the borrower to the servicer at the address the servicer has provided to the borrower for such requests for information. The request must include the name and account number, if any, of the borrower, a statement that the account is or may be in error, and provide sufficient detail to the servicer regarding information sought by the borrower. If requested by the borrower, this statement must also include:

(a) A copy of the original note, or if unavailable, an affidavit of lost note, with all endorsements; and

(b) A statement that identifies and itemizes all fees and charges assessed under the loan servicing transaction and provides a full payment history identifying in a clear and conspicuous manner all of the debits, credits, application of and disbursement of all payments received from or for the benefit of the borrower, and other activity on the student education loan including suspense account activity, if any.

(c) The period of the account history shall cover at a minimum the two-year period prior to the date of the receipt of the request for information. If the servicer has not serviced the student education loan for the entire two-year time period, the servicer must provide the information going back to the date on which the servicer began servicing the loan and identify the previous servicer, if known. If the servicer claims that any delinquent or outstanding sums are owed on the loan prior to the two-year period or the period during which the servicer has serviced the student education loan, the servicer must provide an account history beginning with the month that the servicer claims any outstanding sums that are owed on the student education loan up to the date of the request for the information.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 19-21-157, § 208-620-960, filed 10/22/19, effective 11/24/19
WSR 18-24-013, § 208-620-960, filed 11/27/18, effective 1/1/19.

Wash. Admin. Code § 208-620-970 Servicing student education loans—Acquiring, transferring, or selling servicing activities.

If you are acquiring, transferring, or selling servicing activities of federal student education loans in compliance with the department of education contractual requirements, you are not subject to the following requirements of this section.

(1) When acquiring servicing rights from another servicer you must:

(a) Notify the student education loan borrowers in writing no more than sixty days and no less than forty-five days before the effective date of the transfer of the students' loans to provide them with:

(i) The effective date of the transfer of servicing, and the date at which you will begin to accept payments relating to the loan, if different;

(ii) The name, mailing address, and toll-free telephone number for your designated points of contact, as well as the designated points of contact for the transferring servicer, at which the borrower can obtain answers to inquiries;

(iii) A statement that the transfer of servicing does not affect any term or condition of the student education loan other than the entity servicing the loan;

(iv) Information about how to obtain a payment history from you or the transferring servicer, including a count of payments that qualify toward any forgiveness options, as applicable;

(v) A notification indicating whether an alternative repayment plan or loan consolidation application is pending, if available; and

(vi) Information about how to appropriately direct and submit a complaint to the United States Department of Education, the student loan advocate, student loan ombuds, and other relevant federal or state agencies that collect borrower complaints, in the event of a servicing error. This requirement may be satisfied by language referring the student education loan borrower to their state's relevant authority.

(b) Continue processing student education loan modification requests, including applications for income-driven repayment, loan forgiveness, or loan consolidation received by you or the transferring servicer during the transfer process, if applicable; and

(2) When transferring or selling the servicing of loans you must:

(i) If available, the effective date of the transfer of servicing, and the date at which you will no longer accept payments relating to the loan, if different;

(ii) The name, mailing address, and toll-free telephone number for your designated points of contact, as well as the designated points of contact for the receiving servicer, at which the borrower can obtain answers to inquiries; and

(iii) A statement that the transfer of servicing does not affect any term or condition of the student education loan other than the entity servicing the loan; and

(b) Inform the receiving servicer if a student education loan modification request is pending, if applicable.

History

Statutory Authority: RCW 43.320.040 and 31.04.165. WSR 18-24-013, § 208-620-970, filed 11/27/18, effective 1/1/19.

Chapter 208-630 Regulation of check cashers and sellers and small loans (payday lenders).

Wash. Admin. Code § 208-630-110 What definitions are required to understand these rules?

The definitions in RCW 31.45.010 and this section apply throughout this chapter unless the context clearly requires otherwise.

"ACH" means automated clearing house, an electronic network for financial transactions that processes credit and debit transactions.

"Act" means chapter 31.45 RCW.

"Advertise, advertising, and advertising material" means any form of sales or promotional materials used in connection with the business. Advertising material includes, but is not limited to, newspapers, magazines, leaflets, flyers, direct mail, indoor or outdoor signs or displays, point-of-sale literature or educational materials, other printed materials; radio, television, public address system, or other audio broadcasts; internet pages, social media, instant messages, or electronic bulletin boards.

"Affiliate" means any person who directly or indirectly through one or more intermediaries, controls, or is controlled by, or is in common control with another person.

"Agent" for purposes of RCW 31.45.079 means a person who engages in the business of making small loans by performing small loan agent services.

"Annual percentage rate" or "APR" means the cost of credit expressed as a yearly rate, determined in accordance with the federal Truth in Lending Act (15 U.S.C. Sec. 1601 et seq.), and Regulation Z (12 C.F.R. Part 1026 et seq.), as amended.

The Office of the Comptroller of the Currency (OCC) has developed an APR calculator (APRWIN) that licensees may download and use without charge. APRWIN is available on the OCC's website at http://www.occ.treas.gov/aprwin.htm.

"Board director" means a director of a corporation or a person occupying a similar status and performing a similar function with respect to an organization, whether incorporated or unincorporated.

"Check" means the same as defined in RCW 62A.3-104(f) and, for purposes of conducting the business of making small loans, includes other electronic forms of payment, including stored value cards, internet transfers, and automated clearing house transactions.

"Check casher" means an individual, partnership, unincorporated association, or corporation that, for compensation, engages, in whole or in part, in the business of cashing checks, drafts, money orders, or other commercial paper serving the same purpose.

"Check seller" means an individual, partnership, unincorporated association, or corporation that, for compensation, engages, in whole or in part, in the business of selling checks, drafts, money orders, or other commercial paper serving the same purpose.

"Close of business" for the purposes of RCW 31.45.86 and these regulations means the actual time a licensee closes for business at the location from which a small loan was originated or 11:59 p.m. Pacific Time, whichever is earlier.

"Default" means:

(a) The borrower's failure to repay a small loan in compliance with the terms contained in the small loan agreement or note; or

(b) Failure to pay any installment plan payment within ten days after the date upon which the installment was scheduled to be paid. See WAC 208-630-556 (12)(b).

"Department" means the department of financial institutions.

"Exempt entity" means a person described in RCW 31.45.020 that is engaged in the business of making small loans.

"Gross monthly income" means an individual's total personal income earned during a month prior to any taxes or deductions.

"Installment plan" is a contract between a licensee and borrower that provides that the loaned amount will be repaid in substantially equal installments scheduled on or after a borrower's pay dates and no less than fourteen days apart.

"Investigation" means an examination undertaken for the purpose of detecting violations of chapter 31.45 RCW or these rules or obtaining information lawfully required under chapter 31.45 RCW or these rules.

"License" means a license issued by the director to engage in the business of check cashing or check selling under the provision of chapter 31.45 RCW.

"Loaned amount" means the outstanding principal balance and any fees authorized under RCW 31.45.073 that have not been paid by the borrower.

"Monetary instrument" means a check, draft, money order or other commercial paper serving the same purpose.

"Paid" means that moment in time when the licensee deposits the borrower's check, accepts cash, or initiates an ACH withdrawal from the borrower's account for the full amount owed on a valid small loan. If the borrower's check is dishonored and returned unpaid by the borrower's bank, the loan is not paid. If an ACH authorization is denied, the loan is not paid.

"Payday advance lender" or "payday lender" means a licensee under this chapter who has obtained a small loan endorsement under RCW 31.45.073.

"Payday advance loan," "payday loan" or "deferred deposit loan" means the same as a small loan.

"Postdated check" means a check delivered prior to its date, generally payable at sight or on presentation on or after the day of its date. "Postdated check" does not include any promise or order made or submitted electronically by a borrower to a licensee.

"RCW" means the Revised Code of Washington.

"Small loan" or "loan" means a loan of up to the maximum amount and for a period of time up to the maximum term specified in RCW 31.45.073.

"Small loan agent services" include, but are not limited to:

(a) Marketing and advertising small loans;

(b) Collecting nonpublic personal information from consumers in anticipation of selling the information to potential licensed lenders or other entities providing small loan agent services;

(d) Providing required applicable state and federal disclosures in connection with small loans; and

(e) Collecting on small loans.

Small loan agent services do not include (a) services performed by any person holding a small loan endorsement or (b) collection of small loans by a person licensed under chapter 19.16 RCW or exempt from that chapter or otherwise authorized under Washington law to act as a collection agent.

"State" means the state of Washington.

"Unsafe or unsound financial practice" means any action, or lack of action, the likely consequences of which, if continued, would materially impair the net worth of a licensee or create an abnormal risk of loss to its customers.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.45.200. WSR 16-10-046, § 208-630-110, filed 4/29/16, effective 6/1/16
WSR 14-24-048, § 208-630-110, filed 11/25/14, effective 1/1/15
WSR 13-05-005, § 208-630-110, filed 2/6/13, effective 3/9/13. Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-110, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040. WSR 07-23-094, § 208-630-110, filed 11/20/07, effective 12/21/07. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-110, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-120 What does a business have to do to operate as a check casher and seller or to make small loans as a payday lender?

(1) In order to engage in the business of check cashing and selling, a business must apply for and obtain from the department a check cashing or selling license.

(2) In order to make payday loans (small loans), a business must first obtain a license as a check casher or seller and then obtain a small loan endorsement to that license.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-120, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-120, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-130 How does a business apply for a check casher's or seller's license or a small loan endorsement to a check casher's or seller's license?

Each applicant for a check casher license, or check seller license, or a small loan endorsement to a check casher's or seller's license must apply to the director by filing the following:

(1) An application in a form prescribed by the director including at least the following information:

(a) The legal name, residence, and business address of the applicant if the applicant is an individual or sole proprietorship, and in addition, if the applicant is a partnership, corporation, limited liability company, limited liability partnership, trust, company, or association, the name and address of every member, partner, officer, controlling person, and board director;

(b) The trade name or name under which the applicant will do business under the act;

The director or the director's designated representative may deny an application for a proposed license or trade name if the proposed license or trade name is similar to a currently existing licensee name, including trade names.

(c) The street and mailing address of the company headquarters and each location in which the applicant will engage in business under the act;

(d) The location at which the applicant's records will be kept; and

(e) Financial statements and any other pertinent information the director may require with respect to the applicant and its board directors, officers, trustees, members, or employees, including information regarding any civil litigation filed within the preceding ten years against the applicant or controlling person of the applicant;

(2) A surety bond and related power of attorney, or other security acceptable to the director in an amount equal to the penal sum of the required bond as set forth in this rule. In lieu of the bond, the applicant may demonstrate to the director net worth in excess of three times the amount of the penal sum of the required bond in accordance with RCW 31.45.030 (5)(b) and (e) and this rule;

(3) A current financial statement as of the most recent quarter end prepared in accordance with generally accepted accounting principles which includes a statement of assets and liabilities and a profit and loss statement;

(4) Information on the applicant's or any affiliate's current or previous small loan or related type business in this state or any other state, including, but not limited to, name, address, city, state, licensing authority, and whether any enforcement action is pending or has been taken against the applicant in any state;

(5) Upon request, a complete set of fingerprints and a recent photograph of each sole proprietor, owner, director, officer, partner, member, and controlling person; and

(6) An application fee.

Any information in the application regarding a personal residential address or telephone number, and any trade secret as defined in RCW 19.108.010 including any financial statement that is a trade secret is exempt from the public disclosure requirements of chapter 42.17 RCW.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.45.200. WSR 16-10-046, § 208-630-130, filed 4/29/16, effective 6/1/16. Statutory Authority: RCW 43.320.040. WSR 07-23-094, § 208-630-130, filed 11/20/07, effective 12/21/07. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-130, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-135 What must I do to be authorized to offer small loan agent services?

(1) Persons providing small loan agent services must license with the department. To license you must provide the following information:

(a) The legal name, residence, and business address if an individual or sole proprietorship, and in addition, if a partnership, corporation, limited liability company, limited liability partnership, trust, company, or association, the name and address of every member, partner, officer, controlling person, and board director.

(b) The trade or business name under which you will do business. Please note, your request may be denied if the proposed trade or business name is similar to a currently existing licensee name, including trade names.

(d) The location at which your records will be kept.

(e) Whether the applicant or other person subject to the act is, or has been, subject to a cease and desist order or an injunction issued pursuant to the act or rules or any state or federal law applicable to the business activity.

(f) Whether the applicant or other person subject to the act has been charged or found through an administrative, civil, or criminal proceeding to have violated the provisions of the act or rules, or any state or federal law applicable to the business activity.

(g) Whether the applicant or other person subject to the act has been convicted of, or pled guilty or nolo contendere, in a domestic, foreign, or military court to:

(i) A gross misdemeanor involving dishonesty or financial misconduct within the prior seven years;

(ii) A felony within the prior seven years; or

(iii) A felony that involved an act of fraud, dishonesty, breach of trust, or money laundering at any time preceding the date of application.

(h) Any other pertinent information the director may require.

(2) You must also provide to the department a declaration that the company will not sell consumers' nonpublic personal information to unlicensed entities making loans or to unlicensed small loan agents.

(3) The small loan agent license expires December 31st of each year. You must pay the renewal fee prescribed by the director to renew the license.

(4) If any information about the company changes from that provided to the department at the time of licensure, you must notify the director in writing of the change within a reasonable amount of time from the change.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.45.200. WSR 16-10-046, § 208-630-135, filed 4/29/16, effective 6/1/16
WSR 14-24-048, § 208-630-135, filed 11/25/14, effective 1/1/15.

Wash. Admin. Code § 208-630-136 If I am licensed to provide small loan agent services, what activities may I engage in?

The small loan agent services license is a limited license. You may only provide the following services:

(1) Marketing and advertising small loans;

(2) Collecting nonpublic personal information, including social security, bank account, or credit card numbers, from consumers in anticipation of selling the information to potential licensed lenders or other entities providing small loan agent services;

(3) Assisting consumers in completing small loan documentation;

(4) Providing required disclosures;

(5) Collecting on small loans if licensed under chapter 19.16 RCW or exempt from that chapter or otherwise authorized under Washington law to act as a collection agent.

History

Statutory Authority: Chapter 43.320 RCW and RCW 31.45.200. WSR 14-24-048, § 208-630-136, filed 11/25/14, effective 1/1/15.

Wash. Admin. Code § 208-630-137 What disclosures must I provide when conducting business pursuant to a small loan agent services license?

You must display the following information on your internet home (landing) page in a clear and conspicuous manner:

(1) That you are not a lender and will not be the entity lending money to the consumer.

(2) The department's name and telephone number for consumers to contact with complaints.

The information required in subsections (1) and (2) of this section must be displayed in a manner substantially similar to the following:

"Your use of this website is not an offer or solicitation to lend you money. The owner of this website is not a lender and does not make loans or credit decisions. The owner of this website may sell all or part of your information to lenders and other persons and you may be contacted by lenders and other persons. Contact the Department of Financial Institutions ( 1-877-746-4334) with complaints."

(3) Your privacy policy that describes all actions you may take with consumers' nonpublic personal information.

History

Statutory Authority: Chapter 43.320 RCW and RCW 31.45.200. WSR 14-24-048, § 208-630-137, filed 11/25/14, effective 1/1/15.

Wash. Admin. Code § 208-630-138 What laws govern my conduct as a small loan agent licensee?

Small loan agent licensees are subject to chapter 31.45 RCW and chapter 208-630 WAC, including being subject to the following prohibitions:

(1) Selling nonpublic personal information, including Social Security, bank account, or credit card numbers, to potential lenders or other entities providing small loan agent services without first verifying that the lender or other entity is licensed under the act, or is exempt from licensing.

(2) Selling nonpublic personal information, including Social Security, bank account, or credit card numbers, to persons not required to license under the act without first giving the consumer an opportunity to prohibit the sale of their information.

(3) Failing to comply with the applicable provisions of the Gramm-Leach-Bliley Act, 15 U.S.C. 6801-6809 and 15 U.S.C. 6821-6827.

History

Statutory Authority: Chapter 43.320 RCW and RCW 31.45.200. WSR 14-24-048, § 208-630-138, filed 11/25/14, effective 1/1/15.

Wash. Admin. Code § 208-630-140 Once a business finishes the application process, when does the director issue a license?

If the director determines that all licensing criteria of chapter 31.45 RCW have been met and the appropriate fees paid, the director shall issue a nontransferable license for the applicant to engage in the business of cashing and/or selling checks or a small loan endorsement to a license.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-140, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-150 When does the license expire?

The license and small loan endorsement will remain continuously in effect until surrendered, suspended, or revoked.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-150, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-155 May I conduct my business from more than one location?

Yes. You may establish one or more branch offices under your license.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.45.200. WSR 16-10-046, § 208-630-155, filed 4/29/16, effective 6/1/16.

Wash. Admin. Code § 208-630-160 Does each location where a licensee makes small loans have to have a small loan endorsement?

The law requires a small loan endorsement for each location where a licensee makes small loans. These locations include, in addition to traditional staffed locations, unstaffed locations at which electronic or telephonic terminals such as facsimile machines, telephones, computer terminals or similar devices are available to the public to provide access to small loans, whether or not the locations are located within the premises of an exempt entity.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-160, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-170 Where may a licensee make small loans?

A small loan endorsement may authorize a licensee to make small loans at a location other than the licensed location where it cashes and sells checks.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-170, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-180 Is there a bond requirement for my license?

If you sell checks, drafts, or money orders or if you have a small loan endorsement under chapter 31.45 RCW you must obtain and maintain a bond. The bond must run to the benefit of the state and any person or persons who suffer loss as a result of your actions. You must file the bond with the director at the beginning of each calendar year. The bond must be issued by a surety that meets the requirements of chapter 48.28 RCW. The bond form must be acceptable to the director. You may obtain a copy of an acceptable form from the department.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-180, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-180, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-190 What type of bond is necessary and what are the conditions?

The bond must be continuous and conditioned upon your compliance with chapter 31.45 RCW and all rules in this chapter. The bond must also be conditioned upon you paying to persons who purchase monetary instruments the face value of any monetary instrument dishonored by the drawee financial institution due to insufficient funds or by reason of the account having been closed. The surety is only liable for the face value of the dishonored monetary instrument, and not for any interest or consequential damages. If you have a small loan endorsement, the bond must run to the benefit of the state and any person or persons who suffer loss due to your violation of chapter 31.45 RCW or this chapter.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-190, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-190, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-200 How is a bond canceled?

The bond may be canceled by the surety by giving written notice to the director and licensee of its intent to cancel the bond. The cancellation is effective thirty days after the notice is received by the director.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-200, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-210 What is the liability of the surety under the bond?

Whether or not the bond is renewed, continued, reinstated, reissued, or otherwise extended, replaced, or modified, including increases or decreases in the penal sum, it shall be considered one continuous obligation, and the surety shall not be liable in an aggregate or cumulative amount exceeding the penal sum set forth on the face of the bond. In no event shall the penal sum, or any portion thereof, at two or more points in time be added together in determining the surety's liability. The surety shall not be liable for any liability of the licensee for tortious acts, whether or not such liability is imposed by statute or common law, or is imposed by contract. The bond shall not be a substitute or supplement to any liability or other insurance required by law or by contract. If the surety desires to make payment without awaiting court action against it, the penal sum of the bond shall be reduced to the extent of any payment made by the surety in good faith under the bond.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-210, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-220 Who may make claims against the bond?

Any person who is a purchaser of a monetary instrument from the licensee having a claim against the licensee for the dishonor of any monetary instrument by the drawee financial institution due to insufficient funds or by reason of the account having been closed, or any person who obtained a small loan from the licensee and was damaged by the licensee's violation of chapter 31.45 RCW or this chapter, may bring suit upon such bond or deposit in the superior court of the county in which the monetary instrument was purchased, or in the superior court of a county in which the licensee maintains a place of business. Jurisdiction shall be exclusively in the superior court. Any action must be brought not later than one year after the dishonor of the monetary instrument on which the claim is based. If the claims against a bond or deposit exceed the amount of the bond or deposit, each claimant shall only be entitled to a pro rata amount, based on the amount of the claim as it is valid against the bond, or deposit, without regard to the date of filing of any claim or action.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-220, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-230 What must I do if there are claims against the bond?

You must notify the department of any claim against the bond within ten days of receiving notice of a claim.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-230, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-230, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-240 What is the amount of bond needed for licensees engaging only in check selling?

The penal sum of the surety bond for a person with a check seller license shall not be less than the amount established in the following table:

| Highest Monthly Liability* | Required Bond | Plus Percentage of Excess | | --- | --- | --- | | Up to $50,000 | Highest Monthly Liability or $10,000, whichever is greater | $0 | | $50,001 to $100,000 | $50,000 | .5 above $50,000 | | $100,001 and above | $75,000 | .25 above $100,000 |

| * | The monthly liability is the total sum of checks for a given month. The "highest monthly liability" shall be determined by multiplying the highest monthly liability of checks from the preceding calendar year by seventy-five percent. | | --- | --- |

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-240, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-250 What is the amount of bond needed if a licensee has a small loan endorsement?

The required penal sum of the bond for a small loan endorsement must be ten thousand dollars plus an additional one thousand dollars for each endorsed branch office beyond one branch.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-250, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-260 Do I have any alternative to maintaining a surety bond?

With the approval of the director, you may substitute one of the following alternatives for the surety bond required under this chapter. Any alternative to the surety bond must secure the same obligations the surety bond would. The amount of a bond alternative substituted under subsection (1) or (2) of this section must be equal to or greater than the amount of the required surety bond.

(1) Time deposit. You may purchase and maintain a certificate of deposit assigned in favor of the director. The certificate of deposit must be issued by a financial institution in the state and whose deposits or shares are insured by an agency of the government of the United States. The deposit must be in an amount equal to or greater than the required surety bond. You are entitled to receive all interest and dividends on the certificate of deposit.

(2) Demonstration of sufficient net worth. You must demonstrate net worth of at least three times the amount of the required bond. You must notify the director within ten business days of any date upon which your net worth decreases below the required amount. If you fail to maintain the required level of net worth and continue to operate under a small loan endorsement, you must immediately obtain a surety bond and maintain it for five years after the date of noncompliance. During this five-year period, the director will not accept a demonstration of net worth in lieu of a surety bond.

(3) Reports required. If you maintain net worth in lieu of a surety bond, you must submit to the director an annual audited financial statement and a supplementary year-to-date financial statement within forty-five days after the close of each quarter, both prepared in accordance with generally accepted accounting principles. The financial statements must include at a minimum a statement of assets and liabilities and a profit and loss statement. The director may continue to require other documents, agreements or information necessary to properly evaluate and ensure that you comply with this section.

(4) Bad debts and judgments. If you maintain net worth in lieu of a surety bond you must not consider bad debts and certain judgments as assets. The director may approve exceptions in writing. You must charge off your books any debt upon which any payment is six months or more past due. You may not count as an asset any unpaid judgment more than two years old. Time consumed by an appeal from a judgment is not counted in the two-year limit.

(5) Noncompliance. If you do not comply with this section you must obtain and file with the director a surety bond in the required amount in WAC 208-630-240 and 208-630-250 by the date specified by the director.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-260, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-260, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-270 When and under what circumstances may the director have access to the criminal history of an applicant or licensee, or controlling person?

(1) The director may review any criminal history record information maintained by any federal, state, or local law enforcement agency relating to:

(a) An applicant for a license or small loan endorsement under chapter 31.45 RCW; or

(b) A controlling person of an applicant for a license under chapter 31.45 RCW.

(2) The director may deny, suspend or revoke a license if the applicant, licensee, or controlling person of the applicant or licensee fails to provide a complete set of fingerprints and a recent photograph on request.

(3) All criminal history record information received by the director is confidential information and is for exclusive use of the director and the division of consumer services. Except on court order or as provided by subsection (4) of this section, or otherwise provided by law, the information may not be released or otherwise disclosed to any other person or agency.

(4) The director may not provide a person being investigated under this section with a copy of the person's criminal history record obtained pursuant to subsection (1) of this section. This subsection does not prevent the director from disclosing to the person the dates and places of arrests, offenses, and dispositions contained in the criminal history records.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-270, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-280 Does a licensee have to pay a fee for a license application?

At the time an applicant files for a license, the applicant must pay to the director a deposit fee for investigating and processing the application.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-280, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-290 How much are the fees for various license applications, and when does a licensee pay them?

(1) The director shall collect a fee of sixty-nine dollars per employee hour expended for services, plus actual expenses, for review, investigation and processing of:

(a) New license applications;

(b) Small loan endorsement applications;

(d) Change of control;

(e) Relocation of office;

(f) Voluntary or involuntary liquidation of licensee.

(2) The director may require a lump sum payment in advance to cover the anticipated cost of review and investigation of the activities described in this section.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-290, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-300 What happens if a licensee pays a lump sum payment in advance, and there is a surplus or deficiency in the application deposit?

If the deposit required exceeds the actual amount derived in WAC 208-630-290(1), the amount in excess shall be refunded.

If the deposit fee does not cover the costs of investigation and processing, the applicant will pay for any additional cost, which will be itemized and billed by the director.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-300, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-310 Is the licensee's deposit fee refundable?

The deposit fee is not refundable if the application is denied or withdrawn, or if the license is issued. The director will apply the deposit fee to the actual cost of investigating and processing the application.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-310, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-320 What examination authority does the director have?

The director determines the frequency of examinations for the purpose of determining compliance with chapter 31.45 RCW and these rules.

The director or designee may at any time examine the records and documents used in the business of any licensee or licensee's agent wherever located. This includes licensees whose business is conducted entirely on the internet.

The director or designee may examine the records and documents of any person the director believes is engaging in unlicensed business governed by chapter 31.45 RCW wherever located.

History

Statutory Authority: RCW 43.320.040. WSR 07-23-094, § 208-630-320, filed 11/20/07, effective 12/21/07. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-320, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-330 May the director accept other reports in lieu of an examination?

The director or designees may accept reports prepared by independent certified professionals or prepared by another state or the federal government in lieu of, in whole or in part, an examination performed by the director.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-330, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-340 What should a licensee expect the director to review during an examination?

In conducting examinations the director or designee may:

(1) Obtain access, during reasonable business hours, to the offices and places of business, books, accounts, papers, files, records, computers, safes and vaults of any person in possession of information relevant to the examination;

(2) Interview any person the director or designee believes has information relative to the examination, including, but not limited to, any party to the transaction;

(3) Obtain statements in writing by any person, under oath or otherwise, as to all facts and circumstances concerning the matters under examination;

(4) Require the production of copies of any items in subsection (1) of this section;

(5) Require assistance and cooperation, from any licensee or employee or agent of any licensee under examination with respect to the conduct and subject matter of the examination;

(6) Conduct meetings and exit review with owners, managers or employees of the licensee being examined;

(7) Require a response from the subject of the examination.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-340, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-350 Who pays for the costs of an examination?

Every licensee must pay to the director the actual cost of examining and supervising each licensed place of business at the examination hourly rate of sixty-nine dollars per person per hour expended, plus actual expenses, which for out-of-state exams includes, without limitation, travel, lodging and per diem expense.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-350, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-360 When may the director conduct an investigation?

The director or designee may conduct investigations at any time, in or outside of the state, to determine whether any person has violated or is about to violate chapter 31.45 RCW, these rules, or any order issued under these laws and rules. This includes a licensee or a business that may be conducting transactions requiring a license. For these purposes the director or designee may conduct inquiries, interviews and examinations of any person relevant to the investigation.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-360, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-360, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-370 What powers does the director have during an investigation?

The director or designee may investigate the business of a licensee, or other business or personal financial records of any person subject to investigation. In conducting investigations, the director or designee may:

(1) Have access to any location where records of the subject of the investigation are located, including offices, places of business, commercial storage facilities, computers, safes and vaults for the purposes of obtaining, reviewing or copying books, accounts, papers, files, or records, including electronic records, or records in any format;

(2) Administer oaths and affirmations;

(3) Subpoena witnesses and compel their attendance at a time and place determined by the director or designee, and compel their testimony regarding any matter related to an investigation or examination under chapter 31.45 RCW or these rules, including:

(a) Testimony regarding the existence, description, nature, custody, condition and location of any relevant evidence;

(b) The identity and location of persons having knowledge of any matter related to the investigation; and

(4) Subpoena the production of any books, records in any format, documents or other tangible things, or physical or documentary evidence or matter;

(5) Conduct oral examination, under oath or otherwise, publicly or privately, of any controlling person, employee, agent or independent contractor of a licensee;

(6) Conduct oral examination, under oath or otherwise, publicly or privately, of any person whose testimony is deemed relevant to the investigation;

(7) Copy, or request to be copied, any items described in subsection (1) of this section, or if the director or designee determines that:

(a) There is danger that original records may be destroyed, altered, or removed denying the director access; or

(b) Original documents are necessary for the preparation of criminal referral or trial, the director may take possession of originals of any items described in subsection (1) of this section, regardless of the source of such items. Originals and/or copies taken by the director may be held, returned, or forwarded to other regulatory or law enforcement officials as determined necessary by the director or designee.

(8) Conduct analysis and review of any items described in subsection (1) of this section;

(9) Require assistance, as necessary, from any employee or person subject to investigation under this section with respect to the conduct and subject matter of the investigation;

(10) Conduct meetings and exit reviews with owners, managers, officers, or employees of any person subject to investigation or examination under this chapter;

(11) Conduct meetings and share information with other regulatory or law enforcement agencies; and

(12) Prepare and deliver, as deemed necessary, a report of investigation requiring a response from the recipient.

The director may investigate the business and records of any person who the director has reason to believe is engaging in business which requires a license under chapter 31.45 RCW.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-370, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-380 What are the fees for an investigation?

Unless the person investigated is not required to hold a license, the person must pay the cost of the investigation at the hourly rate of sixty-nine dollars per person per hour expended, plus actual expenses, which for out-of-state investigations includes, without limitation, travel, lodging and per diem expense.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-380, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-390 May the director hire other specialists to assist with examinations and investigations, and who will pay for them?

(1) The director may retain attorneys, accountants, or other professionals and specialists as examiners, auditors, or investigators, to conduct, or assist in the conduct of examinations, or investigations. Fees for services provided to the director by such professionals and specialists under this paragraph will be billed at such rates and in the manner described in WAC 208-630-350 and 208-630-380.

(2) The director may order the retention of such professionals and specialists as auditors, or investigators to conduct, or assist in the conduct of audits or investigations. Unless the director determines that the person investigated is not required to hold a license or otherwise should not bear the cost, the actual cost of these services will be borne by the person who is the subject of the audit, or investigation.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-390, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-400 Once licensed, what fees must a licensee pay to keep a license current?

(1) The director will charge each licensee an annual assessment at the rate set forth in subsection (2) of this section. Assessments for a calendar year will be computed on total volume of transactions as of December 31 of the previous calendar year.

(2) The annual assessment rate is:

(a) For check cashers:

(i) If the volume of checks cashed is one million dollars or less, there is no annual assessment;

(ii) If the volume of checks cashed is over one million dollars, the annual assessment is five hundred thirteen dollars and ninety-five cents per licensed location.

(b) For check sellers:

(i) If the volume of checks sold is one million dollars or less, there is no annual assessment;

(ii) If the volume of checks sold is over one million dollars, the annual assessment is five hundred thirteen dollars and ninety-five cents per licensed location.

(i) If the volume of small loans made is one million dollars or less, there is no annual assessment;

(ii) If the volume of small loans made is over one million dollars, the annual assessment is five hundred thirteen dollars and ninety-five cents per licensed location.

(3) For purposes of this section, "volume" includes all transactions made under this chapter and chapter 31.45 RCW by a Washington licensed check casher or check seller at all licensed locations.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-400, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-420 How can a license be reinstated after it expires?

The director may reinstate the license if, within twenty days after the effective date of expiration, the licensee:

(1) Pays both the annual assessment fee and the late fee; and

(2) Attests under penalty of perjury that it did not engage in conduct requiring a license under this chapter during the period its license was expired. The director may confirm the licensee's attestation by an investigation.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-420, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-450 When may the director waive fees?

The director may waive any or all of the fees and assessments imposed, in whole or in part, when he or she determines that both of the following factors are present:

(1) The consumer services program fund exceeds the projected acceptable minimum fund balance level approved by the office of financial management; and

(2) That such course of action would be fiscally prudent.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-450, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-461 What is the maximum amount that all licensees may lend to a borrower?

The total outstanding principal of all small loans made by all licensees to a single borrower may not exceed seven hundred dollars or thirty percent of the borrower's gross monthly income, whichever is lower.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-461, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-462 What documentation is acceptable as proof of the borrower's gross monthly income?

(1) A record of the borrower's pay stub or payroll receipt;

(2) A record of the borrower's receipt documenting payment of government benefits; or

(3) Other documentation as approved by the director, including, but not limited to, records of bank statements that show regular direct deposits from an identified source and verified to be in favor of the borrower, check cashing history, or an employer's verbal confirmation of the borrower's employment status and current gross income;

(4) You must obtain independent verification of a borrower's gross monthly income every one hundred eighty days;

(5) On loans made without independent verification of the borrower's gross monthly income, you must obtain from the borrower a written declaration of change or no change in their gross monthly income since the last independent verification.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-462, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-463 What is the maximum number of small loans that may be made to a single borrower in any twelve-month period?

The maximum number of loans that all licensees may make to a single borrower in any twelve-month period is eight loans.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-463, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-464 What documentation is acceptable as proof of the borrower's identity?

(1) For small loans made in person you must use one of the following forms of identification which must contain a photograph of the borrower:

(a) Driver's license issued in the United States, Canada, or Mexico;

(b) Any state's state identification card;

(d) Tribal identification;

(e) Passport;

(f) Military identification; or

(g) Other forms or methods of verifying identification, as approved by the director, that provide a reliable means of verifying the borrower's identity.

(2) For loans made over the internet you must use a method of verifying identification, as approved by the director, that provides a reliable means of verifying the borrower's identity.

(3) You must keep a record of the identification information you accepted or a record of the results of the method of verifying identification you used as proof of the borrower's identity in the loan file.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-464, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-466 What fees can I charge on a small loan?

(1) You may charge interest or fees for small loans not to exceed in the aggregate fifteen percent of the first five hundred dollars of principal.

(2) If the principal exceeds five hundred dollars, you may charge interest or fees not to exceed in the aggregate ten percent of the portion of the principal in excess of five hundred dollars.

(3) If you make more than one loan to a single borrower, and the aggregated principal of all loans made to that borrower exceeds five hundred dollars at any one time, you may charge interest or fees not to exceed in the aggregate ten percent on the portion of the aggregated principal of all loans at any one time that is in excess of five hundred dollars.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-466, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-470 What types of information must a licensee include on a borrower's application for a small loan?

The licensee must require and maintain an application for each borrower in each small loan transaction. Each application must contain the borrower's full name, Social Security number or other unique identifier acceptable to the director, current address, loan origination date, and whether the applicant is a military borrower at any time prior to the termination date of the loan. As used in this section "other unique identifier" means a state identification card, a passport, a document issued by the U.S. Immigration and Customs Enforcement that provides identification of the borrower, a matricula consular, a driver's license, or other forms as approved by the director.

Licensees may rely upon an applicant representation regarding the applicant's military status, and are not required to conduct an independent investigation regarding military status.

History

Statutory Authority: RCW 43.320.040. WSR 07-23-094, § 208-630-470, filed 11/20/07, effective 12/21/07. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-470, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-480 How must a licensee maintain customer small loan applications?

The licensee may maintain a single master application in paper or electronic form that the licensee updates each time a customer takes out a new loan.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-480, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-490 What information must the note or small loan agreement contain?

Each small loan made under a small loan endorsement pursuant to chapter 31.45 RCW must be evidenced by a written note or loan agreement which must contain at least the following:

(1) The origination date of the loan;

(2) The principal of the loan;

(3) The manner in which the loan is to be repaid, including a statement of whether any check held in connection with a small loan may be redeemed in cash and if so, a statement of the date and time after which the licensee may choose not to permit redemption;

(4) The termination date of the loan;

(5) The dollar amount of fees and the method of calculating fees;

(6) The annual percentage rate as defined in the federal Truth in Lending Act; and

(7) The signature or electronic signature of the borrower.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-490, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-500 When must a licensee provide a note or small loan agreement to the borrower?

A licensee must provide a copy of the note or loan agreement (or if in electronic form, make available) to the borrower at the time the borrower executes the note or loan agreement.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-500, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-501 How must I determine the due date on the loan?

(1) The earliest due date for repayment is on or after the borrower's next pay date unless the pay date is within seven days of the date of the small loan. If the pay date falls within the seven days, you must set the repayment date on or after the borrower's second pay date after the date of the small loan. With the small loan origination date being day zero, count seven days out to determine the first available due date. A borrower with pay dates on the 5th and 20th of each month has a small loan with a loan origination date of February 1st. February 1st is day zero. February 8th is day seven. The borrower's pay date of February 5th is "within" seven days from loan's origination date. So the first due date will have to be on or after the borrower's next occurring pay date, February 20th.

(2) A loan's due date must be forty-five days or fewer from the origination date on the loan unless the term of the loan is extended by written agreement between you and the borrower at no additional cost to the borrower.

(3) If a small loan's due date falls on a date your business is not open, you must automatically extend the due date to your next business day.

(4) For purposes of this section, "pay date" means the borrower's scheduled pay date or the date the borrower's account is credited with any direct deposit or other electronic transfer of funds into their bank account, whichever is later.

(5) The borrower can pay off the loan at any time before the due date at no additional charge or fee.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.45.200. WSR 16-10-046, § 208-630-501, filed 4/29/16, effective 6/1/16. Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-501, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-505 What process must I follow when a borrower pays off a small loan, or makes a payment toward an installment plan, with cash?

You must prepare a receipt with information that includes, but is not limited to, the date of the payment, the borrower's name, the amount of cash received, an indication that the payment was made in cash, an indication that the payment was made on a loan or towards an installment plan, and an authorized signature, stamp, or other authenticating mark confirming you received the payment.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-505, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040. WSR 07-23-094, § 208-630-505, filed 11/20/07, effective 12/21/07.

Wash. Admin. Code § 208-630-506 What are my obligations if the borrower notifies me that he or she will be or is unable to pay the small loan on time?

You must inform the borrower that he or she has a right to convert the small loan to an installment plan. See WAC 208-630-520.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-506, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-510 When does a borrower have a right to enter into an installment plan?

(1) The borrower has the right to convert a small loan into an installment plan upon request made on or before the small loan's due date. If the request is made on the small loan's due date, it must be made before the close of business, or at another time on the due date as agreed to in the written small loan agreement, but in no event can the agreed upon time be earlier than three o'clock p.m. on the due date.

(2) If you extend a small loan's due date, the borrower's right to request an installment plan on that loan follows the extended date.

(3) If you extend a small loan's due date, you must update the database with that new date as soon as practicable.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-510, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-510, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-520 If a borrower and licensee enter into an installment plan, what are the terms of the installment plan?

An installment plan under RCW 31.45.084 must contain the following terms:

(1) The plan must be in writing;

(2) If the small loan is four hundred dollars or less the term must be for a period of at least ninety days;

(3) If the small loan is over four hundred dollars the term must be for a period of at least one hundred eighty days;

(4)(a) Installment payments must be both substantially equal in payment amount and substantially equally distributed over the installment plan payment period.

(b) An installment plan for ninety to one hundred eighty days is in compliance if there is at least one payment in each month in the period and payments are substantially equally distributed throughout the installment plan period.

(c) The borrower and licensee may mutually agree to fewer payments as long as they are substantially equal in amount and substantially equally distributed over the installment plan payment period.

(5) The borrower may pay off the total amount due at any time without additional penalty, fee, or charge for prepayment; and

(6) You may enter into a written installment plan with a borrower on terms other than these as long as the terms are not less favorable to the borrower and there is no charge to the borrower.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.45.200. WSR 16-10-046, § 208-630-520, filed 4/29/16, effective 6/1/16. Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-520, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-520, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-530 If a borrower and licensee enter into an installment plan, how must the payments be structured?

All installment plans under RCW 31.45.084 must:

(1) Be in writing and acknowledged by both the borrower and licensee; and

(2) Provide for at least three payments; and

(3) Provide for an installment plan length of not less than ninety days for a loan amount of up to and including four hundred dollars; or

(4) Provide for an installment plan length of not less than one hundred eighty days for a loan amount over four hundred dollars; and

(5) Be equal to the total amount of the installment plan balance divided by the number of payments subject to reasonable rounding.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-530, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-530, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-531 May I charge any fees if a borrower decides to convert their loan to an installment plan?

No. You may not charge any fee or interest to the borrower for converting the small loan to an installment plan as provided under RCW 31.45.084.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-531, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-532 May I make a small loan to a borrower who is in default on another small loan?

No. You are prohibited from making a small loan to a borrower who is in default on another small loan. This prohibition expires if the small loan is paid in full or two years have passed from the origination date of the small loan, whichever occurs first.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.45.200. WSR 16-10-046, § 208-630-532, filed 4/29/16, effective 6/1/16. Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-532, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-533 May I make a small loan to a borrower who is in an installment plan?

No. You are prohibited from making a small loan to a borrower who is making payments as part of an installment plan with any licensee until after that loan is paid in full or two years have passed from the initiation date of the installment plan, whichever occurs first.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-533, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-5401 What duties and restrictions must a licensee comply with when making loans to military borrowers?

(1) For purposes of this section, "military borrower" means any active duty member of the armed forces of the United States, or any member of the National Guard or the reserves of the armed forces of the United States who has been called to active duty.

(2) A licensee must:

(a) Comply with the restrictions on loans to military borrowers and their dependents as required by Section 670 of the John Warner National Defense Authorization Act for Fiscal Year 2007 and 32 C.F.R. Part 232, as amended.

(b) Honor the terms of any repayment agreement, including any repayment agreement negotiated through military counselors or third party credit counselors.

(c) Defer all collection activity against a military borrower who has been deployed to a combat or combat support posting, for the duration of the posting.

(3) A licensee must not:

(a) Garnish any wages or salary paid to a military borrower for service in the armed forces when collecting any delinquent small loan.

(b) Contact a military borrower's chain of command in an effort to collect a delinquent small loan.

(c) Make a loan to a person known to the licensee to be a military borrower from a specific location when the military borrower's commander has notified the licensee in writing that the specific location is designated off-limits to military personnel under their command.

History

Statutory Authority: RCW 43.320.040. WSR 07-23-094, § 208-630-5401, filed 11/20/07, effective 12/21/07.

Wash. Admin. Code § 208-630-542 What fees may I charge or collect when a borrower defaults on a small loan?

If the small loan is not in an installment plan, you may charge or collect a fee equal to or less than twenty-five dollars for a check returned unpaid by the bank drawn upon. Only one fee may be collected with respect to a particular check even if it has been redeposited and returned more than once. See WAC 208-630-549 for allowable default fees charged on small loans in an installment plan. On any one loan you can only charge the borrower twenty-five dollars. The fee will either be in the form of a returned check fee or an installment plan default fee, or some combination thereof; but in no event can you charge the borrower more than twenty-five dollars over the life of one loan.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-542, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-543 What are the specifications required of the communication log in RCW 31.45.082(4)?

The communication log must contain:

(1) The date, time, and brief description of all telephone communications initiated by the licensee for collection purposes; and

(2) The date, time, and brief description of all written communications initiated by the licensee for collection purposes.

Returning a communication from a borrower is not initiating a communication with the borrower; however, the response must not violate any of the provisions of RCW 31.45.082.

The communication log may be in hard copy or electronic form, and must indicate the borrower's name.

The log must be maintained in a manner that will allow the examiner to review all collection communications covered under RCW 31.45.082 made during a period of time.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-543, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-544 May I allow a borrower to refinance a small loan with another small loan?

No. You may not allow a borrower to use a new small loan to pay off an existing small loan by the same lender or an affiliate of the lender. Licensees may not apply the proceeds from any small loan to any other loan from the same lender or affiliate of the lender.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-544, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-545 How do I use a trade name when conducting business?

(1) You may add a trade or "DBA" name to your license if you first apply to the department, in a form prescribed by the department, and receive department approval. When the department has approved the trade name, you must conduct business under that trade name in at least one of the two following ways:

(a) Use your license name together with the trade name; or

(b) Use your license number together with the trade name.

(2) The director may deny an application for a proposed DBA name if the proposed DBA name is similar to a currently existing licensee name.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.45.200. WSR 16-10-046, § 208-630-545, filed 4/29/16, effective 6/1/16. Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-545, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-546 What is the limit on the number of checks I may hold from one borrower?

You may not hold more than one check per small loan unless the loan is in an installment plan.

(1) If you have made multiple loans to a single borrower, you may not hold checks that total more than the lower of:

(a) Seven hundred dollars plus the allowable fees; or

(b) Thirty percent of the borrower's gross monthly income plus allowable fees.

(2) For purposes of this section, to "hold a check" does not include a check that has been deposited in your bank and subsequently returned unpaid by the borrower's bank.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-546, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-547 May I continue to hold the borrower's original check or ACH authorization once the borrower has converted the loan to an installment plan?

(1) No. At the initiation of an installment plan, you must either return or, at the borrower's request, destroy any postdated check securing the original small loan.

(2) The initiation of an installment plan voids your authorization to use the borrower's original ACH authorization. You may accept another ACH authorization or authorizations consistent with the payment terms of the installment plan.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-547, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-548 May I hold postdated checks for the installment plan payments?

Yes. You may take postdated checks at the time the installment plan is originated. The checks may not be written for a value more than the amount of the borrower's installment plan payments. If any of the checks are later dishonored, you may not charge the borrower any fee for the dishonored check or checks. Exception, see WAC 208-630-549.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-548, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-549 May I charge the borrower additional fees if the borrower defaults on an installment plan?

Yes. You may charge the borrower a one time default fee of twenty-five dollars. A borrower defaults on an installment plan when the borrower fails to pay any installment plan payment within ten days after the date upon which the installment was scheduled to be paid. On any one loan you can only charge the borrower twenty-five dollars. The fee will either be in the form of a returned check fee or an installment plan default fee, or some combination thereof; but in no event can you charge the borrower more than twenty-five dollars over the life of one loan.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-549, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-551 May I charge a fee to cash monetary instruments I issue as proceeds of a small loan?

No. You may not charge a fee to cash a monetary instrument you or your affiliate issue as proceeds of a small loan you or an affiliate make under chapter 31.45 RCW.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-551, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-555 What is the purpose of the database?

The purpose of this database system is to:

(1) Prevent the practice of refinancing a small loan with another small loan;

(2) Prevent multiple licensees from making simultaneous small loans to an individual borrower so that the loans' total principal balance exceeds the lesser of seven hundred dollars or thirty percent of the borrower's gross monthly income;

(3) Prevent licensees from making more than eight loans to any one borrower in any twelve-month period;

(4) Prevent a licensee from making a loan to a borrower who already has an outstanding small loan principal balance of the lesser of seven hundred dollars or thirty percent of their gross monthly income;

(5) Prevent licensees from making a loan to a borrower who is in default on a small loan or is in an installment plan; and

(6) Ensure that licensees set the small loan due date no earlier than the borrower's next pay date that is more than seven days from the origination date.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.45.200. WSR 16-10-046, § 208-630-555, filed 4/29/16, effective 6/1/16. Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-555, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-556 How do I use the database system for small loan transactions?

(1) Beginning January 1, 2010, each small loan transaction must be registered with the database system and receive a database system-generated transaction authorization number. The transaction authorization number demonstrates that the transaction has been recorded in the database prior to you making the small loan to the borrower.

(2) Do I have to buy any equipment, hardware, or software to use the database system? You must have a computer with access to the internet and Microsoft Internet Explorer 6 or higher. Dial-up capacity of at least 56 kps is sufficient. DSL or broadband access will provide faster access and response. It is also possible to interface directly with the database system; the database vendor can provide you with information about that process.

(3) How and when may I access the database system?

(a) The database system is the means by which real-time access to the data is made available to you through your internet connection.

(b) You must use a computer and the internet to access the database system.

(c) The database system will be accessible 24 hours a day every day of the year, except for routine scheduled system maintenance and upgrades performed by the database vendor.

(4) What must I do to maintain confidentiality of the borrower's information provided to the database? In order to maintain the confidentiality and security of the borrower's information, you must not transmit information to the database system using publicly accessible computers, computers that are not under your control, unsecured wireless connections, or other connections that are not secure. Maintaining a secure connection includes, but is not limited to, installing and regularly updating antivirus and antispyware software and a firewall.

(5) How do I use the database system to determine a borrower's eligibility for a small loan? You must:

(a) Access the database system using the assigned user identification and password provided by the security administrator of your company;

(b) Enter the borrower's Social Security number, individual tax identification number (ITIN), or alien identification number, and the borrower's gross monthly income into the system.

(6) What information will the database system give me when an eligibility search is conducted? The database system will state a borrower's eligibility or ineligibility for a small loan and will give a reason for the eligibility determination. If the borrower is eligible for a small loan, the database system will provide the dollar amount the borrower is eligible to receive.

(7) What must I do once the initial search determines that the borrower is eligible for a small loan?

(a) If you receive an initial indication from the database vendor that the borrower is eligible for a small loan, you must then submit all of the required borrower information necessary to register the transaction in the database, as prescribed by the date base vendor.

(b) When the required information has been submitted to the database, the database system will confirm the initial borrower search. If the borrower's eligibility is confirmed, the small loan transaction will be recorded as open and assigned a transaction authorization number evidencing that the transaction has been authorized by the database system. You must place the transaction authorization number on the small loan agreement.

(8) What must I do if the borrower is determined to be ineligible for a small loan? If the borrower is deemed ineligible you will be provided with a printable message with a reason for the determination. The message will also include the name, address, and toll-free support number of the database vendor. You must provide a copy of the printable message to the borrower.

(9) If I make a mistake entering data and must void the transaction, what do I do? Follow the database vendor's instructions to administratively void the transaction.

(10) If the database system is inaccessible via the internet, how do I access the database?

(a) You will be given at least 24 hours notice for scheduled maintenance or system upgrades. The notice will be by electronic mail to the designated security administrator, or by a broadcast message on the database vendor's website.

(b) In the event the database system is unavailable, you must adhere to the following procedures:

(i) Confirm that the database system remains unavailable by attempting to access the database system with every borrower seeking a new small loan transaction. You need not comply with this procedure if you have been notified via electronic mail by the database vendor of an expected period of time necessary to correct whatever problem is causing the database system to remain unavailable;

(ii) Contact the database vendor's toll-free help desk or voice response system to obtain a temporary transaction authorization number directly from the database vendor; and

(iii) Enter the remaining transactional data into the database system within 24 hours of obtaining the temporary transaction authorization number from the database vendor.

(c) In the event that either the department of financial institutions or the database vendor notifies you that the database system is unavailable and that all alternative methods for registering a transaction and receiving a transaction authorization number are also unavailable:

(i) You are authorized to conduct transactions during the specific period of unavailability, after receiving written authorization, via electronic mail or facsimile from either the department of financial institutions or the database vendor with the department of financial institutions' consent.

(ii) Copies of the written authorization for any transactions conducted during an unavailability period must be attached to the small loan agreement for those transactions. One copy of the authorization must be provided to the borrower and another copy must be kept as an audit record.

(d) Transactions created during a period of authorized unavailability must be registered with the database within 24 hours of notification that the database system is available; provided, however, that if the database system is unavailable for more than 24 hours, then the period for registration shall be extended by 24 hours for each additional 24-hour period of unavailability.

(e) Once the transaction has been registered with the database, the transaction number assigned to that transaction must be placed on the licensee's record copy of the small loan agreement signed by the borrower for that transaction. If the borrower requests that transaction number at any time, the licensee must provide it to the borrower.

(11) Once a loan is made, how can it be canceled or rescinded as authorized under RCW 31.45.086? A borrower may rescind a small loan agreement before the close of business on the next day of business after the date of the transaction without incurring a transaction fee. If a borrower elects to cancel a small loan agreement you must close the transaction on the database as soon as practicable after the borrower rescinds the small loan transaction. A loan that has been rescinded does not count toward the eight loan limit; nor will you incur a two dollar transaction fee on that loan. For the purpose of rescinding a loan, the date of the transaction is the date the borrower actually receives the proceeds either in person or by direct deposit or other electronic transfer of funds into the borrower's bank account.

(12) When must I update information on the database system?

(a) When a borrower's small loan is paid (date of cash received, check deposited, or ACH authorization initiated), you must update open transactions on the database system as soon as practicable to ensure that all identifying information regarding both the borrower and the transaction are accurate, including any comments on the transaction which you deem relevant. You must input the date and time a transaction closes, as well as the payment method, unless you previously entered the payment method.

(b) When a small loan that was in default is paid, it is considered paid when the loaned amount and default fee is paid.

(c) When a loan is in default, you must mark the loan in the database as in default as soon as practicable after the default as follow:

(i) A small loan is in default if not paid on the date and by the time indicated in the small loan agreement. If no time is indicated the small loan is in default the first day after the due date.

(ii) A small loan in an installment plan is in default if unpaid on the 11th day after the due date, with the due date being day zero. If the due date for an installment plan payment is January 1st and is not paid, the loan is considered in default and the database must be updated on January 11th.

(d) When you receive formal notice that a small loan has been discharged in bankruptcy you must close the loan as having been paid, leaving a comment in the comment box about the bankruptcy. Do not administratively close the loan. The loan must continue to count toward the borrower's eight loan limit.

(13) How much will each database transaction cost me? The database vendor's transaction fee is two dollars per loan registered. The database vendor will assess this fee for each transaction that has been registered on the database.

(14) What happens if I do not pay the database fees to the database vendor? The database vendor will lock you out of the database system.

(15) What happens if I do not receive training and become certified in using the database? If you or another designated person in the company do not receive training and certification to use the database, you will not be given an access number for the database.

History

Statutory Authority: RCW 31.45.093, 31.45.200, and 43.320.040. WSR 25-04-038, s 208-630-556, filed 1/28/25, effective 3/1/25. Statutory Authority: Chapter 43.320 RCW, RCW 31.45.200. WSR 16-10-046, § 208-630-556, filed 4/29/16, effective 6/1/16. Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-556, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-560 What disclosures must I make to a borrower?

(1) You must deliver to the borrower at the time you make a small loan, a disclosure that meets the requirements of all applicable laws, including the federal Truth in Lending Act. Compliance with the federal Truth in Lending Act and Regulation Z, 12 C.F.R. Part 226, will be deemed in compliance with this subsection.

(2) You must deliver to the borrower at the time you make the small loan a disclosure of the right to rescind the loan and the right to convert the loan to an installment plan. See WAC 208-630-570.

(3) You must include a statement on the front page of the application for a small loan that is in at least twelve point type and is substantially similar to the following: "At the time you repay this loan, you should have sufficient funds to meet your other financial obligations. If you cannot pay other bills because you are paying off this debt, you should enter the installment plan offered in connection with this loan."

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-560, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040. WSR 07-23-094, § 208-630-560, filed 11/20/07, effective 12/21/07. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-560, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-570 What must be included in the disclosure referred to in WAC 208-630-560(2)?

The disclosure must be substantially in the following form:

Your right to rescind (cancel) this loan. You have the right to rescind this loan by returning the amount of the loan in cash, or returning the check given to you by us to our office by the close of business on our next business day following the date of this loan. We may not charge you for canceling the loan and we will return to you, or at your request destroy any postdated check or electronic equivalent authorization you have given to us. If the ACH authorization cannot be destroyed it becomes void if you cancel the loan.

Your right to an installment plan when you are unable to pay your small loan when it is due.

If you will be or are unable to pay your loan when it is due, you may convert your loan to an installment plan with us by notifying us on or before the loan's due date. If your loan amount is four hundred dollars or less, you may enter into an installment plan that allows you to pay off your loan in substantially equal payments over ninety days. If your loan amount is more than four hundred dollars, you may enter into an installment plan that allows you to pay off your loan in substantially equal payments over one hundred eighty days.

An installment plan will allow you to pay all that you owe without having to pay any additional fees, interest charges or other charge for converting your small loan into an installment plan.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-570, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-570, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-580 In addition to providing disclosures to the borrower, must I post any disclosures?

(1) If you make small loans you must post the following notices conspicuously at each location where small loans are made:

(a) A notice substantially in the form set forth in WAC 208-630-570; and

(b) A notice of how consumers may contact the department, substantially in the following form: "If you have questions about your rights and responsibilities when taking out a payday loan, contact the Department of Financial Institutions at 1-800-RINGDFI ( 1-877-746-4334), or 360-902-8700, or 150 Israel Road S.W., Tumwater, Washington, 98501."

(2) If you make small loans using the internet you must post the notices required by subsections (1) and (2) of this section in a conspicuous location on your websites.

(3) You may download a copy of the notice required by subsection (1)(b) of this section from the department's website or by contacting the department directly.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-580, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040. WSR 07-23-094, § 208-630-580, filed 11/20/07, effective 12/21/07. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-580, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-590 How must I format disclosures?

All disclosures must be presented in a manner and physical format that is clear, conspicuous and designed to call attention to each right and responsibility of the borrower and lender being disclosed. Except for the disclosure that is required on the application (see WAC 208-630-560(3)), such disclosures may be provided separately or included within the note or loan agreement.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-590, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-590, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-600 What documentation must a licensee keep to show that the licensee has made the proper disclosures?

A licensee must maintain in its files sufficient information to show compliance with the consumer disclosure requirements of chapter 31.45 RCW, these rules, and state and federal law.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-600, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-601 Must I provide any information about the changes to the law to borrowers?

Yes. Throughout 2010, when you take a small loan application or use any other form to initiate a small loan, or upon request by a borrower who has not yet made application for a small loan, you must provide to the borrower a written notice with content produced by the department, that describes the changes to the payday lending law due to chapter 510, Laws of 2009 (ESHB 1709). On subsequent loans to the same borrower, during 2010, you must make the information in the notice available to the borrower by providing the information in the lobby area accessible by the borrower in each licensed location or by inquiring whether the borrower would like another copy of the written notice. If you make small loans over the internet, you must make the content provided by the department available on your website throughout 2010. The department will provide the content of the notice in Spanish to be made available in the same manner described above. If the notice becomes available in other languages the department will notify all licensees and provide guidance as to its use.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-601, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-605 Must I maintain a business resumption plan?

Yes. Licensees must have a written plan that details the company's response and recovery to any event that results in damage to or destruction of the books and records relating to the licensee's business triggering the license requirement. The plan must be maintained as part of the licensee's books and records.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.45.200. WSR 16-10-046, § 208-630-605, filed 4/29/16, effective 6/1/16.

Wash. Admin. Code § 208-630-606 Must I have a policy that deals with records disposal?

Yes. Licensees must have written policies and procedures for the destruction of records relating to the licensee's business triggering the license requirement, including electronic records, when the two-year retention period ends. The destruction of records must be accomplished so that the information cannot be reconstructed or read. The destruction of consumer credit report information must also comply with the Federal Disposal Rule at 16 C.F.R. 682.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.45.200. WSR 16-10-046, § 208-630-606, filed 4/29/16, effective 6/1/16.

Wash. Admin. Code § 208-630-610 What accounting and financial records must I keep?

You must maintain the records in this section for at least two years.

(1) Generally, you must maintain the books, accounts, records, papers, documents, files, and other information relevant to the business.

(2) Specifically, you must maintain a record of transactions conducted. The record may be limited to the following provided a sufficient audit trail is available through records obtainable from your bank of account:

(a) Amount of the checks cashed;

(b) Amount of fees charged for cashing the check;

(d) Amount of each check or monetary instrument sold;

(e) Amount of fee charged for the monetary instrument;

(f) Amount of small loan proceeds disbursed;

(g) Fees charged for small loans;

(h) Amount of payments on small loans received;

(i) Origination date of each small loan;

(j) Termination date of each small loan;

(k) Installment plan payment due dates;

(l) Application information as required by rule;

(m) Records of cash payments made on small loans. The record must include the date of the payment, the borrower's name, the amount of cash received, the identity of the employee who received the cash, and whether the payment was applied to a loan or installment plan;

(n) Copies of receipts required under WAC 208-630-505.

(3) You must maintain a cash reconciliation summarizing each day's activity and reconciling cash on hand at the opening of business to cash on hand at the close of business. Such reconciliation must separately reflect cash received from the sale of checks, redemption of returned items, bank cash withdrawals, cash disbursed in cashing of checks, cash disbursed in making small loans, cash received in payment of small loans and bank cash deposits.

(4) You must keep records of the disbursement of loan proceeds and the receipts of all payments on the balance of small loans. The receipt must indicate the date of the transaction, the borrower's name, amount of receipt, and whether the disbursement or payment is on a loan or installment plan.

(5) You must maintain copies of any service agreements with agents.

History

Statutory Authority: Chapter 43.320 RCW and RCW 31.45.200. WSR 13-05-005, § 208-630-610, filed 2/6/13, effective 3/9/13. Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-610, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040. WSR 07-23-094, § 208-630-610, filed 11/20/07, effective 12/21/07. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-610, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-620 In what form must a licensee maintain accounting and financial records?

Licensees may maintain records required in combined form, hand or machine posted, or automated, and licensees may maintain them on any electronic, magnetic, optical or other storage media. However the licensee must maintain the necessary technology to permit access to the records by the department for the period required by law.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-620, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-630 May the director ask a licensee for records regarding the previous day's transactions?

Upon request of the director or director's designee a licensee must within one business day make available, either directly or through a third party, a record of the previous day's transactions.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-630, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-640 What specific accounting records must a licensee maintain?

Licensees must maintain a general ledger containing records of all assets, liabilities, capital, income, and expenses. The licensee must post a general ledger from the daily record of checks cashed or other record of original entry, at least monthly, and it must be maintained in such manner as to facilitate the preparation of an accurate trial balance of accounts in accordance with generally accepted accounting practices.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-640, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-650 May a licensee maintain a consolidated general ledger if the licensee has two or more locations?

A licensee may maintain a consolidated general ledger reflecting activity at two or more locations by the same licensee provided that the licensee maintain books of original entry separately for each location.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-650, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-660 What must a licensee have in employees' personnel files?

Every licensee must maintain personnel files for its employees. Each file must contain the employee's full name, date of birth, date of hire and date of termination, last known address and Social Security number.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-660, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-670 If I have a small loan endorsement on my license, what information must I keep in every loan file?

(1) If you have a small loan endorsement, each loan file must contain at least a record of the application, a record of the note or loan agreement, a record of the documentation used to substantiate the borrower's gross income, a record of the borrower's identification verification, a record of any disclosure statements, a record of an installment plan entered into, and records of the receipts required in WAC 208-630-505. As used in this section, "application" means any information you received from the borrower for the purposes of making a lending decision, including, but not limited to, personal employment history and credit history;

(2) Records required to be maintained may be in paper form or on any electronic, magnetic, optical or other storage media, or any combination thereof, so long as the licensee maintains the necessary technology to permit access to the records by the department for the period required by law.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-670, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-670, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-680 Are there specific banking requirements for check sellers?

All monetary instruments issued by check sellers must be drawn on a financial institution domiciled in the United States.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-680, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-690 When must a check casher deposit a monetary instrument?

Once a licensee cashes a monetary instrument the licensee must send the monetary instrument for deposit to the licensee's account at a depository financial institution located in Washington state or send it for collection not later than the close of business on the third business day after the day on which the licensee accepted the monetary instrument for cash. This subsection does not apply if the licensee accepted the monetary instrument as part of a small loan transaction under chapter 31.45 RCW.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-690, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-700 When may I deposit a monetary instrument accepted in the course of making a small loan?

(1) If you have a small loan endorsement you may not deposit a monetary instrument accepted in the course of making a small loan under the act prior to the due date of the small loan or any date disclosed on the note or small loan agreement.

(2) If the borrower notifies you that he or she is unable to repay the loan when it is due and an installment plan is initiated, you must return or destroy any postdated check or ACH authorization the borrower has given you prior to entering into the installment plan. If destruction of an ACH authorization is not possible, the initiation of an installment plan voids your authorization to use the original ACH authorization. You may accept another ACH authorization or authorizations from the borrower consistent with the payment terms of the installment plan.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-700, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-700, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-710 What other federal and state laws and regulations must a licensee comply with?

Each licensee must comply with applicable federal and state laws including, but not limited to, applicable provisions of the following:

(1) Washington laws: Chapter 63.29 RCW, the Uniform Unclaimed Property Act.

(2) Federal Laws and Regulations:

• "Bank Secrecy Act (BSA)" means the Currency and Foreign Transactions Reporting Act, 31 U.S.C. Sec. 5311-5330 and 12 U.S.C. Sec. 1818(s), and 1951-1959, 31 C.F.R. Part 103.

• "Department of Defense Military Borrower Rules" means Section 670 of the John Warner National Defense Authorization Act for Fiscal Year 2007 and 32 C.F.R. Part 232.

• "Equal Credit Opportunity Act" means the Equal Credit Opportunity Act (ECOA), 15 U.S.C. Sec. 1691 et seq., Regulation B, 12 C.F.R. Part 202.

• "Fair Credit Reporting Act" means the Fair Credit Reporting Act (FCRA), 15 U.S.C. Sec. 1681 et seq.

• "Federal Trade Commission Act" means the Federal Trade Commission Act, 15 U.S.C. Sec. 45(a).

• "Gramm-Leach-Bliley Act (GLBA)" means the Financial Modernization Act of 1999, 15 U.S.C. Sec. 6801-6809, and the GLBA-mandated Federal Trade Commission (FTC) privacy rules, at 16 C.F.R. Parts 313-314.

• "Telemarketing and Consumer Fraud and Abuse Prevention Act" means the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. Sec. 6101-6108, Telephone Sales Rule, 16 C.F.R. Part 310.

• "Truth in Lending Act" means the Truth in Lending Act (TILA), 15 U.S.C. Sec. 1601 et seq., Regulation Z, 12 C.F.R. Part 226 et seq.

History

Statutory Authority: RCW 43.320.040. WSR 07-23-094, § 208-630-710, filed 11/20/07, effective 12/21/07. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-710, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-712 When must a licensee obtain identifying information about its customers?

Each licensee must obtain, verify and maintain records of identifying information about its customers to the extent required by applicable law, including, without limitation, in the following situations:

(1) When completing and filing suspicious activity reports (SARs) of any suspicious transaction relevant to a possible violation of any law or regulation, as required by 31 C.F.R. Section 103.20.

(2) When completing and filing currency transaction reports (CTRs) for transactions involving more than ten thousand dollars in currency in any one day, as required by 31 C.F.R. Section 103.22.

(3) When issuing or selling one or more checks or drafts, cashier's checks, money orders, or traveler's checks for three thousand dollars or more, in currency in any one day, as required by 31 C.F.R. Section 103.29.

History

Statutory Authority: RCW 43.320.040. WSR 07-23-094, § 208-630-712, filed 11/20/07, effective 12/21/07.

Wash. Admin. Code § 208-630-715 What are the minimum requirements of an information security program required by the Federal Safeguards Rule implementing the Gramm-Leach-Bliley Act?

(2) Specifically, at a minimum the plan described in subsection (1) of this section must:

(a) Designate an employee or employees to coordinate the information security program;

(b) Identify and assess the risks to customer information;

(c) Design and implement safeguards to control the risks identified in the risk assessment and regularly monitor and test the safeguards;

(d) Select service providers that can maintain appropriate safeguards and oversee their handling of customer information; and

(e) At least annually evaluate and adjust the program in light of relevant circumstances, including changes in business operations, or the results of testing and monitoring the effectiveness of the implemented safeguards.

(3) The information security plan must be maintained as part of your books and records.

(4) Compliance with the federal Gramm-Leach-Bliley Act and Regulation P, 12 C.F.R. Part 1016, will be deemed compliance with this subsection.

(5) For more information access the FTC website on the Safeguards Rule at: https://www.ftc.gov/tips-advice/business-center/guidance/financial-institutions-customer-information-complying and see 16 C.F.R. 314.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.45.200. WSR 16-10-046, § 208-630-715, filed 4/29/16, effective 6/1/16.

Wash. Admin. Code § 208-630-716 What are the minimum requirements for Consumer Financial Information Privacy under the Gramm-Leach-Bliley Act (Regulation P)?

Licensees must comply with Regulation P.

(1) At a minimum, licensees must:

(b) If licensees share certain customer information with particular types of third parties, the institutions are also required to provide notice to their customers and an opportunity to opt out of the sharing. If a licensee limits its types of sharing to those which do not trigger opt-out rights, it may provide a "simplified" annual privacy notice to its customers that does not include opt-out information. If a licensee's privacy policy has not changed, additional notices may not be required.

(2) Compliance with the federal Gramm-Leach-Bliley Act and Regulation P, 12 C.F.R. Part 1016, will be deemed compliance with this subsection.

(3) See Regulation P at 12 C.F.R. 1016 for the required details.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.45.200. WSR 16-10-046, § 208-630-716, filed 4/29/16, effective 6/1/16.

Wash. Admin. Code § 208-630-717 Must a licensee provide notice to consumers if its data is compromised?

Maybe. If the licensee's data is compromised the licensee may be subject to chapter 19.255 RCW and may have to provide notices to consumers whose information was acquired. Under certain circumstances notice of the breach may also be required by the attorney general's office.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.45.200. WSR 16-10-046, § 208-630-717, filed 4/29/16, effective 6/1/16.

Wash. Admin. Code § 208-630-720 Is a licensee required to register as a money service business with the Secretary of the Treasury?

Licensees may be required to register as a money services business (MSB) under the Bank Secrecy Act, 31 U.S.C. Section 5330, or any regulations promulgated thereunder. Generally, an MSB is a business that cashes checks or exchanges currency (other than as an agent for another business) in an amount greater than one thousand dollars in currency or monetary or other instruments for any person on any day, in one or more transactions.

History

Statutory Authority: RCW 43.320.040. WSR 07-23-094, § 208-630-720, filed 11/20/07, effective 12/21/07. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-720, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-721 If a licensee is considered a money service business (MSB) under the Bank Secrecy Act (see WAC 208-630-720), what are the minimum requirements for the anti-money laundering program the licensee must develop?

A licensee who qualifies as a money services business under the Bank Secrecy Act must develop, implement, and maintain an effective anti-money laundering program consistent with federal law and the requirements of 31 C.F.R. Section 103.125.

History

Statutory Authority: RCW 43.320.040. WSR 07-23-094, § 208-630-721, filed 11/20/07, effective 12/21/07.

Wash. Admin. Code § 208-630-730 What records and actions does a licensee need to take to assure the licensee is correctly reporting under the Bank Secrecy Act?

Each licensee shall maintain detailed records to satisfy currency transaction reporting and suspicious activity reporting requirements of the United States Treasury Department.

Each licensee shall implement an antimoney laundering program that includes the development of internal policies, procedures and controls, training of employees, the appointment of a compliance officer, and the appointment of an external reviewer of the antimoney laundering program if required by 31 U.S.C. Section 5318(h).

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-730, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-740 What obligation do I have to assure that employees comply with the laws and rules regarding payday lending and check cashing and selling?

Because you are responsible for their actions, including violations, you must ensure that any employee or person who engages in business on your behalf (including agents) under the authority granted by chapter 31.45 RCW has sufficient understanding of the law and rules to assure compliance.

History

Statutory Authority: Chapter 43.320 RCW and RCW 31.45.200. WSR 13-05-005, § 208-630-740, filed 2/6/13, effective 3/9/13. Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-740, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-740, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-8201 What business practices are prohibited?

(1) It is a violation of this chapter for any person subject to this chapter to:

(a) Directly or indirectly employ any scheme, device, or artifice to defraud or mislead any borrower, to defraud or mislead any lender, or to defraud or mislead any person;

(b) Directly or indirectly engage in any unfair or deceptive practice toward any person;

(d) Make a small loan to any person physically located in Washington through use of the internet, facsimile, telephone, kiosk, or other means without first obtaining a small loan endorsement;

(e) Accept applications or referrals from an agent or pay for any services provided on your behalf by an agent without first verifying that the agent is licensed under the act;

(f) Directly or indirectly refer a borrower, or encourage a borrower, to use the services of more than one payday lending business that results in an amount outstanding that exceeds the loan limit in RCW 31.45.073;

(g) Directly or indirectly structure a loan transaction in order to exceed the loan limit in RCW 31.45.073;

(h) Directly or indirectly pressure a borrower to not enter into an installment plan;

(i) Directly or indirectly pressure an applicant or borrower to borrow more money than they state they want; provided, it is not a violation of this subsection for a licensee to inform a borrower as to his or her maximum loan amount or that he or she is subject to a limit of eight loans per twelve-months period;

(j) Cash a postdated check before the date written on the check except as permitted by RCW 31.45.070(2);

(k) Make a loan without processing it through the database system except as specifically allowed in law or rule;

(l) Refuse to provide an installment plan to a borrower who has notified you before the due date of the small loan that they cannot pay the small loan; and

(m) Engage in any device or subterfuge to evade the requirements of the act.

(2) In addition to any other penalties, any transaction in violation of subsection (1)(d) of this section is uncollectible and unenforceable.

History

Statutory Authority: Chapter 43.320 RCW and RCW 31.45.200. WSR 13-05-005, § 208-630-8201, filed 2/6/13, effective 3/9/13. Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-8201, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040. WSR 07-23-094, § 208-630-8201, filed 11/20/07, effective 12/21/07.

Wash. Admin. Code § 208-630-830 What are my annual reporting requirements?

On or before April 15th of each year, you must submit the following reports:

(1) Annual financial statements. The financial statements must include at least a balance sheet and a statement of income prepared in accordance with generally accepted accounting principles. If you have established a fiscal year different from the calendar year, the financial statements are due not later than one hundred five days after the close of the fiscal year.

(2) Annual assessment report (AAR). You must submit an AAR on your Washington activities, in a form prescribed by the director. The AAR must contain the following:

(a) The total dollar volume of checks cashed during the period, if applicable; and

(b) The total dollar volume of checks sold during the period, if applicable; and

(d) The annual assessment fee calculation. See WAC 208-630-400.

(3) Consolidated annual report (CAR). You must submit a CAR on your Washington activities, in a form prescribed by the director. The CAR must contain at least the following:

(a) For all licensees, the CAR must contain:

(i) The total number of employees and annual payroll during the period;

(ii) The total number and dollar volume of transactions during the period;

(iii) The total dollar amount of fees collected during the period;

(iv) The total number and dollar amount of undeposited checks taken or held in connection with check cashing and small loan endorsement business at the end of the period;

(v) The total number and dollar amount of returned (NSF) checks taken or held in connection with check cashing and small loan business at the end of the period, and the total dollar amount of fees collected for returned (NSF) checks during the period;

(vi) The total number and dollar amount of charge-offs (losses), net of any recoveries, for the period; and

(vii) The total dollar amount of net income before and after taxes earned under authority of this chapter.

(viii) Such other relevant information as the director may require, in a form prescribed by the director.

(b) For all licensees with a small loan endorsement, the CAR must contain:

(i) The total dollar volume of small loans made during the period, including payment plans made prior to December 31, 2009, and installment plans made after January 1, 2010;

(ii) The total number of loans made for the period;

(iii) The total number of borrowers for the period;

(iv) The number of borrowers whose accounts were referred to collection agencies;

(v) The number of loans rescinded during the period;

(vi) For reporting year 2010, the number of borrowers who entered into a payment plan during 2009;

(vii) The number of installment plans entered into for the period;

(viii) The number of borrowers who defaulted;

(ix) The number of loans made to borrowers to be paid through an ACH (automated clearing house) or other electronic transaction;

(x) The number of loans made to borrowers through other than a physical visit to the licensee's location (e.g., internet, telephone, etc.); and

(xi) The number of active military borrowers during the period.

(c) For all licensees with small loan endorsements and total loan volume of at least ten million dollars in principal for the reporting period, the CAR must contain the following:

(i) The number of loans per borrower for the period;

(ii) The number of loans per military borrower during the period; and

(iii) The number of loans with terms in each of the following categories for the period:

(A) One to seven days;

(B) Eight to fourteen days;

(D) Twenty-two to thirty-one days; and

(E) Thirty-two or more days.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-830, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040. WSR 08-16-092, § 208-630-830, filed 8/5/08, effective 9/5/08. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-830, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-8301 What happens if I am late filing the annual reports and paying the annual assessment?

If you do not file the financial statements (if due at that time), assessment report, consolidated annual report, and pay the annual assessment fee by April 15 of each year, the director will send you a notice of suspension and assess a late fee of twenty-five percent of the annual assessment fee. The reports and payment of both the annual assessment fee and any late fee must arrive in the department's offices by 5:00 p.m. on the tenth day after April 15, unless the department is not open for business on that date, then the reports and payment of both the annual assessment fee and any late fee must arrive in the department's offices by 5:00 p.m. on the next day the department is open for business.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-8301, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040. WSR 08-16-092, § 208-630-8301, filed 8/5/08, effective 9/5/08.

Wash. Admin. Code § 208-630-835 When must I inform the director of significant changes in my business?

(1) You must notify the director in writing within five days of the occurrence of any of the following significant developments:

(a) Your company filing for a chapter 7 or 11 bankruptcy;

(b) Your company receiving notification of a license revocation procedure against it in any state;

(d) You, or a director, officer, partner, member or controlling person of the company receiving notification of the filing of criminal charges or a criminal indictment or information, in any way related to check cashing, check selling or small loan activities.

(2) You must notify the director in writing at least fifteen days prior to a change of control. In the case of a corporation, control is defined as a change of ownership by a person or group acting in concert to acquire fifty percent of the stock, or the ability of a person or group acting in concert to elect a majority of the board directors or otherwise effect a change in policy of the corporation. The director may require such information as deemed necessary to determine whether a new application is required. In the case of entities other than corporations, change in control means any change in controlling persons of the organization, either active or passive. Change of control investigation fees are billed to the persons or group at the rate billed for applications.

(3) Other. Post notification. Within forty-five days of a data breach you must notify the director in writing. This notification requirement may change based on directives or recommendations from law enforcement. See also WAC 208-630-717.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.45.200. WSR 16-10-046, § 208-630-835, filed 4/29/16, effective 6/1/16. Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-835, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-836 When ceasing my small loan business, what information must I file before I close the business?

(1) You must notify the department at least thirty days before ceasing operations. The notice must be in writing, signed by a principal of the small loan licensee, and include the following:

(a) The date you will cease small loan activity;

(b) A list of all open and pending transactions;

(d) Your plan for the orderly closure of open loans on the database system.

(2) For purposes of this section, the term "ceasing operations" means that you have closed the offices to the public or have removed public access to the website, if such access is the sole means of communication with customers. This provision does not apply if you have given customers a reasonable alternative for communications and payments.

History

Statutory Authority: Chapter 43.320 RCW, RCW 31.45.200. WSR 16-10-046, § 208-630-836, filed 4/29/16, effective 6/1/16. Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-836, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-630-840 Who may a licensee hire to prepare the financial statements in the annual report?

Financial statements contained in the annual report may be prepared by outside accountants or by the licensee's own accountants.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-840, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-880 As a check seller what must I report when my license is surrendered or revoked?

If you are engaged in the business of selling monetary instruments you must submit to the director, at your own expense, a closing annual report containing audited financial statements as of the effective date of the surrender or revocation. The director must receive the closing annual report on or before one hundred five days after the effective date of the surrender or revocation. The closing annual report must cover the twelve months ending with the surrender or revocation date or for such other time period as the director may specify. If the report, certificate, or opinion of the independent accountant is in any way qualified, the director may require you to take such action as appropriate to permit an independent accountant to remove any qualification from the report, certificate, or opinion. The report shall include relevant information specified by the director.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-880, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-880, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-890 If I am not a check seller what must I report when my license is surrendered or revoked?

If you are not engaged in the business of selling monetary instruments you must submit to the director at your own expense a closing annual report covering the twelve months ending with the surrender or closure date, or for such other time period as the director may specify. The closing annual report must be received by the director on or before one hundred five days after the effective date of surrender or revocation. Financial statements contained in this closing report may be prepared by outside accountants or by your own accountants.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-890, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-890, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-910 May I request an extension of time to comply with the reporting requirements?

For good cause and upon written request, the director may extend the time for compliance with reporting requirements if you make the request at least ten days prior to the date the report is due.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-910, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-910, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-920 Under what circumstances would a licensee submit unaudited financial statements to the director?

A licensee shall, when requested by the director, for good cause, submit its unaudited financial statement, prepared in accordance with generally accepted accounting principles and consisting of at least a balance sheet and statement of income as of the date and for the period specified by the director.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-920, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-930 When may the director reject financial statements and other reports submitted to the director by the licensee?

The director may reject any financial statement, report, certificate, or opinion filed pursuant to this section. The director must notify the licensee or other person required to make such filing of its rejection and the cause thereof.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-930, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-940 How much time does a licensee have to correct the deficiency in financial statements or other reports?

Within thirty days after the receipt of such notice, the licensee or other person shall correct such deficiency. The director shall retain a copy of all filings so rejected.

History

Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-940, filed 10/21/05, effective 11/21/05.

Wash. Admin. Code § 208-630-950 What trust accounting requirements must a I comply with?

(1) At least monthly a licensee in the business of selling checks must withdraw from the trust account an amount equal to fees earned for the corresponding period from the sale of monetary instruments. The remaining balance of the trust account must be sufficient to cover all monetary instruments that remain outstanding and drawn against the trust account.

(2) A licensee is prohibited from allowing the financial institution holding the trust account to charge back checks or drafts deposited to the trust account and subsequently dishonored against the trust account.

(3) A licensee whose license has expired or been suspended or terminated must not make withdrawals from the trust account without the director's consent, until a closing report has been received according to these rules.

History

Statutory Authority: RCW 43.320.040, 31.45.200, and 2009 c 510. WSR 09-24-089, § 208-630-950, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 31.04.165, 43.320.040, 31.45.030, 31.45.050, 31.45.200. WSR 05-22-009, § 208-630-950, filed 10/21/05, effective 11/21/05.

Chapter 208-660 Mortgage brokers and loan originators—Licensing.

Wash. Admin. Code § 208-660-005 Purpose, scope and coverage.

(1) What is the purpose of the Mortgage Broker Practices Act? The purpose of the Mortgage Broker Practices Act is to establish a state system of licensure and rules of practice and conduct for mortgage brokers and loan originators, to promote honesty and fair dealing with citizens, and to preserve public confidence in the lending and real estate community.

(2) What is the purpose of the Mortgage Broker Practices Act rules? The purpose of these rules is to administer and interpret the Mortgage Broker Practices Act in order to govern the activities of licensed mortgage brokers, loan originators, and other persons subject to the act.

(3) What is the scope and coverage of the Mortgage Broker Practices Act and these rules? There are four criteria to determine the scope and coverage of the Mortgage Broker Practices Act and these rules. All of the criteria must be met in order for a person or entity to fall under the scope and coverage of the act and these rules. The criteria are:

(a) The persons or entities conducting business;

(b) The type of transactions performed when conducting the business;

(d) The location of the mortgage broker, loan originator, potential borrower, and residential real estate.

(4) What persons or entities are covered? The Mortgage Broker Practices Act and these rules apply to all persons or entities defined as mortgage brokers or loan originators under RCW 19.146.010. However, certain mortgage brokers and loan originators may be exempt from all or part of the act under RCW 19.146.020 as discussed in WAC 208-660-008.

(5) What types of transactions are covered? The Mortgage Broker Practices Act and these rules cover the assisting to obtain any "residential mortgage loan" defined in RCW 19.146.010 and WAC 208-660-006. Violations of RCW 19.146.0201, however, are not limited to residential mortgage loan transactions.

(6) What is residential real estate? Residential real estate is real property upon which is constructed or intended to be constructed, a single family dwelling, or multiple family dwelling of four or less units. See examples in WAC 208-660-006, "residential real estate."

(7) Does the location of the mortgage broker, loan originator, potential borrower, and residential real estate affect whether the transaction is covered under the Mortgage Broker Practices Act? If the mortgage broker, loan originator, potential borrower, or residential real estate is located in Washington, the transaction is covered by the Mortgage Broker Practices Act and these rules. However, the director may choose to defer to other jurisdictions where doing so would, in the director's sole discretion, achieve the purposes of the Mortgage Broker Practices Act.

(8) What are some examples of transactions falling under the scope and coverage of the Mortgage Broker Practices Act and these rules?

(a) A loan originator employed with Mortgage Broker, Inc. with a physical office in Redmond, Washington takes a loan application from a Kirkland, Washington resident for the purchase of a home located in Bellevue, Washington. Mortgage Broker, Inc. is not exempt from the Mortgage Broker Practices Act under RCW 19.146.020. The home located in Bellevue meets the definition of residential real estate and the purchaser intends to reside in the home.

(b) A loan originator with a physical office in Spokane, Washington takes a loan application from a Yakima, Washington resident for the purchase of a home located in Oregon. The mortgage broker is not exempt from the Mortgage Broker Practices Act under RCW 19.146.020. The home located in Oregon meets the definition of residential real estate and the purchaser intends to reside in the home.

(c) A loan originator with a physical office in Reno, Nevada working for a Nevada mortgage broker takes a loan application from a Nevada resident for the purchase of a home located in Olympia, Washington. The mortgage broker is not exempt from the Mortgage Broker Practices Act under RCW 19.146.020. The home located in Washington meets the definition of residential real estate and the purchaser intends to reside in the home.

History

Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-005, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-005, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-006 Definitions.

What definitions are applicable to these rules? Unless the context clearly requires otherwise, the definitions in this section apply throughout these rules.

(1) "Act" means the Mortgage Broker Practices Act, chapter 19.146 RCW.

(2) "Advertising material" means any form of sales or promotional materials used in connection with the mortgage broker business. Advertising material includes, but is not limited to, newspapers, magazines, leaflets, flyers, direct mail, indoor or outdoor signs or displays, point-of-sale literature or educational materials, other printed materials; radio, television, public address system, or other audio broadcasts; or internet pages or social media pages.

(3) "Application" means the submission of a borrower's financial information in anticipation of a credit decision relating to a residential mortgage loan, which includes the borrower's name, monthly income, Social Security number to obtain a credit report, the property address, an estimate of the value of the property, and the mortgage loan amount sought. An application may be in writing or electronically submitted, including a written record of an oral application. If the submission does not state or identify a specific property, the submission is an application for a prequalification and not an application for a residential mortgage loan under this part. The subsequent addition of an identified property to the submission converts the submission to an application for a residential mortgage loan.

(4) "Appraisal" means the act or process of developing an opinion of value, the act pertaining to an appraisal-related function, or any verbal or written opinion of value offered by an appraiser. The opinion of value by the appraiser includes any communication that is offered as a single point, a value range, a possible value range, exclusion of a value, or a minimum value.

(5) "Branch office" means a fixed physical location such as an office, separate from the principal place of business of the licensee, where the licensee holds itself out as a mortgage broker.

(6) "Branch office license" means a branch office license issued by the director allowing the licensee to conduct a mortgage broker business at the location indicated on the license.

(7) "Business day" means Monday through Friday excluding federally recognized bank holidays.

(8) "Compensation or gain" means remuneration, benefits, or an increase in something having monetary value including, but not limited to, moneys, things, discounts, salaries, commissions, fees, duplicate payments of a charge, stock, dividends, distributions of partnership profits, franchise royalties, credits representing moneys that may be paid at a future date, the opportunity to participate in a money-making program, retained or increased earnings, increased equity in a parent or subsidiary entity, special or unusual bank or financing terms, services of all types at special or free rates, sales or rentals at special prices or rates, lease or rental payments based in whole or in part on the amount of business referred, trips and payments of another person's expenses, or reduction in credit against an existing obligation. "Compensation or gain" is not evaluated solely on a loan by loan basis.

For example, a realtor advertising that buyers using their services will receive free loan origination assistance is doing so in the anticipation of "compensation or gain" through increased real estate business.

(9) "Computer loan information systems" or "CLI system" means a real estate mortgage financing information system that facilitates the provision of information to consumers by a mortgage broker, loan originator, lender, real estate agent, or other person regarding interest rates and other loan terms available from different lenders.

For purposes of this definition, the CLI system includes computer hardware or software, an internet-based system, or any combination of these, which provides information to consumers about residential mortgage interest rates and other loan terms which are available from another person.

(10) "Computer loan information system provider" or "CLI provider" is any person who provides a computer loan information service, either directly, or as an owner-operator of a CLI system, or both.

(11) "Consumer Protection Act" means chapter 19.86 RCW.

(12) "Control" including the terms "controls," "is controlled by," or "is under common control" means the power, directly or indirectly, to direct or cause the direction of the management or policies of a person, whether through ownership of the business, by contract, or otherwise. A person is presumed to control another person if such person is:

(a) A general partner, officer, director, or employer of another person;

(b) Directly or indirectly or acting in concert with others, or through one or more subsidiaries, owns, holds with power to vote, or holds proxies representing, more than 20 percent of the voting interests of another person; or

(13) "Convicted of a crime," irrespective of the pronouncement or suspension of sentence, means a person:

(a) Has been convicted of the crime in any jurisdiction;

(b) Has been convicted of a crime which, if committed within this state would constitute a crime under the laws of this state;

(c) Has plead guilty or no contest or nolo contendere or stipulated to facts that are sufficient to justify a finding of guilt to such a charge before a court or federal magistrate; or

(d) Has been found guilty of a crime by the decision or judgment of a state or federal judge or magistrate, or by the verdict of a jury.

(14) "Depository institution" has the same meaning as in section 3 of the Federal Deposit Insurance Act on the effective date of this section, and includes credit unions.

(15) "Discount points" or "points" means a fee paid by a borrower, upfront or at closing, to a lender to reduce the interest rate of a residential mortgage loan. Pursuant to Regulation X, discount points are to be reflected on the good faith estimate or loan estimate and applicable settlement statement as points and as a dollar amount.

(16) "Division of consumer services" means the division of consumer services within the department of financial institutions, or such other division within the department delegated by the director to oversee implementation of the act and these rules.

(17) "Dwelling" means the same as in Regulation Z implementing the Truth in Lending Act which is a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile or manufactured home, and trailer, if it is used as a residence. See 12 C.F.R. 1026.2.

(18) "Examination" or "compliance examination" means the examination performed by the division of consumer services, or such other division within the department delegated by the director to oversee implementation of the act and these rules to determine whether the licensee is in compliance with applicable laws and regulations.

(19) "Federal statutes and regulations" includes, among others, the following:

(a) "Alternative Mortgage Transaction Parity Act" means the Alternative Mortgage Transaction Parity Act (AMTPA), 12 U.S.C. Sec. 3801 et seq.

(b) "Equal Credit Opportunity Act" means the Equal Credit Opportunity Act (ECOA), 15 U.S.C. Sec. 1691 et seq., Regulation B, 12 C.F.R. Part 1002.

(d) "Federal Trade Commission Act" means the Federal Trade Commission Act, 15 U.S.C. Sec. 41-58.

(e) "Gramm-Leach-Bliley Act (GLBA)" means the Financial Modernization Act of 1999, 15 U.S.C. Sec. 6801-6809, and the GLBA-mandated Federal Trade Commission (FTC) privacy rules, at 16 C.F.R. Parts 313-314.

(f) "Home Equity Loan Consumer Protection Act" means the Home Equity Loan Consumer Protection Act, 15 U.S.C. Sec. 1637 and 1647.

(g) "Home Mortgage Disclosure Act" means the Home Mortgage Disclosure Act (HMDA), 12 U.S.C. Sec. 2801-2810, Regulation C, 12 C.F.R. Part 203.

(h) "Home Ownership and Equity Protection Act" means the Home Ownership and Equity Protection Act (HOEPA), 15 U.S.C. Sec. 1639.

(i) "Homeowners Protection Act" means the Homeowners Protection Act of 1998 (HPA), 12 U.S.C. Sec. 4901 et seq.

(j) "MAP" means the Mortgage Acts and Practices - Advertising, Regulation N, 12 C.F.R. Part 1014.

(k) "Real Estate Settlement Procedures Act" means the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. Sec. 2601 et seq., Regulation X, 12 C.F.R. Part 1024.

(l) "S.A.F.E. Act" means the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, Title V of the Housing and Economic Recovery Act of 2008 (HERA), P.L. 110-289, effective July 30, 2008, codified at 12 U.S.C. 5101; Regulation G, 12 C.F.R. Part 1007; and Regulation H, 12 C.F.R. Part 1008.

(m) "Telemarketing and Consumer Fraud and Abuse Prevention Act" means the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. Sec. 6101-6108, Telemarketing Sales Rule, 16 C.F.R. Part 310.

(n) "Truth in Lending Act" means the Truth in Lending Act (TILA), 15 U.S.C. Sec. 1601 et seq., Regulation Z, 12 C.F.R. Part 1026.

(20) "Federally insured financial institution" means a savings bank, savings and loan association, or credit union, whether state or federally chartered, or a federally insured bank, authorized to conduct business in this state.

(21) "Financial misconduct," for the purposes of the act, means a criminal conviction for any of the following:

(a) Any conduct prohibited by the act;

(b) Any conduct prohibited by statutes governing mortgage brokers in other states, or the United States, if such conduct would constitute a violation of the act;

(c) Any conduct prohibited by statutes governing other segments of the financial services industry, including but not limited to the Consumer Protection Act, statutes governing the conduct of securities broker dealers, financial advisers, escrow officers, title insurance companies, limited practice officers, trust companies, and other licensed or chartered financial service providers; or

(d) Any conduct commonly known as white collar crime, including, but not limited to, embezzlement, identity theft, mail or wire fraud, insider trading, money laundering, check fraud, or similar crimes.

(22) "License number" means the NMLS unique identifier displayed as prescribed by the director. Some examples of the way you may display your license number are: NMLS ID 12345, NMLS 12345, NMLS #12345, MB-12345, or MLO-12345.

(23) "Licensed location" means a main office or branch office, including an individual loan originator's residence, where the licensee conducts business under the act with Washington residents or Washington residential real estate and the licensee has obtained a main or branch license through NMLS for that location.

(24) "Loan originator licensee" means a natural person who is licensed as a loan originator or is subject to licensing under RCW 19.146.200 or who is acting as a loan originator subject to any provisions of the act.

(25) "Loan originator's residence" means a loan originator's primary or secondary residence located in the United States.

(26) "Material litigation" means any litigation that would be relevant to the director's ruling on an application for a license including, but not limited to, criminal or civil action involving dishonesty or financial misconduct.

(27) "Mortgage broker licensee" means a person that is licensed as a mortgage broker or is subject to licensing under RCW 19.146.200 or is acting as a mortgage broker subject to any provisions of the act.

(28) "Mortgage Broker Practices Act" means chapter 19.146 RCW.

(29) "NMLS" means the Nationwide Multistate Licensing System and Registry, Nationwide Mortgage Licensing System, NMLSR, or such other name or acronym as may be assigned to the multistate system developed by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators and owned and operated by the state regulatory registry, LLC, or any successor or affiliated entity, for the licensing and registration of persons in the mortgage and other financial services industries.

(30) "Out-of-state applicant or licensee" means a person subject to licensing that maintains an office outside of this state.

(31) "Prepaid escrowed costs of ownership," as used in RCW 19.146.030(4), means any amounts prepaid by the borrower for the payment of taxes, property insurance, interim interest, and similar items in regard to the property used as security for the loan.

(32) "Principal" means any person who controls, directly or indirectly through one or more intermediaries, or alone or in concert with others, a 10 percent or greater interest in a partnership, company, association, or corporation, and the owner of a sole proprietorship.

(33) "Rate lock agreement" means an agreement with a borrower made by a mortgage broker, loan originator, or lender in which the mortgage broker, loan originator, or lender agrees that, for a period of time, a specific interest rate or other financing terms will be the rate or terms at which it will make a loan available to that borrower.

(34) "Registered agent" means a person located in Washington appointed to accept service of process for a licensee.

(35) "Registered mortgage loan originator" means any individual who meets the definition of mortgage loan originator and is an employee of:

(a) A depository institution, a subsidiary that is owned and controlled by a depository institution and regulated by a federal banking agency, or an institution regulated by the farm credit administration; and

(b) Is registered with, and maintains a unique identifier through, the NMLS.

(36) "Residential real estate" is real property upon which is constructed or intended to be constructed, a single family dwelling or multiple family dwelling of four or less units.

(a) Residential real estate includes, but is not limited to:

(i) A single family home;

(ii) A duplex;

(iii) A triplex;

(iv) A fourplex;

(v) A single condominium in a condominium complex;

(vi) A single unit within a cooperative;

(vii) A manufactured home; or

(viii) A fractile, fee simple interest in any of the above.

(b) Residential real estate does not include:

(i) An apartment building or dwelling of five or more units; or

(ii) A single piece of real estate with five or more single family dwellings unless each dwelling is capable of being financed independently of the other dwellings.

(37) "Table funding" means a settlement at which a mortgage loan is funded by a contemporaneous advance of loan funds and an assignment of the loan to the person advancing the funds. The mortgage broker originates the loan and closes the loan in its own name with funds provided contemporaneously by a lender to whom the closed loan is assigned.

(38) "Third-party provider" means any person other than a mortgage broker or lender who provides goods or services to the mortgage broker in connection with the preparation of the borrower's loan and includes, but is not limited to, credit reporting agencies, title companies, appraisers, structural and pest inspectors, or escrow companies.

A lender is considered a third party only when the lender provides lock-in arrangements to the mortgage broker in connection with the preparation of a borrower's loan.

(39) "Underwriting" means a lender's detailed credit analysis preceding the offering or making of a loan. The analysis may be based on information furnished by the borrower (employment history, salary, financial statements), the borrower's credit history from a credit report, the lender's evaluation of the borrower's credit needs and ability to pay, and an assessment of the collateral for the loan. While mortgage brokers may have access to various automated underwriting systems to facilitate an evaluation of the borrower's qualifications, the mortgage broker who qualifies or approves a borrower in this manner is not the underwriter of the loan and cannot charge a fee for underwriting the loan. Third-party charges the mortgage broker incurs in using or accessing an automated system to qualify or approve a borrower may, like other third-party expenses, be passed on to the borrower.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 22-24-049, § 208-660-006, filed 11/30/22, effective 12/31/22
WSR 19-21-142, § 208-660-006, filed 10/22/19, effective 11/24/19. Statutory Authority: Chapter 43.320 RCW, RCW 19.146.223. WSR 16-08-027, § 208-660-006, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 13-24-023, § 208-660-006, filed 11/22/13, effective 1/1/14. Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. WSR 12-18-048, § 208-660-006, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2010 c 35. WSR 10-20-125, § 208-660-006, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-006, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 109. WSR 09-01-156, § 208-660-006, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040, 19.146.223. WSR 08-11-103, § 208-660-006, filed 5/20/08, effective 6/20/08
WSR 08-05-126, § 208-660-006, filed 2/20/08, effective 3/22/08. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-006, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-007 Good standing.

(1) What does good standing mean? For the purposes of the act and these rules, good standing means that the applicant, licensee, or other person subject to the act demonstrates financial responsibility, character, and general fitness sufficient to command the confidence of the community and to warrant a belief that the business will be operated honestly, fairly, and efficiently within the purposes of the act and these rules. In determining good standing the director will consider the following factors, and any other evidence relevant to good standing as defined in this rule:

(a) Whether the applicant or licensee has paid all fees due to the director or the NMLS.

(b) Whether the mortgage broker licensee has filed quarterly and annual reports as prescribed by the director.

(c) Whether the mortgage broker licensee has filed and maintained the required surety bond or had its surety bond canceled or revoked for cause.

(d) Whether the mortgage broker licensee has maintained a designated broker in compliance with the act and these rules.

(e) Whether the applicant, licensee, or other person subject to the act has had any license, or any authorization or ability to do business under any similar statute of this or any other state, suspended, revoked, or restricted within the prior five years.

(f) Whether the applicant, licensee, or other person subject to the act has been convicted of, or pled guilty or nolo contendere to, in a domestic, foreign, or military court to:

(i) A gross misdemeanor involving dishonesty or financial misconduct within the prior seven years;

(ii) A felony within the prior seven years; or

(iii) A felony that involved an act of fraud, dishonesty, breach of trust, or money laundering at any time preceding the date of application.

(g) Whether the licensee or other person subject to the act, is, or has been subject to a cease and desist order or an injunction issued pursuant to the act, or the Consumer Protection Act, or has been found through an administrative, civil, or criminal proceeding to have violated the provisions of the act or rules, or the Consumer Protection Act, chapter 19.86 RCW.

(h) Whether the director has filed a statement of charges, or there is an outstanding order by the director to cease and desist against the licensee or other person subject to the act.

(i) Whether there is documented evidence of serious or significant complaints filed against the licensee, or other person subject to the act, and the licensee or other person subject to the act has been notified of the complaints and been given the opportunity to respond.

(j) Whether the licensee has allowed the licensed mortgage broker business to deteriorate into a condition that would result in denial of a new application for a license.

(k) Whether the licensee, or other person subject to the act has failed to comply with an order, directive, subpoena, or requirement of the director or director's designee, or with an assurance of discontinuance entered into with the director or director's designee.

(l) Whether the licensee or other person subject to the act has interfered with an investigation or disciplinary proceeding by willful misrepresentation of facts before the director or director's designee, or by the use of threats or harassment against a client, witness, employee of the licensee, or representative of the director for the purpose of preventing them from discovering evidence for, or providing evidence in, any disciplinary proceeding or other legal action.

(2) Under what circumstances may the department conduct a good standing review of an applicant, mortgage broker licensee, designated broker, or exempt mortgage broker? The department may conduct a good standing review when:

(a) Processing an application for a new mortgage broker branch office license.

(b) Processing an application for appointment of a different designated broker (both the licensed mortgage broker, including those individuals to whom the license was granted, and the proposed designated broker must meet good standing).

(3) When will an applicant, licensee, or other person subject to the act receive notice from the department of their failure to meet a determination of good standing? If the department conducts a good standing review, the department will notify the applicant, licensee, or other person subject to the act that they have failed to meet the department's good standing requirement within ten business days of the department's receipt of any application or request that requires a determination of good standing. See subsection (2) of this section. For purposes of the notice required by this section, a statement of charges filed and served on the licensee is sufficient notice of a lack of good standing.

(4) What recourse does an applicant, licensee, or other person subject to the act have when the department has determined that they are not in good standing? The applicant, licensee, or other person subject to the act may request a brief adjudicative proceeding under the Administrative Procedure Act, chapter 34.05 RCW, to challenge the department's determination. See WAC 208-660-009.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 13-24-023, § 208-660-007, filed 11/22/13, effective 1/1/14. Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. WSR 12-18-048, § 208-660-007, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-007, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.146.223. WSR 08-05-126, § 208-660-007, filed 2/20/08, effective 3/22/08. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-007, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-008 Exemptions.

(1) Who is exempt from all provisions of the act? Any person doing business under the laws of the state of Washington or the United States and any federally insured depository institution doing business under the laws of any other state relating to commercial banks, bank holding companies, savings banks, trust companies, savings and loan associations, credit unions, insurance companies, or real estate investment trusts as defined in 26 U.S.C. Sec. 856 and the affiliates, subsidiaries, and service corporations thereof.

(2) Who is exempt from licensing as a mortgage loan originator?

(a) Any individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member of the individual; or

(b) Any individual who offers or negotiates terms of a residential mortgage loan secured by a dwelling that served as the individual's residence.

(3) If I am licensed as an insurance agent under RCW 48.17.060, must I have a separate license to act as a loan originator or mortgage broker? Yes. You will need a separate license as a loan originator or mortgage broker if you are a licensed insurance agent and you do any of the following:

(a) Take a residential mortgage loan application for a mortgage broker;

(b) Offer or negotiate terms of a mortgage loan for direct or indirect compensation or gain, or in the expectation of direct or indirect compensation or gain;

(d) Hold yourself out as being able to perform any of the above services.

(4) Are insurance companies exempt from the Mortgage Broker Practices Act? Yes. Insurance companies authorized to transact the business of insurance in this state by the Washington state office of the insurance commissioner are exempt from the Mortgage Broker Practices Act.

(5) As an attorney, must I have a mortgage broker or loan originator license to assist a person in obtaining or applying to obtain a residential mortgage loan in the course of my practice?

(a) If you are an attorney licensed in Washington and if the mortgage broker activities are incidental to your professional duties as an attorney, you are exempt from the Mortgage Broker Practices Act under RCW 19.146.020 (1)(c).

(b) Whether an exemption is available to you depends on the facts and circumstances of your particular situation. For example, if you hold yourself out publicly as being able to perform the services of a mortgage broker or loan originator, or if your fee structure for those services is different from the customary fee structure for your professional legal services, the department will consider you to be principally engaged in the mortgage broker business and you will need a mortgage broker or loan originator license before performing those services. A "customary" fee structure for the professional legal service does not include the receipt of compensation or gain associated with assisting a borrower in obtaining a residential mortgage loan on the property.

(6) As a licensed real estate broker or salesperson, must I have a mortgage broker or loan originator license when I assist the purchaser in obtaining financing for a residential mortgage loan involving a bona fide sale of real estate? You are exempt from the act under RCW 19.146.020 (1)(e) if you only receive the customary real estate commission in connection with the transaction. A "customary" real estate commission does not include receipt of compensation or gain associated with the financing of the property. A "customary" real estate commission only includes the agreed upon commission designated in the listing or purchase and sale agreement for the bona fide sale of the subject property.

(7) Are independent contractor loan originators exempt from licensing? No. An independent contractor working as a loan originator must hold a loan originator license.

(8) What other persons or entities are exempt from the Mortgage Broker Practices Act?

(a) Any person doing any act under order of any court except for a person subject to an injunction to comply with any provision of the act or any order of the director issued under the act.

(b) The United States of America, the state of Washington, any other state, and any Washington city, county, or other political subdivision, and any agency, division, or corporate instrumentality of any of these entities in this subsection (b).

(c) Registered mortgage loan originators, or any individual required to be registered, employed by entities exempt from the act.

(d) A manufactured or modular home retailer employee who performs purely administrative or clerical tasks and who receives only the customary salary or commission from the employer in connection with the transaction.

(9) When is a CLI provider exempt from the licensing requirements of the act? See WAC 208-660-143.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 19-21-142, § 208-660-008, filed 10/22/19, effective 11/24/19. Statutory Authority: Chapter 43.320 RCW, RCW 19.146.223. WSR 16-08-027, § 208-660-008, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-008, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 109. WSR 09-01-156, § 208-660-008, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040, 19.146.223. WSR 08-11-103, § 208-660-008, filed 5/20/08, effective 6/20/08
WSR 08-05-126, § 208-660-008, filed 2/20/08, effective 3/22/08. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-008, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-009 Application of Administrative Procedure Act.

(4) May I request a brief adjudicative proceeding in response to an administrative enforcement action? Yes, but only if the matter has been designated by the department as one for which a BAP is available. The director adopts RCW 34.05.482 through 34.05.494 for the administration of brief adjudicative proceedings. Brief adjudicative proceedings shall be limited to a determination of one or more of the following issues:

(a) Whether an applicant for a loan originator license meets the requirements of RCW 19.146.310 (1)(a), (b), (c), (d), (e), or (h);

(b) Whether an applicant for a mortgage broker license meets the requirements of RCW 19.146.210 (1)(a), (b), (c), (d), or (e); and

(a) Only legal issues exist; or

(b) Both parties have agreed to a brief proceeding. As used in this section, "persons other than the parties" does not include an attorney or representative for a party, or a witness for a party.

(6) How does the BAP work? Brief adjudicative proceedings are controlled by the provisions of RCW 34.05.482 through 34.05.494. The department will use the following procedure:

(a) Presiding officer. The director shall designate a presiding officer to conduct the brief adjudicative proceedings. The presiding officer must have department expertise in the subject matter, but must not have personally participated in the department's licensing application denial, or work in the department's division of consumer services, or such other division within the department delegated by the director to oversee implementation of the act and these rules.

(c) Notice of hearing. The presiding officer will set the date, time, and place of the hearing, giving at least seven business days notice to the applicant.

(e) Oral argument. The presiding officer may exercise discretion on whether to allow oral argument.

(f) Witnesses. Live witness testimony will not be allowed. Witnesses providing testimony by sworn declaration or affidavit will be allowed at the discretion of the presiding officer.

History

Statutory Authority: RCW 43.320.040. WSR 09-12-111, § 208-660-009, filed 6/2/09, effective 7/3/09.

Wash. Admin. Code § 208-660-105 How does the department interpret the definition of residential mortgage loan modification services in RCW 19.146.010(21)?

Residential mortgage loan modification services means activities conducted by persons not engaged in servicing the borrower's existing residential mortgage loan. The activities may include negotiating, attempting to negotiate, arranging, attempting to arrange, or otherwise offering to perform residential mortgage loan modification services. The activities may also include the collection of data for submission to another person performing mortgage loan modification services or to a residential mortgage loan servicer.

Any person in violation of the act while providing residential mortgage loan modification services is subject to the department's investigation and enforcement authorities including being responsible for an investigation fee when the department investigates the books and records of any person subject to the act.

History

Statutory Authority: Chapter 43.320 RCW, RCW 19.146.223. WSR 16-08-027, § 208-660-105, filed 3/30/16, effective 4/30/16
WSR 12-18-048, § 208-660-105, filed 8/29/12, effective 11/1/12.

Wash. Admin. Code § 208-660-106 How does the department interpret the definition of loan processor in RCW 19.146.010(12)?

"Loan processor" means an individual who performs clerical or support duties as an employee (not as an independent contractor) of a person licensed or exempt from licensing and at the direction of and subject to the supervision and instruction of an individual licensed, or exempt from licensing, under this chapter. The job responsibilities may include the receipt, collection and distribution of information common for the processing of a loan. The loan processor may also communicate with a borrower to obtain the information necessary for the processing of a loan, provided that such communication does not include offering or negotiating loan rates or terms, or counseling borrowers about loan rates or terms. A loan processor engaged as an independent contractor by a licensee must hold a mortgage loan originator license. See WAC 208-660-300(13).

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 22-24-049, § 208-660-106, filed 11/30/22, effective 12/31/22
WSR 19-21-142, § 208-660-106, filed 10/22/19, effective 11/24/19
WSR 13-24-023, § 208-660-106, filed 11/22/13, effective 1/1/14.

Wash. Admin. Code § 208-660-107 How does the department interpret the definition of "licensee" in RCW 19.146.010(10)?

"Licensee" means:

• A mortgage broker licensed by the director;

• The principal(s) or designated broker of a mortgage broker;

• A loan originator licensed by the director;

• Any person subject to licensing under RCW 19.146.200; or

• Any person acting as a mortgage broker or loan originator subject to any provisions of the act.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 19-21-142, § 208-660-107, filed 10/22/19, effective 11/24/19.

Wash. Admin. Code § 208-660-108 How does the department interpret the definition of "loan originator" in RCW 19.146.010(11)?

"Loan originator" or "mortgage loan originator" means a natural person who for direct or indirect compensation or gain, or in the expectation of direct or indirect compensation or gain:

• Takes a residential mortgage loan application; or

• Offers or negotiates terms of a mortgage loan, including short sale transactions. An individual "offers or negotiates terms of a residential mortgage loan" if the individual:

(a) Presents for consideration by a borrower or prospective borrower particular residential mortgage loan terms; or

(b) Communicates directly or indirectly with a borrower, or prospective borrower for the purpose of reaching a mutual understanding about prospective residential mortgage loan terms.

"Loan originator" also includes a person who holds themselves out to the public as able to perform any of the activities described in this definition. For purposes of this definition, a person "holds themselves out" by advertising or otherwise informing the public that the person engages in any of the activities of a mortgage broker or loan originator, including the use of business cards, stationery, brochures, rate lists, or other promotional items.

For purposes of further defining "loan originator," "taking a residential mortgage loan application" includes soliciting, accepting, or offering to accept an application for a residential mortgage loan or assisting a borrower or offering to assist a borrower in the preparation of a residential mortgage loan application.

"Loan originator" also includes a natural person who for direct or indirect compensation or gain or in the expectation of direct or indirect compensation or gain performs residential mortgage loan modification services.

"Loan originator" does not mean persons performing purely administrative or clerical tasks for a mortgage broker. For the purposes of this paragraph, "administrative or clerical tasks" means the receipt, collection, and distribution of information common for the processing of a loan in the mortgage industry and communication with a borrower to obtain information necessary for the processing of a loan. An individual who holds himself or herself out to the public as able to obtain a loan is not performing administrative or clerical tasks.

"Loan originator" does not include a person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with applicable state law, unless the person or entity is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of such a lender, mortgage broker, or other mortgage loan originator. For purposes of this chapter, the term "real estate brokerage activity" means any activity that involves offering or providing real estate brokerage services to the public, including:

(a) Acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property;

(b) Bringing together parties interested in the sale, purchase, lease, rental, or exchange of real property;

(c) Negotiating, on behalf of any party, any portion of a contract relating to the sale, purchase, lease, rental, or exchange of real property, other than in connection with providing financing with respect to any such transaction;

(d) Engaging in any activity for which a person engaged in the activity is required to be registered or licensed as a real estate agent or real estate broker under any applicable law; and

(e) Offering to engage in any activity, or act in any capacity, described in (a) through (d) of this definition.

"Loan originator" does not include a person or entity solely involved in extensions of credit relating to timeshare plans, as that term is defined in Sec. 101(53D) of Title 11, U.S.C.

The definition of loan originator does not apply to employees of a housing counseling agency approved by the United States Department of Housing and Urban Development unless the employees of a housing counseling agency are required under federal law to be licensed individually as loan originators.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 19-21-142, § 208-660-108, filed 10/22/19, effective 11/24/19.

Wash. Admin. Code § 208-660-109 How does the department interpret the definition of "mortgage broker" in RCW 19.146.010(14)?

"Mortgage broker" means any person who for compensation or gain, or in the expectation of compensation or gain (a) assists a person in obtaining or applying to obtain a residential mortgage loan or (b) holds himself or herself out as being able to assist a person in obtaining or applying to obtain a residential mortgage loan. A mortgage broker either prepares a residential mortgage loan for funding by another entity or table funds the residential mortgage loan. See the definition of "table funding." (These are the two activities allowed under the MBPA.)

For purposes of this definition, a person "assists a person in obtaining or applying to obtain a residential mortgage loan" by, among other things, counseling on loan terms (rates, fees, other costs), preparing loan packages, or collecting enough information on behalf of the consumer to anticipate a credit decision under Regulation X, 12 C.F.R. Part 1024.2(b).

For purposes of this definition, a person "holds himself or herself out" by advertising or otherwise informing the public that they engage in any of the activities of a mortgage broker or loan originator, including the use of business cards, stationery, brochures, rate sheets, or other promotional items.

"Mortgage broker" also includes any person who for direct or indirect compensation or gain or in the expectation of direct or indirect compensation or gain performs residential mortgage loan modification services or holds himself or herself out as being able to perform residential mortgage loan modification services.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 19-21-142, § 208-660-109, filed 10/22/19, effective 11/24/19.

Wash. Admin. Code § 208-660-143 Computer loan information (CLI) providers.

(1) When is a CLI provider exempt from the licensing requirements of the act? A CLI provider is exempt from the licensing requirements of the act:

(a) When the CLI provider meets the general statutory requirements under RCW 19.146.020 (1)(a), (c), (d), or (f); or

(b) When a real estate broker or salesperson licensed in Washington, acting as a CLI provider and a real estate agent, obtains financing for a real estate transaction involving a bona fide sale of real estate and does not receive either:

(i) A separate fee for the CLI service; or

(ii) A sales commission greater than that which would be otherwise customary in connection with the sales transaction; or

(i) Provides only information regarding rates, terms, and lenders;

(ii) Complies with all requirements of subsection (4) of this section;

(iii) Does not represent or imply to a borrower that they are able to obtain a residential mortgage loan from a mortgage broker or lender;

(iv) Does not accept a loan application, assist in the completion of a loan application, or submit a loan application to a mortgage broker or lender on behalf of a borrower;

(v) Does not accept any deposit for third-party provider services or any loan fees from a borrower in connection with a loan, regardless of when the fees are paid;

(vi) Does not negotiate interest rates or terms of a loan with a mortgage broker or lender on behalf of a borrower; and

(vii) Does not provide to the borrower a good faith estimate or loan estimate or other disclosure(s) required of mortgage brokers or lender(s) by state or federal law.

(d) If the CLI provider is not exempt under (a), (b), or (c) of this subsection, the CLI provider is not required to have a mortgage broker license if the CLI provider does not receive any fee or other compensation or gain, directly or indirectly, for performing or facilitating the CLI service.

(2) When is a CLI provider required to have a mortgage broker license?

(a) If a CLI provider, who is not otherwise exempt from the licensing requirements of the act, performs any act that would otherwise require that they be licensed, including accepting a loan application, or submitting a loan application to a mortgage broker or lender, the CLI provider must obtain a mortgage broker or a loan originator license.

(b) Example - License required: A CLI provider uses an internet-based CLI system in which an abbreviated application is available for online completion by borrower. Once the borrower presses "submit," the information collected in the abbreviated application is forwarded to lender. The information contains the borrower's name, Social Security number, contact information, purpose of the loan sought (e.g., purchase, refinance, home equity, second mortgage), size of loan requested, annual salary, and a self-declaration of total unsecured debt. The electronic entries made by the borrower are then used by lender to electronically populate "form fields" and to initiate lender's loan application. A loan originator for the lender then follows up with borrower to complete the loan application. On or after closing, CLI provider receives a CLI service fee.

(c) Example - License not required: A CLI provider uses an internet-based CLI system in which various interactive informational tools are present, including an online "prequalification" tool. Based upon borrower's self-declared data input, borrower receives an indication of borrower's "maximum affordable loan amount," based upon standard norms of debt-to-income ratio and loan-to-value ratio, and also subject to verification of information, availability and suitability of loan products, and independent underwriting by any lender. The borrower indicates a desire for follow-up from one or more lenders by inputting personal contact information and pressing "submit." A number of lenders receive only the personal identity information of borrower and not any financial information. However, the CLI system has been programmed (and may be continuously reprogrammed) to route personal contact information to certain lenders based upon borrower's "prequalification" data input and the lending criteria of each of the lenders for whom CLI provider has a relationship. None of borrower's self-declared financial information is actually submitted to any of the lenders whose criteria match borrower's profile. Loan originators from lender A and lender B initiate contact with borrower based solely on borrower's contact information. Lender A and lender B, through their assigned loan originators, contact borrower with the object of beginning and hopefully completing a loan application. In this example, CLI provider has not taken a loan application.

(3) Must the CLI provider provide any disclosures?

(a) Yes. If a borrower using or accessing the CLI services pays for the CLI service, either directly or indirectly, the CLI provider must give the following disclosure:

(i) The amount of the fee the CLI provider charges the borrower for the service;

(ii) That the use of the CLI system is not required to obtain a residential mortgage loan; and

(iii) That the full range of loans available may not be listed on the CLI system, and different terms and conditions, including lower rates, may be available from others not listed on the system.

(b) Each CLI provider must give the borrower a copy of the disclosure form when the first CLI service is provided to the borrower. The form must be signed and dated by the borrower and a copy maintained as part of the CLI provider's books and records for at least two years.

(4) Are CLI system providers subject to enforcement under the act? Yes. CLI system providers are responsible for any violations of the act and will be subject to any applicable fines or penalties.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 19-21-142, § 208-660-143, filed 10/22/19, effective 11/24/19.

Wash. Admin. Code § 208-660-155 Mortgage brokers—General.

(1) May I originate residential mortgage loans in Washington without a license? No. Mortgage brokers must have a valid Washington license, or be exempt from licensing pursuant to RCW 19.146.020, and must maintain a sponsored loan originator who is approved by the director, in order to originate residential mortgage loans or conduct residential mortgage loan modification services. There is no "one-time, one loan" exception.

(2) May I originate a Washington residential mortgage loan using the license of an already licensed or exempt Washington mortgage broker and then split the proceeds with that mortgage broker? No. Mortgage broker licenses may only be used by the person named on the license. Mortgage broker licenses may not be transferred, sold, traded, assigned, loaned, shared, or given to any other person. Two individually licensed mortgage brokers may originate a loan. Each licensee is itemized in the disclosures and is paid their proportionate share of fees in relation to the work provided at the loan closing. Federal laws may prohibit this cobrokering.

(3) Do I need a license to assist a borrower with a residential mortgage loan modification? Yes. Persons providing loan modification services for compensation or gain must be licensed under this chapter, or under chapter 31.04 RCW. See also WAC 208-660-430(23), 208-660-500(4), 208-660-550 (3)(c) and (4).

(4) As a licensed mortgage broker, am I responsible for the actions of my employees and independent contractors? Yes. You are responsible for any conduct violating the act or these rules by any person you employ, or engage as an independent contractor, to work in the business covered by your license.

(5) Who at the licensed mortgage broker company is responsible for the licensee's compliance with the act and these rules? The designated broker, principals, and owners with supervisory authority are responsible for the licensee's compliance with the act and these rules.

(6) What is the nature of my relationship with the borrower? You have a fiduciary relationship with the borrower. See RCW 19.146.095.

(7) May I charge upfront broker fees when assisting the borrower in applying for a loan? No. You may only charge the borrower a fee, commission, or other compensation for the preparation, negotiation, and brokering of a residential mortgage loan when the loan is closed on the terms and conditions agreed upon by you and the borrower.

(8) May I charge fees when the loan does not close, or does not close on the terms and conditions agreed upon by me and the borrower? You may charge a fee, and may bring a suit for collection of the fee, not to exceed three hundred dollars, for services rendered, for the preparation of documents, or for the transfer of documents in the borrower's file which were prepared for, or paid for by, the borrower if:

(a) You have obtained a written commitment from a lender on the same terms and conditions agreed upon by you and the borrower; and

(b) The borrower fails to close on a loan through no fault of yours; and

(9) As a mortgage broker, may I solicit or accept fees from a borrower in advance to pay third-party providers? Yes. However, prior to accepting the funds, you must provide the borrower a good faith estimate or loan estimate identifying the specific third-party provider goods and services the funds are to be used for and the cost of the goods and services. Additionally, you must not charge the borrower more for the third-party provider goods and services than the actual costs of the goods and services charged by the provider. Once you have the funds you must then:

(a) Deposit the funds in a trust account pursuant to the act and these rules (see WAC 208-660-410 on Trust accounting);

(b) Refund any fees collected for goods or services not provided.

(10) What is a "written commitment from a lender on the same terms and conditions agreed upon by the borrower and mortgage broker"? The written commitment is a written agreement or contract between the mortgage broker and lender containing mutually acceptable loan provisions and terms. The lender must be one with whom the mortgage broker maintains a written correspondent or loan brokerage agreement as required by RCW 19.146.040(3). The mutually acceptable loan provisions and terms must be the same terms and conditions set forth in the most recent good faith estimate or loan estimate.

(11) How do I sponsor a loan originator? You must file a sponsorship request through the NMLS.

(12) What action must a mortgage broker take to terminate a working relationship with a loan originator? The licensed mortgage broker must process the termination through the NMLS.

(13) When must I update my record in the NMLS after I terminate employment with a loan originator? You must process the termination through the NMLS within five business days of the termination.

(14) Are there any loan originator compensation models I am prohibited from using? Yes. You are prohibited from using a compensation model for loan originators based on a loan's interest rate or other terms. You are not prohibited from basing compensation on the principal balance of a loan. Additionally, your loan originator compensation models must comply with federal law, including Regulation Z, 12 C.F.R. Part 1026.

History

Statutory Authority: Chapter 43.320 RCW, RCW 19.146.223. WSR 16-08-027, § 208-660-155, filed 3/30/16, effective 4/30/16
WSR 12-18-048, § 208-660-155, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2010 c 35. WSR 10-20-125, § 208-660-155, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-155, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 109. WSR 09-01-156, § 208-660-155, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-155, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-163 Mortgage brokers—Licensing.

(1) How do I apply for a mortgage broker license? Your application consists of an online filing through the NMLS and Washington specific requirements provided directly to DFI. You must pay an application fee through the NMLS.

(a) Appoint a designated broker. You must appoint a designated broker who meets the requirements of WAC 208-660-250.

(b) Submit an application. You must complete an online application through the NMLS.

(c) Pay the application and license fees. You will have to pay application fees to cover the costs of processing the application. You must also pay a separate annual license fee. See WAC 208-660-550 Department fees and costs.

(d) Prove your identity. You must provide information about the identity of owners, principals, officers, and the designated broker, including fingerprints.

(e) Provide a surety bond. Mortgage brokers must have a surety bond based upon the annual loan origination volume of the mortgage broker. See WAC 208-660-175 (1)(e).

(2) What information will the department consider when deciding whether to approve a mortgage broker license application? The department considers the financial responsibility, character, and general fitness of the applicant, principals, and the designated broker.

(3) Why does the department consider financial responsibility, character, and general fitness before issuing a mortgage broker license? One of the purposes of the act is to ensure that mortgage brokers and loan originators deal honestly and fairly with the public. Applicants, principals, and designated brokers who have demonstrated their financial responsibility, character, and general fitness to operate their businesses honestly, fairly, and efficiently are more likely to deal honestly and fairly with the public.

(4) What specific information will the department consider to determine if the mortgage broker business will be operated honestly, fairly, and in compliance with applicable law?

(a) Whether the applicant, licensee, or other person subject to the act has had any license, or any authorization to do business under any similar statute of this or any other state, denied, suspended, or restricted within the prior five years.

(b) Whether the applicant has ever had a license denied or revoked under this chapter or any similar state statute, including a license for insurance, securities, consumer lending, or escrow.

(c) Whether the applicant, licensee, or other person subject to the act has been convicted of, or pled guilty or nolo contendere to, in a domestic, foreign, or military court to:

(i) A gross misdemeanor involving dishonesty or financial misconduct within the prior seven years;

(ii) A felony within the prior seven years; or

(iii) A felony that involved an act of fraud, dishonesty, breach of trust, or money laundering at any time preceding the date of application.

(d) Whether the licensee or other person subject to the act is, or has been, subject to a cease and desist order or an injunction issued pursuant to the act, or the Consumer Protection Act, or has been found through an administrative, civil, or criminal proceeding to have violated the provisions of the act or rules, or the Consumer Protection Act, chapter 19.86 RCW.

(e) Whether the director has filed a statement of charges, or there is an outstanding order by the director to cease and desist against the licensee or other person subject to the act.

(f) Whether there is documented evidence of serious or significant complaints filed against the licensee, or other person subject to the act, and the licensee or other person subject to the act has been notified of the complaints and been given the opportunity to respond.

(g) Whether the licensee has allowed the licensed mortgage broker business to deteriorate into a condition that would result in denial of a new application for a license.

(h) Whether the licensee or other person subject to the act has failed to comply with an order, directive, subpoena, or requirement of the director or director's designee, or with an assurance of discontinuance entered into with the director or director's designee.

(i) Whether the licensee or other person subject to the act has interfered with an investigation, or disciplinary proceeding by willful misrepresentation of facts before the director or director's designee, or by the use of threats or harassment against a client, witness, employee of the licensee, or representative of the director for the purpose of preventing them from discovering evidence for, or providing evidence in, any disciplinary proceeding or other legal action.

(5) What will happen if my mortgage broker license application is incomplete? If your application is incomplete your file will be marked "pending-deficient" in the NMLS. The department will either identify each deficiency or respond that there are multiple deficiencies and ask you to contact the department. You are responsible for reviewing your record and responding to each issue.

(6) How do I withdraw my application for a mortgage broker license? You may request to withdraw the application through the NMLS.

(7) When will the department consider my mortgage broker license application abandoned? If you do not respond as directed by the department's request for information and within fifteen business days, your license application is considered abandoned and you forfeit all fees paid. Failure to provide the requested information will not affect new applications filed after the abandonment. You may reapply by submitting a new application package and new application fee.

(8) What are my rights if the director denies my license application, or denies, suspends, or revokes my mortgage broker license? The Administrative Procedure Act, chapter 34.05 RCW, governs the proceedings for license application denials, cease and desist orders, license suspension or revocation, the imposition of civil penalties or other remedies ordered by the department, and any appeals or reviews of those actions. See also WAC 208-660-009.

You have the right to request an administrative hearing. To request a hearing, you must notify the department within twenty days from the date of the director's notice to you that your license application has been denied, that you wish to have a hearing. See also WAC 208-660-009.

Upon denial of your mortgage broker license application, and provided the department finds no unlicensed activity, the department will return your surety bond, and refund any remaining portion of the license fee that exceeds the department's actual cost to investigate the license.

(9) May I advertise my business while I am waiting for my mortgage broker license application to be processed? No. It is a violation of the act for nonlicensed, nonexempt mortgage brokers or loan originators to hold themselves out as mortgage brokers or loan originators in Washington.

(10) May I originate Washington residential mortgage loans while waiting for my mortgage broker license application to be processed? No. You may not originate loans prior to receiving your mortgage broker license.

(11) How do I change information on my mortgage broker license? You must file a license amendment application through the NMLS. See also WAC 208-660-400.

(12) When does a mortgage broker license expire? The mortgage broker license expires annually. The expiration date is shown on the license. If the license is an interim license, it may expire in less than one year.

(13) When may the department issue interim mortgage broker licenses? To prevent an undue delay, the director may issue interim mortgage broker licenses, including branch office licenses, with a fixed expiration date. The license applicant must have substantially met the initial licensing requirements, as determined by the director, to receive an interim license.

One example of having substantially met the initial licensing requirements is: Submitting a complete application, paying all application fees, and the department having received and reviewed the result of the applicant's background check.

(14) How do I renew my mortgage broker license?

(a) Before the license expiration date you must:

(i) Complete a renewal request through the NMLS.

(ii) Show evidence that your designated broker completed the required annual continuing education.

(iii) Pay the annual license assessment fee.

(b) The renewed license is valid for the term listed on the license or until surrendered, suspended, or revoked.

(15) If I let my mortgage broker license expire must I apply to get a new license? If you complete all the requirements for renewal on or before the last day of February each year, you may renew an expired license. However, if you renew your license after the expiration, in addition to paying the annual assessment on your license, you must pay an additional fifty percent of your annual assessment. See subsection (14) of this section for the license renewal requirements.

During this two-month period, your license is expired and you must not conduct any business under the act that requires a license until your license has been renewed.

If you fail to comply with the renewal request requirements by the last day of February each year, you must apply for a new license.

(16) May I still conduct my mortgage broker business if my mortgage broker license has expired? No. If your mortgage broker license expires, you must not conduct any business under the act that requires a license until you renew your license.

(17) What should I do if I wish to close my mortgage broker business? You may surrender the mortgage broker license by submitting a surrender request through the NMLS and submitting a completed departmental closure form. Surrendering your license does not change your civil or criminal liability, or your liability for any administrative actions arising from any acts or omissions occurring before you surrender your license. Contact the Washington department of revenue to find out how to handle any unclaimed funds in your trust account.

(18) May I transfer, sell, trade, assign, loan, share, or give my mortgage broker license to another person or company? No. A mortgage broker license authorizes only the person named on the license to conduct the business at the location listed on the license. See also WAC 208-660-155(2).

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 19-21-142, § 208-660-163, filed 10/22/19, effective 11/24/19. Statutory Authority: Chapter 43.320 RCW, RCW 19.146.223. WSR 16-08-027, § 208-660-163, filed 3/30/16, effective 4/30/16
WSR 12-18-048, § 208-660-163, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-163, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 109. WSR 09-01-156, § 208-660-163, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040, 19.146.223. WSR 08-05-126, § 208-660-163, filed 2/20/08, effective 3/22/08. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-163, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-175 Mortgage brokers—Surety bond.

(1) What are the surety bond requirements for licensed mortgage brokers?

(a) Mortgage brokers must at all times have a valid surety bond on file with the director. The surety bond must be provided on a form prescribed by the department.

(b) The surety bond amount must be based upon the annual loan origination volume of the licensee in the state of Washington.

(c) When the mortgage broker initially applies for a license, the dollar amount of the surety bond must be a minimum of twenty thousand dollars. Thereafter, by March 31st of each year, you must determine your required bond amount based on loan origination volume and provide DFI with proof of having an adequate bond.

(d) The surety bond must list the mortgage broker's corporate name and NMLS unique identifier.

(e) The following chart shows the surety bond amount required for the annual loan origination volume of the licensee in the state of Washington:

| Loan Volume in Millions | Bond Amount | | | | --- | --- | --- | --- | | | $40+ | | $60,000 | | | $20 to $40 | | $40,000 | | | $0 to $20 | | $20,000 |

(f) If you only offer residential mortgage loan modification services, your bond amount is twenty thousand dollars, initially and thereafter.

(2) Who provides mortgage broker surety bonds? To purchase a surety bond, contact your insurance broker. A list of insurance companies that underwrite Washington surety bonds in Washington is available from the Washington state office of the insurance commissioner's website.

(3) What happens to my mortgage broker license if my surety bond is canceled? Failure to maintain a surety bond is a violation of the act and may result in an enforcement action against you.

(4) May I change surety bond companies? Yes. You may change your insurance provider at any time. Your current insurance company will issue a cancellation notice for your existing surety bond. The cancellation notice may be effective no less than thirty days following the director's receipt of the cancellation notice.

Prior to the cancellation date of the existing surety bond, you must have on file with the department a replacement surety bond. The replacement surety bond must be in effect on or before the cancellation date of the prior surety bond.

(5) Why must I carry a surety bond to have a mortgage broker license? The surety bond protects the state and any persons who suffer loss by reason of violations of any provision of the act or these rules by you or your employees or independent contractors.

(6) Who may make a claim against a licensed mortgage broker's surety bond? The director, or any person, including a third-party provider, who has been injured by a violation of the act, may make a claim against a bond.

(7) How does a person make a claim against a licensed mortgage broker's surety bond? The department can provide the name of a licensed mortgage broker's surety bond provider. Contact the surety bond company and follow its required procedures to make your claim.

(8) How long does the bond claim procedure take? The time to complete a bond claim may vary among bonding companies. If the claimant is not a borrower, final judgment will not be entered prior to one hundred eighty days after the claim is filed.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 19-21-142, § 208-660-175, filed 10/22/19, effective 11/24/19. Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. WSR 12-18-048, § 208-660-175, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2010 c 35. WSR 10-20-125, § 208-660-175, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-175, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-175, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-176 Mortgage brokers—Recovery fund in lieu of surety bond.

(1) What if the surety bond required in WAC 208-660-175 is not reasonably available in the insurance market? If the director determines that the bond required is not reasonably available due to the insurance market or other product availability issue, the director must waive the requirements for the bond.

(2) If a recovery fund is created, how will it be funded? All licensees will pay a fee at application and renewal, in addition to all license application fees, through the NMLS, to fund the recovery fund.

(3) How much will the recovery fund fees be?

(a) Two hundred fifty dollars for the main office location;

(b) One hundred fifty dollars for each branch office; and

(4) Will the fund have a cap or maximum? After the fund has been in existence for three years, and periodically thereafter, the director may determine the maximum fund amount needed based upon claims made.

(5) What happens to any interest that accrues on the mortgage recovery fund balance? All interest that accrues in the fund will be added to the balance of the fund.

(6) Can the department use any of the recovery fund money? Yes. On an annual basis the department may apply up to fifty thousand dollars to fund the department's expenses in administering the mortgage recovery fund.

(7) What is the procedure for recovery from the fund?

(a) A claimant must obtain a money judgment from a superior court that includes findings of violations of this act against a mortgage broker or mortgage loan originator.

(b) The final money judgment must be obtained after January 1, 2010, after execution has been returned unsatisfied and the judgment has been recorded.

(c) The person in (a) of this subsection must file a verified claim with the court in which the judgment was entered, and on twenty days' written notice to the director and to the judgment debtor, may apply to the court for an order directing payment from the mortgage recovery fund of any unpaid amount on such judgment.

(d) After giving notice and the opportunity for a hearing to the person seeking recovery, to the judgment debtor and to the department, the court may enter an order requiring the director to pay from the mortgage recovery fund the amount the court finds payable on the claim, pursuant to and in accordance with the limitations contained in this section, if the court is satisfied as to the proof of all matters required to be shown under subsection (a) of this section, and that the person seeking recovery from the mortgage recovery fund has satisfied all requirements of this section.

(e) If the court finds that the aggregate amount of claims against a mortgage broker or mortgage loan originator exceeds the limits set forth in WAC 208-660-175, the court must reduce proportionately the amount the court finds payable on the claim.

(f) When the director receives notice that a hearing is scheduled under this section, the director may enter an appearance, file a response, appear at the hearing or take any other appropriate action as he or she deems necessary to protect the mortgage recovery fund from spurious or unjust claims and to ensure compliance with the requirements for recovery under this section.

(g) The department must provide the court with information concerning the mortgage recovery fund necessary to enable the court to carry out its duties under this section.

(8) What must a person show at the hearing on the recovery fund claim? The person seeking recovery from the mortgage recovery fund must show:

(a) That the judgment has not been discharged in bankruptcy and is based on facts allowing recovery under the act;

(b) That the person is not a spouse of the judgment debtor, or the personal representative of the spouse;

(c) That the person is not a mortgage broker or mortgage loan originator as defined by this chapter who is seeking to recover any compensation regarding the mortgage loan transaction which is the subject of the money judgment upon which a claim against the mortgage recovery fund is based; and

(d) That, based on the best available information, the judgment debtor lacks sufficient nonexempt assets in this or any state to satisfy the judgment.

(9) What may recovery funds obtained be used for?

(a) Any recovery on the money judgment received by the judgment creditor before payment from the mortgage recovery fund must be applied by the judgment creditor to reduce the judgment creditor's actual damages which were awarded in the judgment.

(b) A recovery from the fund will not include punitive damages awarded by a court.

(10) What is the statute of limitations for a claim from the recovery fund? A verified claim against the recovery fund must be filed within one year of the date of termination of all court proceedings concerning the judgment, including appeals.

(11) What types of claims will the fund award money on?

(a) The fund will be used to reimburse persons awarded actual damages resulting from acts constituting violations of the act by a mortgage broker or mortgage loan originator who was licensed, or required to be licensed, under this chapter at the time that the act was committed.

(b) Payments from the mortgage recovery fund may not be made to:

(i) Any licensee whose acts were found by a court to be violations of this chapter and a basis of the court's award of a money judgment to a person injured by such violations;

(ii) Any person who acquires a mortgage loan where acts associated with the origination of such loan are found by a court to be violations of this chapter and a basis for a judgment obtained by a person injured by such violations; or

(iii) The spouse, the personal representative of the spouse of the judgment debtor or the personal representative of the judgment debtor.

(12) Will the department revoke my license if a claim is made against the recovery fund based on my actions?

(a) The director may revoke a license issued under this chapter if the director is required by court order under this section to make a payment from the mortgage recovery fund based on a money judgment that includes findings of violations of this chapter by such licensee.

(b) A person whose license has been revoked under this subsection is not eligible to be considered for the issuance of a new license under this chapter until the person has repaid in full, plus interest at the current legal rate, the amount paid from the mortgage recovery fund resulting from that person's violation of this chapter.

(c) This section does not limit the authority of the director to take disciplinary action against a licensee under this chapter for a violation of this chapter or of rules promulgated or orders issued pursuant to this chapter. The repayment in full to the mortgage recovery fund of all obligations of a licensee under this chapter does not nullify or modify the effect of any other disciplinary proceeding brought under this chapter.

History

Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. WSR 12-18-048, § 208-660-176, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-176, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-660-180 Mortgage brokers—Main office.

(1) Must a licensed mortgage broker have a designated broker? Yes. Licensed mortgage broker companies must have an approved designated broker at all times.

(2) How many designated brokers may a mortgage broker have? The mortgage broker may appoint only one individual to be the designated broker at any given time. The designated broker need not be a principal of the licensee.

It is a prudent business practice to have more than one qualified individual working for the licensee who could be appointed as the designated broker.

(3) If my designated broker leaves, may I continue to operate my mortgage broker business? Yes. You may continue to operate your mortgage broker business. However, you must notify the department within five business days of the loss of or change of your designated broker. You must then replace the designated broker within thirty days of the loss or change of the designated broker. If you need more than thirty days to replace the designated broker, you must seek approval from the department. Failure to replace your designated broker, or receive approval from the director for an extension, may result in an enforcement action against you.

(4) What must I do to replace my designated broker? You must apply through the NMLS for approval of the new designated broker. The new designated broker must meet the requirements of WAC 208-660-250(1). You and the new designated broker must meet the good standing requirements of WAC 208-660-007.

(5) What must I do if I sell all or part of my mortgage broker company? See WAC 208-660-400(13).

(6) After my mortgage broker license is approved, may I change my business structure? Yes. See WAC 208-660-400 (7)(a)(iv).

(7) May a licensed mortgage broker share an office with a licensed real estate broker? Yes. A licensed mortgage broker may share an office with a licensed real estate broker. The mortgage broker location must be licensed as a main or branch mortgage broker office.

(8) If a licensed mortgage broker shares an office with a licensed real estate broker, what must the mortgage broker do to notify the public that the office is shared? The licensed mortgage broker must clearly identify the mortgage broker business as separate from the real estate business to the public on any signage, advertising, or other material identifying the businesses.

(9) May I add a trade name (or "DBA") to my mortgage broker license? Yes. You may add a trade or "DBA" name to the mortgage broker license if you first apply to the department, in a form prescribed by the department, and receive department approval. When the department has approved the trade name, you must conduct business under that trade name in at least one of the two following ways:

(a) Use your license name together with the trade name; or

(b) Use your mortgage broker license number together with the trade name.

(10) May the department deny an application for a proposed DBA name because it is similar to an existing licensee name? Yes. The director may deny an application for a proposed DBA name if the proposed DBA name is similar to a currently existing licensee name.

(11) May I conduct my mortgage broker business from more than one location? Yes. You may establish one or more branch offices under your license. See WAC 208-660-195 for information on licensing branch offices.

History

Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. WSR 12-18-048, § 208-660-180, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-180, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.146.223. WSR 08-05-126, § 208-660-180, filed 2/20/08, effective 3/22/08. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-180, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-195 Mortgage brokers—Branch offices.

(1) May I open branch offices under my mortgage broker license? Yes. A licensed mortgage broker may submit license application(s) to the department through the NMLS to establish branch office(s) under the existing mortgage broker license. Each branch office must be licensed and must pay an annual license fee. See WAC 208-660-550, Department fees and costs.

(2) If my branch offices are under separate ownership, does that limit my liability for their activities? No. Licensed mortgage brokers are responsible for the activity and violations at their branch offices regardless of the structure or label given the branch offices. Licensure of a branch office creates a direct line of responsibility from the main office to the branch.

(3) If my branch offices are under separate ownership, what level of supervision must I maintain? Because branch offices, regardless of their business structure, are not independent from your license and surety bond, you are responsible for the conduct of anyone conducting business under your license. You must have a written supervisory plan. The details of the plan, and how you implement the plan for your branch offices, must take into account the number of branch offices, their location, and the number of individuals working at the branch offices. You must maintain your written supervisory plan as part of your business books and records.

(4) How do I apply for a mortgage broker branch office license? As the licensed mortgage broker, you must apply for a branch office license through the NMLS and receive approval from the department before operating from any location other than your licensed location. You must be in good standing. You will have to pay application and annual assessment fees for the branch office(s). See WAC 208-660-550, Department fees and costs.

(5) What does the department consider when reviewing an application for a branch office license? The department considers:

(a) Whether the mortgage broker is in good standing. See WAC 208-660-007.

(b) Whether the physical address listed in the application can be verified as a branch office location.

(6) If I am an internet company, how do I display my license? You must display your license information, as it appears on your license, including any or all business names, and the license number, on your website. The information must also include a list of the states in which you are licensed.

(7) How do I change information on my mortgage broker branch office license? You must file a license amendment through the NMLS.

(8) Does my branch office license expire? The license expires annually. The expiration date is shown on the license. If the license is an interim license, it may expire in less than one year.

(9) How do I renew my mortgage broker branch office license?

(a) Before the expiration date, the licensed mortgage broker must submit an online renewal and pay the branch office annual assessment fee through the NMLS.

(b) The renewed mortgage broker branch office license is valid for the term listed on the license or until surrendered, suspended, or revoked.

(10) If my mortgage broker branch office license expires, must I apply for a new license? If you complete all the requirements for renewal by the last day of February each year, you may renew an existing license. However, if you renew your license during this two-month period, in addition to paying the annual assessment on your branch office license, you must pay an additional fifty percent of your annual assessment for that branch. See subsection (9) of this section for the license renewal requirements.

During this two-month period, your license is expired and you must not conduct any business under the act that requires a license until your license has been renewed.

If you fail to comply with the renewal request requirements by the last day of February, each year, you must apply for a new license.

(11) If my mortgage broker branch office license has expired, may I still conduct my mortgage broker business from that location? No. Once the mortgage broker branch office license has expired, you must not conduct any business under the act that requires a license until you renew your license.

(12) If my mortgage broker main office license expires, may I still conduct my mortgage broker business from a branch office? No. Once the mortgage broker main office license expires, you must not conduct any business under the act that requires a license from any location until you renew the main office license.

(13) May I add a trade name (or "DBA") to my mortgage broker branch office license? Yes. You may add a trade name, or "DBA" name, to the mortgage broker branch office license if you first apply to the department, in a form prescribed by the director, and receive department approval. Branch trade names must also be listed on the main office record in the NMLS. The branch office trade name must at all times be identified as connected with the mortgage broker's license name as it appears on the mortgage broker license. When the department has approved the trade name, you must conduct business under that trade name in at least one of the two following ways:

(a) Use your license name together with the branch office trade name; or

(b) Use the branch office trade name and mortgage broker main office license number together.

(14) How must I identify my mortgage broker branch office(s)? The branch office must be prominently identified as a branch or division of the licensed mortgage broker so as not to appear to be an independent enterprise.

(15) Does my branch office have to be a physical location? Yes. The physical location may be at a commercial or residential address but does not have to be in Washington. See WAC 208-660-420, Out-of-state mortgage brokers and loan originators.

(16) Must I have a branch manager? No. Although you may appoint one, the act does not require a branch manager. You and the designated broker are responsible for the business conducted at all locations.

(17) If I appoint a branch manager, must he or she be licensed? If the branch manager performs any of the functions of a mortgage broker or loan originator, he or she must be licensed. If they do not perform those functions, they must not be paid a commission or salary based upon the number of transactions closed.

(18) Must I have a designated broker at each branch? No. You may have only one designated broker who is responsible for the mortgage broker business at all locations.

(19) If I want my licensed company to become a branch of another mortgage broker, what must be completed before the licensed loan originators can start transacting business under the sponsorship of the other mortgage broker? The loan originators may begin doing business when the other mortgage broker has filed and received department approval of a new branch office, if necessary, and has sponsored and received departmental approval for each of the licensed loan originators.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 19-21-142, § 208-660-195, filed 10/22/19, effective 11/24/19
WSR 13-24-023, § 208-660-195, filed 11/22/13, effective 1/1/14. Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. WSR 12-18-048, § 208-660-195, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-195, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 109. WSR 09-01-156, § 208-660-195, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040, 19.146.223. WSR 08-05-126, § 208-660-195, filed 2/20/08, effective 3/22/08. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-195, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-250 Designated brokers—General.

(1) How do I become a designated broker?

(a) Be eighteen years or older.

(b) Have a high school diploma, an equivalent to a high school diploma, or two years experience in the industry in addition to the experience required in (e) of this subsection. The experience must meet the criteria in (e) of this subsection.

(c) You must pass the Washington designated broker test. See WAC 208-660-260, Designated brokers—Testing. If you will originate loans, you must also take and pass the loan originator test and apply for and receive a loan originator license.

(d) You must be appointed to the designated broker position by the licensed mortgage broker through an application and approval process with the department and the NMLS.

(e) You must have a minimum of two years experience lending or originating residential mortgage loans.

(i) The work experience must be in one or more of the following, within the last five years:

(A) As a mortgage broker or designated broker of a mortgage broker for a minimum of two years; or

(B) As a mortgage banker, responsible individual, or manager of a mortgage banking business; or

(C) As a loan originator with responsibility primarily for originating loans secured by a lien on residential real estate; or

(D) As a branch manager of a lender with responsibility primarily for loans secured by a lien on residential real estate; or

(E) As a manager or supervisor of mortgage loan originators; or

(F) As a mortgage processor, underwriter, or quality control professional; or

(G) As a regulator, examiner, investigator, compliance expert, or auditor, whose primary function is the review of mortgage companies and their compliance processes, and the department determines your background is sufficient.

(ii) The work experience must be evidenced by a detailed work history and:

(A) W-2 Federal Income Tax Reporting Forms in the designated broker appointee's name; or

(B) 1099 Federal Income Tax Reporting Forms in the designated broker appointee's name; or

(C) Corporate tax returns signed by the designated broker appointee or corporate officer for a licensed or exempt residential mortgage company; or

(f) In addition to supplying the application information, both you and the licensed mortgage broker must be in good standing with the department; or

(g) Demonstrate financial responsibility, character and general fitness.

(2) How do I demonstrate financial responsibility? The department will review your credit history to determine if you have outstanding judgments (except judgments involving medical expenses); current outstanding tax liens or other government liens and filings; foreclosures within the last three years; or a pattern of seriously delinquent accounts within the past three years.

Specifically, you are not eligible to become a designated broker if you have one hundred thousand dollars or more of tax liens against you at the time of appointment by a licensed mortgage broker.

(3) May I work as the designated broker for more than one company? Yes. You may be the designated broker for more than one licensee after receiving approval from the director.

(4) As the designated broker, must I hold a loan originator's license? Yes. If you perform any of the functions of a loan originator, you must apply for and receive a loan originator license.

(5) May I work as the designated broker for one licensee and a licensed loan originator for another licensee? Yes. If you want to originate loans for a mortgage broker different from the mortgage broker for whom you are the designated broker, you must amend your license information through the NMLS to reflect the new relationship and the second company must sponsor you. Federal law may prohibit a mortgagee from hiring employees who work for more than one mortgage broker or who have multiple employers.

(6) May a designated broker hire employees or independent contractors apart from the employees or independent contractors working for the mortgage broker licensee? No. Only the mortgage broker licensee can have employees or independent contractors. This prohibition against a designated broker having employees or independent contractors includes clerical or administrative personnel whose work is related to the mortgage broker licensee's activities, and loan processors.

(7) As a designated broker, what reporting requirements must I comply with? See WAC 208-660-400, Reporting requirements.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 13-24-023, § 208-660-250, filed 11/22/13, effective 1/1/14. Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. WSR 12-18-048, § 208-660-250, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-250, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 109. WSR 09-01-156, § 208-660-250, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040, 19.146.223. WSR 08-05-126, § 208-660-250, filed 2/20/08, effective 3/22/08. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-250, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-260 Designated brokers—Testing.

(1) Must I pass a test prior to becoming a designated broker? Yes. You must take and pass the Washington designated broker test. See subsection (3) of this section if you are going to originate loans. See WAC 208-660-250(1) if you have never been a designated broker.

(2) If I am currently a designated broker, will I have to take the test again? You will only have to retake the test if you stop working as a designated broker for five years or longer.

(3) If I am currently a designated broker that originates loans, will I have to take the loan originator test and obtain a loan originator license? Yes. You must take and pass the national and state NMLS tests and obtain the necessary prelicensing education prior to acting as a loan originator.

(4) Where can I get information about the designated broker test? Go to the department's website for information about the designated broker test: http://www.dfi.wa.gov/cs/mb_testing.htm.

(5) What topics may be covered in the designated broker test? See WAC 208-660-600(3).

(6) How soon after failing the designated broker test may I take it again? After failing the test three consecutive times you must wait at least fourteen days before taking the test again.

History

Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. WSR 12-18-048, § 208-660-260, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-260, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 109. WSR 09-01-156, § 208-660-260, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040, 19.146.223. WSR 08-05-126, § 208-660-260, filed 2/20/08, effective 3/22/08. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-260, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-270 Designated brokers—Continuing education.

(1) Where can I get information about continuing education? The NMLS will publish a list of approved courses and providers. The providers will have detailed information about the continuing education courses they offer. The department will accept the continuing education courses approved by the NMLS for designated broker continuing education.

(2) As a designated broker, how many hours of continuing education must I have? The continuing education requirement for designated brokers is nine hours.

(3) As a designated broker, may I take the same approved course multiple times to meet my annual continuing education requirement? No. You may not take the same approved course in the same or successive years to meet the annual requirements for continuing education.

(4) If I teach a continuing education course approved by the NMLS, may I use my course as credit toward my annual continuing education requirement? Yes. As an instructor of a NMLS approved continuing education course, you may receive credit for your annually required designated broker continuing education courses from the course(s) you teach. You will receive credit at the rate of one course taught equaling two continuing education course credits.

(5) Is ethics a required continuing education topic for designated brokers? Yes. You must take two hours of ethics each year you act as a designated broker. The ethics course must include the topics of fraud, consumer protection, and fair lending. You must not take the same course in the same or successive years.

(6) If I accumulate more than the required designated broker continuing education course credits during a year, may I carry-over the excess credit to the next year? No. Continuing education credits only apply to the year in which they are taken.

(8) If I fail to complete the required continuing education, what happens to my license? When your license expires, the department will not renew it and you cannot continue conducting any business under the act. See WAC 208-660-350(20) to renew your license within two months after expiration.

History

Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. WSR 12-18-048, § 208-660-270, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-270, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-270, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-300 Loan originators—General.

(1) May I work as a loan originator for more than one mortgage broker? Yes.

(2) How do I obtain approval to work for more than one mortgage broker? Using the NMLS, the company will submit a sponsorship request. The department will notify you and others associated with your license upon approval of your request. The NMLS will charge a fee for the additional relationship. See also WAC 208-660-550.

(3) If I work as a loan originator for more than one mortgage broker, may I take an application from a borrower without identifying one specific mortgage broker? No. You may take an application for only one mortgage broker at a time in any one transaction. Prior to presenting yourself to a specific borrower as licensed to originate mortgage loans, you must state who you represent. You must clearly identify the mortgage broker by name and address on the application, on all disclosures, authorization forms, and other material provided to the borrower. There must be no confusion by the borrower as to which mortgage broker you are representing at any given time.

(4) May I work from any location when I am a licensed loan originator? No. You can only work from a licensed location unless you conduct activity under the act from your residence pursuant to WAC 208-660-505.

(5) May a loan originator transfer loan files to a mortgage broker other than the mortgage broker the loan originator is associated with? No. Only the borrower may submit a written request to the licensed mortgage broker to transmit the borrower's selected information to another mortgage broker or lender. The licensed mortgage broker must transmit the information within five business days after receiving the borrower's written request.

(6) Who owns loan files? Loan files are the property of the mortgage broker named on the loan application and the mortgage broker must keep the original files and documents.

(7) May I act as a loan originator and a real estate agent or with someone in the same real estate agency in the same transaction or for the same borrower in different transactions? Yes, for required disclosure language see RCW 19.146.0201(14).

(8) As a loan originator, may I be paid directly by the borrower for my services? No. As a loan originator, you may not be paid any compensation or fees directly by the borrower.

(9) May a loan originator charge the borrower a fee, commission, or other compensation for preparing, negotiating, or brokering a loan for the borrower? No. A loan originator may not charge the borrower a fee, commission, or compensation of any kind in connection with the preparation, negotiation, and brokering of a residential mortgage loan.

(10) May a loan originator bring a lawsuit against a borrower for the collection of compensation? No. Only licensed mortgage brokers, or exempt mortgage brokers, may bring collection actions against borrowers to collect compensation.

(11) May I work as a licensed loan originator for a mortgage broker located out of the state? Yes. You may originate loans for any mortgage broker who sponsors you and who is licensed under Washington law.

(12) May a licensed loan originator hire employees or independent contractors to assist in the mortgage broker licensee's activities? No. Only the mortgage broker licensee can have employees or independent contractors. This prohibition against loan originators hiring employees or independent contractors includes clerical or administrative personnel whose work is related to the mortgage broker licensee's activities, and loan processors.

(13) Do loan processors have to be licensed as loan originators? W-2 employee loan processors are not required to have a loan originator license provided they work under the supervision and instruction of a licensed mortgage loan originator (including the designated broker) and do not hold themselves out as able to conduct the activities of a licensed mortgage broker or loan originator. Independent contractor loan processing companies must be licensed as a mortgage broker, have a designated broker, and have at least one licensed mortgage loan originator (who can be the designated broker). The W-2 employee loan processors are not then required to be licensed mortgage loan originators. Individual independent contractor loan processors must be licensed as mortgage loan originators, be sponsored by a licensed mortgage broker, and be supervised by that licensee's licensed mortgage loan originator (including the designated broker).

(14) May loan processors work on files from an unlicensed location? A loan processor may work on loan files from an unlicensed location under the following circumstances:

(a) The loan files are in electronic format and the loan processor accesses the files directly from the licensed mortgage broker's main computer system. The loan processor may not maintain any electronic files on any computer system other than the system belonging to the licensed mortgage broker.

(b) The loan processor does not conduct any of the activities of a licensed loan originator.

(c) The licensed mortgage broker must have safeguards in place for the computer system that safeguards borrower information.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 22-24-049, § 208-660-300, filed 11/30/22, effective 12/31/22. Statutory Authority: Chapter 43.320 RCW, RCW 19.146.223. WSR 16-08-027, § 208-660-300, filed 3/30/16, effective 4/30/16
WSR 12-18-048, § 208-660-300, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-300, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 109. WSR 09-01-156, § 208-660-300, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040, 19.146.223. WSR 08-05-126, § 208-660-300, filed 2/20/08, effective 3/22/08. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-300, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-350 Loan originators—Licensing.

(1) How do I apply for a loan originator license? Your application consists of an online filing through the NMLS and Washington specific requirements provided directly to DFI. You must pay an application fee through the NMLS system. See also WAC 208-660-352 Temporary authority to originate loans. You also must:

(a) Be eighteen years or older.

(b) Prove your identity. You must provide information to prove your identity.

(c) Complete prelicensing education. You must complete prelicensing education before submitting the license application. See WAC 208-660-355.

(d) Pass a licensing test. You must take and pass the NMLS test before submitting the license application. See WAC 208-660-360 Loan originators—Testing.

(e) Pay the application fee. You must pay an application fee for your application, as well as an administrative fee to the NMLS. See WAC 208-660-550 Department fees and costs.

(2) In addition to reviewing my application, what else will the department consider to determine if I qualify for a loan originator license?

(b) License revocations.

(i) You are not eligible for a loan originator license if you have been found to be in violation of the act or the rules.

(ii) You are not eligible for a loan originator license if you have ever had a license issued under the Mortgage Broker Practices Act or the Consumer Loan Act or any similar state statute revoked.

(iii) For purposes of (b) and (c) of this subsection, a "similar statute" may include statutes involving other financial services, such as insurance, securities, escrow or banking.

(i) You are not eligible for a loan originator license if you have ever been convicted of a felony involving an act of fraud, dishonesty, breach of trust, or money laundering.

(ii) You are not eligible for a loan originator license if you have been convicted of a gross misdemeanor involving dishonesty or financial misconduct, or a felony not involving fraud, dishonesty, breach of trust, or money laundering, within seven years of the filing of the present application.

(d) Financial background.

(i) The department will investigate your financial background including a review of your credit report to determine if you have demonstrated financial responsibility including, but not limited to, an assessment of your current outstanding judgments (except judgments solely as a result of medical expenses); current outstanding tax liens or judgments or other government liens or filings; foreclosure within the last three years; or a pattern of seriously delinquent accounts within the past three years.

(ii) Specifically, you are not eligible to receive a loan originator license if you have one hundred thousand dollars or more of tax liens against you at the time of appointment by a licensed mortgage broker.

(3) What will happen if my loan originator license application is incomplete? After submitting your online application through the NMLS, the department will notify you of any application deficiencies.

(4) How do I withdraw my application for a loan originator license? Once you have submitted the online application through NMLS you may withdraw the application through NMLS. You will not receive a refund of the NMLS application fee but you may receive a partial refund of your licensing fee if the fee exceeds the department's actual cost to investigate the license application. The withdrawal of your license application will not affect any license suspension or revocation proceedings in progress at the time you withdraw your application through the NMLS.

(5) When will the department consider my loan originator license application to be abandoned? If you do not respond as directed by the department's request for information within fifteen business days, your loan originator license application is considered abandoned and you forfeit all fees paid. Failure to provide the requested information will not affect new applications filed after the abandonment. You may reapply by submitting a new application package and new application fee.

(6) What happens if the department denies my application for a loan originator license, and what are my rights if the license is denied? Under the Administrative Procedure Act, chapter 34.05 RCW, you have the right to request a hearing. To request a hearing, notify the department, in writing, within twenty days from the date of the director's notice to you notifying you your license application has been denied. See also WAC 208-660-009.

(7) May I transfer, sell, trade, assign, loan, share, or give my loan originator license to someone else? No. A loan originator license authorizes only the individual named on the license to conduct the business at the location listed on the license.

(8) How do I change information on my loan originator license? You must submit an amendment to your license through the NMLS. You may be charged a fee.

(9) What is an inactive loan originator license? When a licensed loan originator is not sponsored by a licensed or exempt company, the license is inactive. When an individual holds an inactive license, they may not conduct any of the activities of a loan originator, or hold themselves out as a licensed loan originator.

(10) When my loan originator license is inactive, am I subject to the director's enforcement authority? Yes. Your license is granted under specific authority of the director and under certain situations you may be subject to the director's authority even if you are not doing any activity covered by the act.

(11) May I originate loans from a website when my license is inactive? No. You may not originate loans, or engage in any activity that requires a license under the act, while your license is inactive.

(12) When my loan originator license is inactive, must I continue to pay annual fees, and complete continuing education for that year? Yes. You must comply with all the annual licensing requirements or you will be unable to renew your inactive loan originator license.

(13) How do I activate my loan originator license? The sponsoring company must submit a sponsorship request for your license through the NMLS. The department will notify you and all the companies you are working with of the new working relationship if approved.

(14) When may the department issue interim loan originator licenses? To prevent an undue delay, the director may issue interim loan originator licenses with a fixed expiration date. The license applicant must have substantially met the initial licensing requirements, as determined by the director, to receive an interim license. In no case shall these requirements be less than the minimum requirements to obtain a license under the S.A.F.E. Act.

(15) When does my loan originator license expire? The loan originator license expires annually on December 31st. If the license is an interim license, it may expire in less than one year.

(16) How do I renew my loan originator license?

(a) You must continue to meet the minimum standards for license issuance. See RCW 19.146.310.

(b) Before the license expiration date you must renew your license through the NMLS. Renewal consists of:

(i) Pay the annual assessment fee; and

(ii) Meet the continuing education requirement. You will not have a continuing education requirement in the year in which you complete the core twenty hours of prelicensing education. See WAC 208-660-370.

(17) If I let my loan originator license expire, must I apply to get a new license? If you complete all the requirements for renewal on or before the last day of February each year, you may renew an existing license. However, if you renew your license during this two-month period, in addition to paying the annual assessment on your license, you must pay an additional fifty percent of your annual assessment. See subsection (16) of this section for the license renewal requirements.

During this two-month period, your license is expired and you must not conduct any business under the act that requires a license.

If you fail to comply with the renewal request requirements by the last day of February each year, you must apply for a new license.

(18) If I let my loan originator license expire and then apply for a new loan originator license, must I comply with the continuing education requirements from the prior license period? Yes. Before the department will consider your new loan originator application complete, you must provide proof of satisfying the continuing education requirements from the prior license period.

(19) May I still originate loans if my loan originator license has expired? No. Once your license has expired you may no longer conduct the business of a loan originator, or hold yourself out as a licensed loan originator, as defined in the act and these rules.

(20) What happens to the loan applications I originated before my loan originator license expired? Because loan files belong to the licensed mortgage broker, existing loan applications must be processed by the licensed mortgage broker, unless the borrower makes a written demand that the loan file be transferred to another licensed entity. See WAC 208-660-300 (5) and (6).

(21) May I surrender my loan originator's license? Yes. Only you may surrender your license before the license expires through the NMLS.

Surrendering your loan originator license does not change your civil or criminal liability, or your liability for any administrative actions arising from acts or omission occurring before the license surrender.

(22) Must I display my loan originator license where I work as a loan originator? No. Neither you nor the mortgage broker company is required to display your loan originator license. However, evidence that you are licensed as a loan originator must be made available to anyone who requests it.

(23) Must I include my license number on any documents? You must include your license number closely following your license name on (a) through (d) of this subsection. An example of closely following is: Your license name followed by your title (if you use one) followed by your license number.

(a) Solicitation. This includes correspondence in any form. Correspondence that is not a solicitation does not have to include your license number.

(b) Business cards.

(d) Any state or federal form that requires your license number. See also WAC 208-660-350(25).

(24) When must I disclose my loan originator license number? In the following situations you must disclose your loan originator license number and the name and license number of the mortgage broker you are associated with:

(a) When asked by any party to a loan transaction, including third party providers;

(b) When asked by any person you have solicited for business, even if the solicitation is not directly related to a mortgage transaction;

(d) When taking a residential mortgage loan application.

(25) May I conduct business and advertise under a name other than the name on my loan originator license? You must use the name on your license when you are conducting business and in your advertisements with the following exceptions: Except, use of your middle name is not required. Except, you may use only your middle and last name; except, you may use a nickname as your first name if it is registered in NMLS on your MU4 as an "other" name.

(26) Will I have to obtain an individual bond if the company I work for is exempt from licensing? Reserved.

(27) Will I have to file quarterly call reports if I have an individual bond? Reserved.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 19-21-142, § 208-660-350, filed 10/22/19, effective 11/24/19. Statutory Authority: Chapter 43.320 RCW, RCW 19.146.223. WSR 16-08-027, § 208-660-350, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 13-24-023, § 208-660-350, filed 11/22/13, effective 1/1/14. Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. WSR 12-18-048, § 208-660-350, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040 and 19.146.223. WSR 11-22-022, § 208-660-350, filed 10/25/11, effective 11/25/11. Statutory Authority: RCW 43.320.040, 19.146.223, and 2010 c 35. WSR 10-20-125, § 208-660-350, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-350, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040. WSR 09-12-111, § 208-660-350, filed 6/2/09, effective 7/3/09. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 109. WSR 09-01-156, § 208-660-350, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040, 19.146.223. WSR 08-05-126, § 208-660-350, filed 2/20/08, effective 3/22/08. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 07-13-079, § 208-660-350, filed 6/18/07, effective 7/19/07
WSR 06-23-137, § 208-660-350, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-352 Temporary authority to originate loans.

(3) How do I receive temporary authority?

(a) You must be employed and sponsored by a company licensed in Washington;

(b) You must file a license application pursuant to WAC 208-660-350 (1)(a) through (d); and

(c) You must not have any disqualifying criminal history, been subject to or served with a cease and desist order, or had an MLO license denied, revoked, or suspended in any jurisdiction.

(5) Can my license application be denied during the period of temporary authority? Yes. Your application can be denied at any time during the application review process.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 19-21-142, § 208-660-352, filed 10/22/19, effective 11/24/19.

Wash. Admin. Code § 208-660-355 Loan originators—Prelicensing education.

(1)(a) Must I obtain prelicensing education before I will be given a license? Yes. You must complete at least twenty-two hours of prelicensing education from an NMLS approved provider. The prelicensing education must include at least three hours of federal law and regulations; three hours of ethics, which must include instruction on fraud, consumer protection, and fair lending issues; two hours related to lending standards for the nontraditional mortgage product marketplace; and at least four hours of training specifically related to Washington law.

(b) You will receive credit for having completed the SAFE required prelicensing education for every state once you have successfully completed the SAFE required prelicensing education requirements approved by the NMLS for any state.

(2) Who provides prelicensing education? The NMLS approves course providers and courses for prelicensing education. See the NMLS Resource Center for a list of approved providers and courses.

(3) Must I complete continuing education in the year I complete the prelicensing education? No. You will not have a continuing education requirement in the year in which you complete the core twenty hours of prelicensing education.

History

Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. WSR 13-06-022, § 208-660-355, filed 2/27/13, effective 4/1/13
WSR 12-18-048, § 208-660-355, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-355, filed 12/1/09, effective 1/1/10.

Wash. Admin. Code § 208-660-360 Loan originators—Testing.

(1) Must I pass a test prior to becoming a loan originator? Yes. You must take and pass the NMLS sponsored loan originator test. The test has two parts; one on federal law and regulation and one on uniform state law and regulation. You must receive a score of seventy-five percent or higher to pass the test.

(2) Where may I find information about the loan originator test? The NMLS contracts for its test provider. You will find information on the test provider on the NMLS website at www.stateregulatoryregistry.org.

(3) How much does the loan originator test cost? Testing costs are set by contract between the test provider and the NMLS and may be modified from time to time. The department will publish the current testing fee on its website or you may find it on the NMLS website at www.stateregulatoryregistry.org.

(4) How do I register to take the loan originator test? The department will provide a link to the NMLS test provider on its website.

(6) After passing the loan originator test, will I have to take it again? You must retake the loan originator test if you have not been a loan originator within the past five years.

(7) How soon after failing the loan originator test may I take it again? You may retake a test three consecutive times with each consecutive taking occurring at least thirty days after the preceding test. After failing three consecutive tests, you must wait at least six months before taking the test again.

History

Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. WSR 13-06-022, § 208-660-360, filed 2/27/13, effective 4/1/13
WSR 12-18-048, § 208-660-360, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-360, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 109. WSR 09-01-156, § 208-660-360, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-360, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-370 Loan originators—Continuing education.

(1) How many hours of continuing education must I have each year to renew my license?

(a) You must have at least eight hours to satisfy the federal requirement. The eight hours of education must include three hours of federal law and regulations; two hours of ethics on fraud, consumer protection, and fair lending issues; and two hours on lending standards for the nontraditional mortgage product marketplace.

(b) You must have at least one additional hour of continuing education to satisfy the Washington requirement.

(2) Who approves the continuing education for loan originators? The NMLS approves all education that meets the federal requirement.

(3) Where may I get information about continuing education for loan originators? The NMLS website will have information about the approved NMLS courses.

(4) As a loan originator, may I take the same approved course multiple times to meet my annual continuing education requirement? No. You may not take the same approved course in the same or successive years to meet the annual requirements for continuing education.

(5) If I teach an approved continuing education course may I use my course as credit toward my annual loan originator continuing education requirement? Yes. As an instructor of an approved continuing education course, you may receive credit for your annually required loan originator continuing education courses from the course(s) you teach. You will receive credit at the rate of one course taught equaling two continuing education course credits.

(6) Is ethics a required continuing education course for loan originators? Yes. You must take at least two ethics hours annually. The annual ethics credits must include the topics of fraud, consumer protection, and fair lending.

(7) If I accumulate more than the required loan originator continuing education course credits during a year, may I carry-over the excess credit to the next year? No. Continuing education credits only apply to the year in which they are taken.

(8) If I fail to complete the required continuing education, what happens to my loan originator license? When your license expires, the department will not renew it, and you cannot continue conducting any business under the act. See WAC 208-660-350(16) to renew your license within two months of it expiring. See also, WAC 208-660-350(15).

(9) How do I provide the department with proof of the continuing education courses I have completed? The course provider will report your continuing education to the NMLS and DFI will have access to that information.

History

Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. WSR 12-18-048, § 208-660-370, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-370, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 109. WSR 09-01-156, § 208-660-370, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040, 19.146.223. WSR 08-05-126, § 208-660-370, filed 2/20/08, effective 3/22/08. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-370, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-400 Reporting requirements and notices to the department.

(1) What are my NMLS mortgage call report filing requirements? You are required to file accurate and complete mortgage call reports, including residential mortgage loan activity reports and financial condition reports, through the NMLS on the dates and in a form prescribed by the director or NMLS.

(2) As a licensed mortgage broker what are my reporting responsibilities when something of significance happens to my business?

(a) Notification required. You must notify the director through amendment to the NMLS and upload supporting documents, if applicable, to a change of:

(i) Principal place of business or any branch offices;

(ii) Sponsorship status of a mortgage loan originator;

(iii) Answers to the NMLS generated disclosure questions or if your answer does not change but another event has occurred that requires disclosure and uploading of explanatory documentation.

(iv) Any change in the information supplied to the director in your original application.

(b) Prior notification required. You must notify the director in writing twenty days prior to a change of:

(i) Name or legal status (e.g., from sole proprietor to corporation, etc.);

(ii) Legal or trade name; or

(iii) A change of ownership control of twenty percent or more. The department will consider the qualifications of the new people and notify you whether or not the proposed change is acceptable. A criminal background check through NMLS will be required.

(iv) The addition of a control person. A criminal background check through NMLS will be required.

(c) Post notification within ten business days. You must notify the director through the NMLS or in writing to the director within ten days after an occurrence of any of the following:

(i) Change in mailing address, telephone number, fax number, or email address;

(ii) Cancellation or expiration of its Washington state business license;

(iii) Change in standing with the Washington secretary of state, including the resignation or change of the registered agent;

(iv) Receipt of notification of cancellation of your surety bond;

(v) Receipt of notification of license revocation proceedings against you in any state;

(vi) If you, or any officer, director, or principal is convicted of a felony, or a gross misdemeanor involving lending, brokering or financial misconduct; or

(vii) Name and mailing address of your registered agent if you are out-of-state.

(d) Post notification within twenty business days. You must notify the director in writing within twenty business days after the occurrence of any of the following developments:

(i) The filing of a felony indictment or information related to lending or brokering activities against you, or any officer, board director, or principal, or an indictment or information involving dishonesty against you, or any officer, board director, or principal;

(ii) The receipt of service of notice of the filing of any material litigation against you;

(iii) The change in your residential address or telephone number; or

(iv) The closure or surrender of a main or branch license location.

(e) Other post notification. Within thirty days of a data breach you must notify the director in writing. This notification requirement may change based on directives or recommendations from law enforcement. See also WAC 208-660-480.

(3) As a licensed mortgage loan originator, what are my reporting responsibilities? You must notify the director through amendment to the NMLS and upload supporting documents, if applicable, within ten business days to a change of:

(a) Answers to the NMLS generated disclosure questions or if your answer does not change but another event has occurred that requires disclosure and uploading of explanatory documentation;

(b) Sponsorship status with a licensed mortgage broker;

(d) Any change in the information supplied to the director in your original application.

(4) Must I notify the department of the physical address of my mortgage broker books and records? Yes. You must provide the physical address of your mortgage broker books and records in your initial license application through NMLS. If the location of your books and records changes, you must provide the department, through the NMLS, with the new physical address within five business days of the change.

(5) Must I notify the department if my designated broker leaves, or is no longer my designated broker? Yes. You must notify the department, through NMLS, within five business days of the loss of or change of status of your designated broker. See WAC 208-660-180(3).

(6) If I am a registered agent under the act, must I notify the department if I resign? Yes. You must provide the department with your statement of resignation letter at least thirty-one days prior to the intended effective date. You must also provide a copy of the resignation letter to the licensed mortgage broker. The department will terminate your appointment thirty-one days after receiving your resignation letter.

(7) What are my responsibilities when I sell my business?

(a) At least thirty days prior to the effective date of sale, you must notify the department of the pending sale by completing the following: Notify the department in writing and provide requested information. At the effective date of sale, update and file all required information through the NMLS for your main and any branch offices, including updating information about the location of your books and records.

(b) You must give written notice to borrowers whose applications or loans are in process, advising them of the change in ownership.

(c) You must give written notice to third party providers that have or will provide services on loans in process, and all third-party providers you owe money to, bringing accounts payable current.

(d) You must reconcile the trust account and return any funds to the borrowers or others to whom they belong, or transfer funds into a new trust account at the borrower's direction. If excess funds still remain and are unclaimed, follow the procedures provided by the department of revenue's unclaimed property division.

(8) Must I notify the department if I cease doing business in this state? Yes. You must notify the department within twenty days after you cease doing business in the state by updating your MU1 record through the NMLS.

(9) Must I notify the department of changes to my trust account? Yes. You must notify the department within five business days of any change in the status, location, account number, or other particulars of your trust account, made by you or the federally insured financial institution where the trust account is maintained. A change in your trust account includes the addition of a trust account.

(10) What must I do if my licensed mortgage broker company files for bankruptcy?

(a) Notify the director within ten business days after filing the bankruptcy.

(b) Respond to the department's request for information about the bankruptcy.

(11) If I am a designated broker and file for personal bankruptcy, what are my reporting responsibilities? A designated broker must notify the department in writing within ten business days of filing for bankruptcy protection.

(12) If I am a designated broker and file for personal bankruptcy, what action may the department take? The director may require the licensed mortgage broker to replace you with another designated broker.

(13) If I am a loan originator and file for personal bankruptcy, what are my reporting responsibilities? A licensed loan originator must notify the director in writing within ten business days of filing for bankruptcy protection.

(14) If I am a loan originator and file for personal bankruptcy, what action may the department take? Depending on the circumstances, the director may revoke or condition your license.

(15) When may I apply for a license after surrendering one due to my personal bankruptcy filing? If you surrendered your license, you may apply for a license at any time. However, the department may deny your license application for three years after the bankruptcy has been discharged provided that no new bankruptcies have occurred or are in progress.

(16) Who in the mortgage broker company must notify the department if they are charged with or convicted of a crime? Licensees, whether on active or inactive license status, must notify the department in writing within ten business days of being:

(a) Charged by indictment or information with any felony, or a gross misdemeanor involving dishonesty or financial misconduct in any jurisdiction.

(b) Convicted of any felony, or any gross misdemeanor involving dishonesty or financial misconduct in any jurisdiction.

(d) Convicted outside of Washington for any crime that if charged in Washington would constitute a felony, or gross misdemeanor for dishonesty or financial misconduct.

(17) Who in the mortgage broker company must notify the department if they are the subject of an administrative enforcement action? Licensees, whether holding active or inactive licenses, must notify the department in writing within ten business days of the occurrence if:

(a) Charged with any violations by an administrative authority in any jurisdiction; or

(b) The subject of any administrative action, including a license revocation action, in any jurisdiction.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 19-21-142, § 208-660-400, filed 10/22/19, effective 11/24/19. Statutory Authority: Chapter 43.320 RCW, RCW 19.146.223. WSR 16-08-027, § 208-660-400, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 13-24-023, § 208-660-400, filed 11/22/13, effective 1/1/14. Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. WSR 12-18-048, § 208-660-400, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-400, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 109. WSR 09-01-156, § 208-660-400, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040, 19.146.223. WSR 08-05-126, § 208-660-400, filed 2/20/08, effective 3/22/08. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-400, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-410 Trust accounting.

(1) What are trust funds? Trust funds are all funds received from borrowers, or on behalf of borrowers, for payments to third-party providers. The funds are considered to be held in trust immediately upon receipt. Trust funds include, but are not limited to, borrower deposits for appraisal fees, credit report fees, title report fees, and similar fees to be paid for services rendered by third-party providers in the borrower's loan transaction. Funds received by a broker from a settlement agent or lender, on or after closing, for payments the broker made, or will make, to third-party service providers are not trust funds and therefore can be deposited directly into the broker's general account.

(2) Are lock-in agreement fees paid by a borrower to the mortgage broker considered trust funds? Yes, these fees are considered trust funds and must be deposited in the mortgage broker's trust account, unless the check is made payable to the lender. If the check is made payable to the lender, the mortgage broker has a duty to exercise ordinary care to see that the check is not used for any unauthorized purpose. The mortgage broker must deliver the check to the lender pursuant to any agreement with the lender, or within three business days of receiving the funds.

(3) Must I have a trust account if I receive funds from borrowers for the payment of third-party providers? Yes. All funds received from borrowers, or on behalf of borrowers, for payments to third-party providers are trust funds and are considered held in trust immediately upon receipt. You must deposit those funds in a trust account in your name as it appears on your license, or if exempt in the name of the exempt broker, in a federally insured financial institution's branch located in this state within three business days of receiving the funds. The funds must remain on deposit until disbursed to the third-party provider except as permitted by the act and these rules. The mortgage broker is responsible for depositing, holding, disbursing, accounting for and otherwise safeguarding the funds in accordance with the act and these rules.

(4) Must I have a trust account if I do not receive any trust funds? No. If you do not accept trust funds at any point before, during, or after a loan transaction, a trust account is not required.

(5) Must I have a trust account if I am a mortgage broker exempt from licensing under the act? Mortgage brokers exempt under RCW 19.146.020 (1)(a), (b), (c), (d), and (g) are not required to have a trust account even if they receive trust funds.

(6) What does it mean to receive trust funds "on behalf of borrowers"? Trust funds are identified by purpose rather than source. Funds received by the mortgage broker from the borrower for the payment of third-party provider services are trust funds. Funds received from relatives of borrowers or the seller in a real estate transaction are trust funds. Funds deposited to a borrower's subaccount by the mortgage broker as an advance are funds received on behalf of the borrower and are trust funds.

(7) What forms of payment must trust funds take? Trust funds may be in any form that allows deposit into the trust account, including, but not limited to, cash, check, or any electronic transmission of funds including, but not limited to, bank wires, ACH authorization, credit card or debit transactions, or online payments through a website.

(8) How do I receive trust funds through electronic transmission?

(a) The trust funds must be transmitted directly from the borrower, or other person on behalf of the borrower, into your trust account, in a federally insured financial institution located in the state of Washington.

(b) Each electronic transmission must be evidenced by a record including a traceable identifying name or number supplied by the federally insured financial institution or transferring entity. Electronic transmissions must be included in the monthly trust account reconciliation.

(9) When must I deposit trust funds? You must deposit all funds you receive, that are required to be held in trust, before the end of the third business day following your receipt of the funds.

(10) How must I document deposits?

(a) You must document all deposits to the trust account(s) and maintain a record indicating that the funds were actually deposited into the proper account(s).

(b) You must document and maintain a record for the deposit of electronic funds, including a traceable identifying name or number supplied by the financial institution or transferring entity.

(11) May I deposit funds other than trust funds into my trust account? You may advance your own funds into the trust account(s) to prevent a disbursement in excess of an individual borrower's subaccount, provided that the exact sum of deficiency is deposited and detailed records of the deposit and its purpose are maintained in the trust ledger and the trust account(s) check register. Any deposits of your own funds into the trust account(s) must be held in trust in the same manner as funds paid by borrowers for the payment of third-party providers and treated accordingly in compliance with the act and these rules.

(12) May a loan originator accept trust funds? A loan originator may not solicit or receive fees for a third-party provider of goods or services except that a loan originator may transfer funds from a borrower to a licensed mortgage broker, exempt mortgage broker, or third-party provider, if the loan originator does not deposit, hold, retain, or use the funds for any purpose other than the payment of bona fide fees to third-party providers. The funds must be in the form of a check made payable to a licensed mortgage broker, exempt mortgage broker, or third-party provider. The loan originator must transfer the borrower's funds to the licensed mortgage broker, exempt mortgage broker, or third-party provider within one business day of receiving the check from the borrower.

(13) May a mortgage broker accept and hold a check from a borrower that is made payable to a third-party provider and intended to be used to pay for third-party provider services without depositing the check into a trust account? Yes. The check must be payable to a specific third-party provider. The payee line may not be left blank. The mortgage broker has a duty to exercise ordinary care to see that the check is not used for any unauthorized purpose. The mortgage broker must deliver the check to the third-party provider within the time frames and requirements established in RCW 19.146.0201(12).

(14) May a loan originator accept and hold a check from a borrower that is made payable to a third party and intended to be used to pay for third-party provider services? A loan originator may only hold a borrower's check for the purpose of transferring the funds from the borrower to the licensed mortgage broker, exempt mortgage broker, or third-party provider. The loan originator must transfer the borrower's funds to the licensed mortgage broker, exempt mortgage broker, or third-party provider within one business day of receiving the check from the borrower.

(15) Is a lender or mortgage broker, or agent or employee of a lender or mortgage broker, considered a third party? A lender is considered a third party only when the lender provides lock-in arrangements to the mortgage broker in connection with the preparation of a borrower's loan.

(16) If a mortgage broker receives funds on or after closing from a settlement agent, or a lender, for the payment of third-party provider services, are these funds considered trust funds? No.

(17) What books and records must I keep regarding my trust account? You must maintain as part of your books and records:

(a) A trust account deposit register and copies of all validated deposit slips or signed deposit receipts for each deposit to the trust account;

(b) A record of all invoices for payments made on behalf of a borrower including but not limited to payments for appraisals, credit reports, title cancellations, and verification of deposit;

(c) A ledger for each trust account. Each ledger must contain a separate subaccount ledger sheet for each borrower from whom funds are received for payment of third-party providers. Each receipt and disbursement pertaining to such funds must be posted to the ledger sheet at the time the receipt or disbursement occurs. Entries to each ledger sheet must show the date of deposit, identifying check or instrument number, amount and name of remitter. Offsetting entries to each ledger sheet must show the date of check or electronic transmission, check number or identifying electronic transmission number, amount of check or electronic transmission, name of payee and invoice number if any. Canceled or closed ledger sheets must be identified by time period and borrower name or loan number;

(d) A trust account check register consisting of a record of all deposits to and disbursements from the trust account whether by check or electronic transmission;

(e) Reconciled trust account bank statements;

(f) A monthly trial balance of the ledger of trust accounts, and a reconciliation of the ledger of trust accounts with the related bank statement(s) and the related check register(s). The reconciled balance of the trust account(s) must at all times equal the sum of:

(i) The outstanding amount of funds received from or on behalf of borrowers for payment of third-party providers; and

(ii) The outstanding amount of any deposits into the trust fund of the mortgage broker's own funds in accordance with subsection (11) of this section; and

(g) A printed and dated source document file to support any changes to existing accounting records.

Any alternative records you propose for use must be approved in advance by the director.

(18) What is a "subaccount"? A "subaccount" is a recordkeeping segregation of each borrower's funds held in the mortgage broker's single deposit trust account that holds the aggregated funds for the mortgage broker's clients. Alternatively, the mortgage broker may establish a separate bank account for each borrower. When added together, individual subaccounts must exactly equal the total of funds held in trust.

(19) May I transfer funds between a borrower's subaccounts? If a borrower has more than one loan application pending with a mortgage broker, the mortgage broker must maintain a separate subaccount ledger for each loan application. The borrower must consent to any transfer of trust account funds between the individual subaccounts associated with these pending loan applications. The consent must be maintained in the borrower's loan file and referenced in the borrower's subaccount ledger sheets.

(20) May I be reimbursed for funds that I have advanced into the trust account?

(a) If you deposit your own funds into the trust account as provided in subsection (11) of this section, you may receive reimbursement for such deposit at closing into your general business bank account provided:

(i) All third-party providers' charges associated with your deposit have been paid; and

(ii) Any funds disbursed by escrow at closing to you for payment of unpaid third-party providers' expenses charged or to be charged to you are deposited into the borrower's subaccount of the trust account.

(b) If you advance your own funds into the trust account as provided in subsection (11) of this section, and the loan does not close, the funds remain the property of the borrower.

(21) May I disburse trust funds through electronic transmission? Yes. You may disburse trust funds from the trust account by electronic transmission. Each electronic transmission must be evidenced by a record including a traceable identifying name or number supplied by the federally insured financial institution or transferring entity.

Electronic transmission(s) must be included in the monthly trust account reconciliation.

(22) How must I handle trust account disbursements?

(a) Disbursements from trust accounts may be by electronic transmission or manual check. If a manual check is used, the check must on its face identify the specific third-party provider transaction or borrower refund, except as specified in this section. If an electronic transmission is used, each transmission must be evidenced by a record including a traceable identifying name or number supplied by the federally insured financial institution or transferring entity.

(b) Disbursements may be made from the trust account(s) for the payment of bona fide third-party providers' services rendered in the course of the borrower's loan origination, if the borrower has consented in writing to the payment. Such consent may be given at any time during the application process and in any written form, provided that it contains sufficient detail to verify the borrower's consent to the use of trust funds. No disbursement on behalf of the borrower may be made from the trust account until the borrower's or broker's deposit of sufficient funds into the trust account(s) is available for withdrawal.

(23) What are the requirements concerning the checks I write from my trust account? You must use checks that are prenumbered by the supplier (printer) unless you use an automated check writing system which numbers all checks in sequence. All trust account checks must have the words "trust account" on the front. If you use an automated program that writes checks, the check number must appear in the magnetic coding which also identifies the account number for readability by federally insured financial institution computers and the program may assign suffixes or subaccount codes before or after the check number for identification.

(24) What disbursements are prohibited? Among other prohibited disbursements, no disbursement may be made from a borrower's subaccount:

(a) In excess of the amount held in the borrower's subaccount (commonly referred to as a disbursement in excess);

(b) In payment of a fee owed to any employee of the mortgage broker or in payment of any business expense of the mortgage broker;

(d) For payment of any fees owed to the mortgage broker by the borrower, or to transfer funds from the subaccount to any other account; and

(e) For the payment of fees owed to the broker under RCW 19.146.070 (2)(a).

(25) When may a mortgage broker transfer excess funds from a borrower subaccount?

(a) A mortgage broker may, in the case of a closed and funded transaction, transfer excess funds remaining in the individual borrower's subaccount into the mortgage broker's general business bank account in full or partial payment of fees owed to the mortgage broker upon determination that all third-party providers' expenses have been accurately reported in the loan closing documents and have been paid in full.

(b) Each mortgage broker must maintain a detailed audit trail for any disbursements from the borrower's subaccount(s) into the mortgage broker's general business bank account. The disbursements must be made by a check drawn or electronic transmission on the trust account and deposited directly into the mortgage broker's general business bank account.

(26) What if there are funds remaining in a borrower's subaccount after all third-party providers have been satisfied? Any remaining funds in a borrower's subaccount must be returned to the borrower within five business days of the determination that all payments to third-party providers owed by the borrower have been satisfied.

(27) What if the mortgage broker cannot locate a borrower in order to remit excess funds in the borrower's subaccount? The mortgage broker must follow the procedures provided by the department of revenue's unclaimed property division to handle any trust funds held for a borrower who cannot be located.

(28) Is a mortgage broker responsible for all disbursements out of the trust account? Yes. A mortgage broker is responsible for all disbursements from the trust account whether disbursed by personal signature, signature plate, signature of another person authorized to act on its behalf, or any authorized electronic transfer.

(29) If a mortgage broker receives a check from closing that includes both the mortgage broker's fee and a payment or payments for third-party providers, how does the mortgage broker lawfully handle the funds? Because these funds are not trust funds, the mortgage broker may:

(a) Split the check at the teller window at the time of deposit and route any moneys due to third-party providers to an approved trust account, and moneys due the broker to the broker's general account;

(b) Deposit the entire check into the trust account. After paying any and all moneys due to third-party service providers and insuring that the borrower has received credit for all funds deposited in the trust account, the mortgage broker may transfer excess funds remaining in the individual borrower's subaccount into the mortgage broker's general business bank account. This amount must be equal to the fee disclosed on the applicable settlement statement or final HUD-1, less any amounts already received by the mortgage broker, and must be duly recorded in the trust subaccount ledger. The mortgage broker may not transfer moneys from the trust account to its general business bank account before the loan is closed; or

(30) Is the mortgage broker allowed to transfer funds out of the trust account for any reason other than for payment to a third-party provider? The mortgage broker may transfer the borrower's funds out of the trust account by check back to the borrower or to any party so instructed in writing by the borrower. A mortgage broker, when complying with these rules, may transfer excess trust funds to itself; however, failure to comply with these rules is a serious violation punishable by imprisonment, other penalties, or both as authorized by the act.

(31) If a settlement agent did not follow written instructions and issued a check or wired funds to me after closing that includes fees for third-party service providers, may I deposit the check into my general account and pay those third-party providers immediately? Yes.

(32) How does a mortgage broker disburse funds from a subaccount when there is more than one borrower due to receive those funds? When disbursing funds back to the borrowers, a mortgage broker must make the trust account disbursement check payable to all borrowers with the term "and" written between each borrower's name. When disbursing funds to another party instructed by the borrowers, all borrowers must sign the written notice of instruction.

(33) May mortgage brokers using an interest-bearing trust account keep the interest? No. Mortgage brokers using an interest bearing account must refund or credit to the borrower the interest earned on the borrower's subaccount. The refund or credit to the borrower may be made either at closing or upon withdrawal or denial of the borrower's loan application.

(34) Are there any separate requirements for a computerized accounting system? Yes. The requirements are as follows:

(a) Your computer system must provide the capability to back up data files;

(b)(i) You must print the following documents at least once per month and retain them as part of your books and records:

(A) Trust account deposit register;

(B) Trust account check register;

(ii) You must print each subaccount at closure and retain the closure document as part of your books and records;

(d) You must print your computer-generated reconciliations of the trust account at least once each month and retain the printouts as a part of your books and records.

(35) Are there penalties for violating trust account requirements under RCW 19.146.050? A violation of this section is a class C felony and may be punishable by imprisonment. In addition, a mortgage broker or other person violating this section may be subject to penalties as enumerated under RCW 19.146.220.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 19-21-142, § 208-660-410, filed 10/22/19, effective 11/24/19. Statutory Authority: Chapter 43.320 RCW, RCW 19.146.223. WSR 16-08-027, § 208-660-410, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-410, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-410, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-420 Out-of-state mortgage brokers and loan originators.

(1) May I be a licensed mortgage broker in Washington without a physical office in Washington? Yes. You are not required by the act to have a physical location in Washington.

(2) May I be a licensed mortgage broker in Washington and have branch offices both in Washington and outside of Washington? Yes. However, each of your branch offices that offer Washington residential mortgage loans must hold a Washington license, even if the location is outside Washington.

(3) May my mortgage broker business be conducted entirely on the internet? Yes. But you must have a license for all locations including those that offer loans by mail or internet.

(4) May I work as a loan originator in Washington if I do not have a physical location in Washington? Yes. You may originate Washington loans from any licensed location or your residence pursuant to WAC 208-660-505, inside or outside of Washington, as long as the company that sponsors you is licensed to do business in Washington.

(5) May I work as a licensed loan originator for a licensed mortgage broker that is out of the state? Yes, as long as you work from a licensed location or your residence pursuant to WAC 208-660-505.

(6) If my mortgage broker business is not located in Washington, where must I keep my records? If your business is located outside of Washington, you may either maintain the books and records at a location in Washington, or pay the department's travel expenses to the out-of-state location to examine the books and records. Travel expenses may include, but are not limited to, transportation, meals, and lodging.

(7) What additional requirements must I comply with if my business does not have a physical location in Washington? You must continuously maintain a registered agent in Washington and provide the department, through the NMLS, with the registered agent's name, physical and mailing address, and written consent to be the registered agent.

(8) How do I change the information about my registered agent? You must update the information in the NMLS within 10 business days from the change.

(9) If I am a registered agent under the act, what must I do to resign as registered agent?

(a) Provide the department with a statement of resignation at least 31 days prior to the intended effective date of your resignation.

(b) Provide a copy of the statement of resignation to the licensed mortgage broker.

(c) The department will terminate your appointment on the 31st day after the date on which the statement of resignation was delivered.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 22-24-049, § 208-660-420, filed 11/30/22, effective 12/31/22. Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. WSR 12-18-048, § 208-660-420, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-420, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 109. WSR 09-01-156, § 208-660-420, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-420, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-430 Disclosure requirements.

(1) What disclosures must I make to borrowers and when?

(a) Within three business days of receiving a borrower's loan application, or receiving money from a borrower for third-party provider services, you, as a mortgage broker or loan originator on behalf of a mortgage broker, must make all disclosures required by RCW 19.146.030 (1), (2), (3), and 19.144.020. The one page disclosure summary required by RCW 19.144.020 must be dated when provided to the borrower. The disclosures must be in a form acceptable to the director.

(b) If a lender is providing disclosures to the borrower, you must maintain copies of those disclosures and a copy of your agreement with the lender about the provision of disclosures; failure to do so would result in a violation.

(2) What is the disclosure required under RCW 19.146.030(1)? A full written disclosure containing an itemization and explanation of all fees and costs that the borrower is required to pay in connection with obtaining a residential mortgage loan, and specifying the fee or fees which inure to the benefit of the mortgage broker. An estimate made in good faith of a fee or cost must be provided if the exact amount of the fee or cost is not determinable. This subsection does not require disclosure of the distribution or breakdown of loan fees, discount, or points between the mortgage broker and any lender or investor.

The specific content of the disclosure required under RCW 19.146.030(1) is identified in RCW 19.146.030(2).

(3) What is the disclosure required under RCW 19.146.030(2)? Mortgage brokers must disclose the following content:

(a) The annual percentage rate, finance charge, amount financed, total amount of all payments, number of payments, amount of each payment, amount of points or prepaid interest and the conditions and terms under which any loan terms may change between the time of disclosure and closing of the loan; and if a variable rate, the circumstances under which the rate may increase, any limitation on the increase, the effect of an increase, and an example of the payment terms resulting from an increase.

Disclosure in compliance with the requirements of the Truth-in-Lending Act and Regulation Z, as now or hereafter amended, is considered compliance with the disclosure content requirements of this subsection; however, RCW 19.146.030(1) governs the delivery requirement of these disclosures;

(b) The itemized costs of any credit report, appraisal, title report, title insurance policy, mortgage insurance, escrow fee, property tax, insurance, structural or pest inspection, and any other third-party provider's costs associated with the residential mortgage loan. Disclosure in compliance with the requirements of Regulation Z, Truth-in-Lending Act and Regulation X, RESPA as now or hereafter amended, is considered compliance with the disclosure content requirements of this subsection; however, RCW 19.146.030(1) governs the delivery requirement of these disclosures;

(c) If a rate lock agreement has been entered into, you must disclose to the borrower whether the rate lock agreement is guaranteed and if so, if guaranteed by a company other than your company, you must provide the name of that company, whether and under what conditions any rate lock fees are refundable to the borrower and:

(i) The number of days in the rate lock period;

(ii) The expiration date of the rate lock;

(iii) The rate of interest locked;

(iv) The date the rate lock agreement was provided to the borrower; and

(v) Any other terms of the rate lock agreement.

(d) You may rely on a lender's rate lock agreement if it is in compliance with (c) of this subsection.

(e) If the borrower wants to lock the rate after the initial disclosure, you must provide a rate lock agreement within three business days of the rate lock date that includes the items from (b) of this subsection;

(f) Prior to closing, you must disclose payment of a rate lock as a cost in Block 2 of the federal good faith estimate or in "Loan Cost" on the loan estimate. At closing, you must disclose the payment of a rate lock in section 800 "Items Payable" on a HUD-1 or in "Loan Cost" on the closing disclosure;

(g) See subsection (7) of this section if the borrower initially chooses to float rather than lock the interest rate;

(h) A statement that if the borrower is unable to obtain a loan for any reason, the mortgage broker must, within five days of a written request by the borrower, give copies of any appraisal, title report, or credit report paid for by the borrower, to the borrower, and transmit the appraisal, title report, or credit report to any other mortgage broker or lender to whom the borrower directs the documents to be sent; and

(i) A statement providing that moneys paid by the borrower to the mortgage broker for third-party provider services are held in a trust account and any moneys remaining after payment to third-party providers will be refunded. If the mortgage broker does not collect trust funds of any kind, the disclosure is not required.

(4) What is the disclosure required under RCW 19.144.020?

(a) You must provide the borrower with a clear, brief, one page summary to help borrowers understand their loan terms. The disclosure summary must be provided on one page separate from any other documents and must use clear, simple, plain language terms that are reasonably understandable to the average person.

(b) Disclosure in compliance with the Real Estate Settlement Procedures Act, 12 U.S.C. Sec. 2601, and Regulation X, 12 C.F.R. 1024.7 is considered compliance with this disclosure requirement.

(5) How do I disclose the lender's credit or charge for the interest rate?

(a) You must disclose the credit or charge for the interest rate as a dollar amount credited to the borrower on the good faith estimate or loan estimate.

(b) You must direct the settlement service provider to disclose the credit or charge for the interest rate on the applicable settlement statement. The amount must be expressed as a dollar amount.

(c) Failure to properly disclose the credit or charge for the interest rate is a violation of RCW 19.146.0201 (6) and (11), and RESPA.

(6) Are there additional disclosure requirements related to interest rate locks? Yes. You must provide the borrower a new rate lock agreement within three business days of a change in the locked interest rate. The new rate lock agreement must include all the terms required under subsection (3)(c) of this section. Changes to a locked interest rate can only occur for valid reasons such as changes in loan to value, credit scores, or other loan factors directly affecting pricing. Lock extensions and relocks are also valid reasons for changes to a previously locked interest rate.

(7) What must I disclose to the borrower if they do not choose to enter into a rate lock agreement? If a rate lock agreement has not been entered into, you must disclose to the borrower that the disclosed interest rate and terms are subject to change. Compliance with the good faith estimate or loan estimate required by TILA is deemed compliance with this subsection.

(8) Will a rate lock agreement always guarantee the interest rate and terms? No. A rate lock agreement may or may not be guaranteed by the mortgage broker or lender. The rate lock agreement must clearly state whether the rate lock agreement is guaranteed by the mortgage broker or lender.

(9) How do I disclose the payment of a rate lock fee? In a table funded transaction, prior to closing, you must disclose payment of a rate lock as a cost in Block 2 of the federal good faith estimate or in "Loan Cost" on the loan estimate. At closing, you must disclose the payment of a rate lock in section 800 "Items Payable" on a HUD-1 or in "Loan Cost" on the closing disclosure.

(10) Are there any model forms that suffice for the disclosure content under RCW 19.146.030(2)? Yes. The following model forms are acceptable forms of disclosure:

(a) For RCW 19.146.030 (2)(a), mortgage brokers are encouraged to use the federal loan estimate form for mortgage loan transactions provided under the Truth-in-Lending Act and Regulation Z, as now or hereafter amended. However, the federal loan estimate only suffices for the content of disclosures under RCW 19.146.030 (2)(a). The delivery of disclosures is governed by RCW 19.146.030(1).

(b) For RCW 19.146.030 (2)(b), mortgage brokers are encouraged to use the federal good faith estimate or loan estimate disclosure form provided under the Real Estate Settlement Procedures Act and Regulation X or the Truth in Lending Act and Regulation Z, as now or hereafter amended. However, the federal good faith estimate or loan estimate disclosure only suffices for the content of disclosures under RCW 19.146.030 (2)(b). The delivery of disclosures is governed by RCW 19.146.030(1).

(c) For RCW 19.146.030 (2)(c), (d), (e), (f) and (3), the department encourages mortgage brokers to use the department published model disclosure forms that can be found on the department's website.

(11) May my mortgage broker fees increase following the disclosures required under RCW 19.146.030(1)? Pursuant to RCW 19.146.030(4), a mortgage broker must not charge any fee that inures to the benefit of the mortgage broker if it exceeds the fee disclosed on the initial written good faith estimate or loan estimate disclosure required in RCW 19.146.030 (1) and (2)(b), unless:

(a) The need to charge the fee was not reasonably foreseeable at the time the written disclosure was provided; and

(b) The mortgage broker has provided to the borrower, no less than three business days prior to the signing of the loan closing documents, a clear written explanation of the fee and the reason for charging a fee exceeding that which was previously disclosed.

(12) Are there any situations in which fees that benefit the mortgage broker can increase without additional disclosure? Yes, there are two possible situations where an increase in the fees benefiting the mortgage broker may increase without the requirement to provide additional disclosures. These situations are:

(a) The additional disclosure is not required if the borrower's closing costs, excluding prepaid escrowed costs of ownership, on the applicable settlement statement or final HUD-1 do not exceed the total closing costs, excluding prepaid escrowed costs of ownership, in the most recent good faith estimate or loan estimate provided to the borrower. For purposes of this section "prepaid escrowed costs of ownership" mean any amounts prepaid by the borrower for the payment of taxes, property insurance, interim interest, and similar items in regard to the property used as security for the loan; or

(b) The fee or set of fees that benefit the mortgage broker are disclosed as a percentage of the loan amount and the increase in fees results from an increase in the loan amount, provided that:

(i) The increase in loan amount is requested by the borrower; and

(ii) The fee or set of fees that are calculated as a percentage of the loan amount have been disclosed on the initial written disclosure as both a percentage of the loan amount and as a dollar amount based upon the assumed loan amount used in the initial written disclosure; and

(iii) The total aggregate increase in the fee or set of fees that benefit the mortgage broker as a result of the increase in loan amount is less than seven hundred fifty dollars.

This section does not apply to the disclosure required in RCW 19.144.020.

(13) What action may the department take if I improperly disclose my mortgage broker fees on the good faith estimate or loan estimate and applicable settlement statement? If you fail to disclose your mortgage broker fees as required, the department may request, direct, or order you to refund those fees to the borrower if the result of that disclosure resulted in confusion or deception to the borrower.

(14) May the department take action against a mortgage broker when mortgage broker fees are disclosed incorrectly on the applicable settlement statement and the incorrect disclosure was made by an independent escrow agent, title company, or lender? If the mortgage broker can show the department that they disclosed their fees correctly on the good faith estimate or loan estimate, and have instructed the independent escrow agent, title company, or lender to disclose the fees correctly on the applicable settlement statement, and the independent escrow agent, title company, or lender has not followed the instructions, the department may not take action against the mortgage broker.

(15) What action may the department take if I fail to provide additional disclosures as required under RCW 19.146.030(4)? Generally, the department may request, direct, or order you to refund fees.

(16) How will the department determine whether to request, direct or order me to refund fees to the borrowers? Generally, the department will make its determination by answering the following questions:

(a) Has an initial good faith estimate or loan estimate disclosure of costs been provided to the borrower in accordance with RCW 19.146.030 (1) and (2)(b)?

(b) Were any subsequent good faith estimate or loan estimate disclosures of costs provided to the borrower no less than three business days prior to the signing of the loan closing documents? Additionally, was the subsequent disclosure accompanied by a clear written explanation of the change? Was the change due to a valid change of circumstance as allowed under RESPA?

(c) How were the costs disclosed in each good faith estimate or loan estimate (e.g., dollar amount, percentage, or both)?

(d) Did the total costs, excluding prepaid escrowed costs of ownership, on the applicable settlement statement or final HUD-1 exceed the total closing costs, excluding prepaid escrowed costs of ownership, in the most recent good faith estimate or loan estimate provided to the borrower no less than three business days prior to the signing of the loan closing documents?

(e) If the costs at closing did exceed the most recent disclosure of costs was the need to charge the fee reasonably foreseeable at the time the written disclosure was provided?

(f) If the costs at closing did exceed the most recent disclosure of costs did the mortgage broker provide a clear written explanation of the fee and the reason for charging a fee exceeding that which was previously disclosed, no less than three business days prior to the signing of the loan closing documents?

(17) If I failed to provide the initial good faith estimate or loan estimate under RCW 19.146.030 (1) and (2)(a) and (b) what action may the department take? If you have not provided the initial good faith estimate or loan estimate as required, including both delivery and content requirements, the department may request, direct or order you to refund to the borrower fees that inured to your benefit.

(18) If I received trust funds from a borrower, but failed to provide the disclosures as required in RCW 19.146.030 (1) and (2), what action may the department take? If you did not provide the disclosures as required, including both delivery and content requirements, the department may request, direct, or order you to refund to the borrower any trust funds they have paid regardless of whether you have already expended those trust funds on third-party providers.

(19) Under what circumstances must I redisclose the initial disclosures required under the act? Generally, any loan terms or conditions that change must be redisclosed to the borrower no less than three business days prior to the signing of the loan closing documents. Some examples are:

(a) Adjustable rate loan terms, including index, margin, and any changes to the fixed period.

(b) The initial fixed period.

(d) Interest only options and any changes to the options.

(e) Lien position of the loan.

(f) Terms and the number of months or years for amortization purposes.

(g) Prepayment penalty terms and conditions.

(h) Any other term or condition that may be specific to a certain loan product.

(20) If a loan application is canceled or denied within three days of application must I provide the disclosures required under RCW 19.146.030? If you have not used any borrower trust funds and those funds have been returned to the borrower in conformance with these rules, the disclosures pursuant to RCW 19.146.030 are not required.

(21) Is a mortgage broker that table funds a loan exempt from disclosures? No. A mortgage broker must provide all disclosures required by the act, and disclose all fees as required by Regulation X, regardless of the funding mechanism used in the transaction.

(22) What must I provide to the borrower if I am unable to complete a loan for them and they have paid for services from third-party providers? If you are unable to complete a loan for the borrower for any reason, and if the borrower has paid you for third-party provider services, and the borrower makes a written request to you, you must provide the borrower with copies of the product from any third-party provider, including, but not limited to, an appraisal, title report, or credit report. You must provide the copies within five business days of the borrower's request.

The borrower may also request that you provide the originals of the documents to another mortgage broker or lender of the borrower's choice. By furnishing the originals to another mortgage broker or lender, you are conveying the right to use the documents to the other broker or lender. You must, upon request by the other broker or lender, provide written evidence of the conveyance. You must provide the originals to the mortgage broker or lender within five business days of the borrower's request.

(23) Must I provide a written fee agreement when I provide residential mortgage loan modification services? Yes. You must provide a written fee agreement as prescribed by the director when providing residential mortgage modification services. You must provide a copy of the signed fee agreement to the consumer and you must keep a copy as part of your books and records.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 19-21-142, § 208-660-430, filed 10/22/19, effective 11/24/19. Statutory Authority: Chapter 43.320 RCW, RCW 19.146.223. WSR 16-08-027, § 208-660-430, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 13-24-023, § 208-660-430, filed 11/22/13, effective 1/1/14. Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. WSR 12-18-048, § 208-660-430, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2010 c 35. WSR 10-20-125, § 208-660-430, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-430, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 109. WSR 09-01-156, § 208-660-430, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040, 19.146.223. WSR 08-05-126, § 208-660-430, filed 2/20/08, effective 3/22/08. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-430, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-440 Advertising.

(1) Am I responsible for ensuring that my advertising material is accurate, reliable, and in compliance with the act? Yes. Each mortgage broker is responsible for ensuring the accuracy and reliability of the advertising material.

(2) A licensee is prohibited from advertising with envelopes, stationery, or images in an electronic format that are designed to resemble a government agency mailing or that suggest an affiliation that does not exist. What are some examples of emblems or government-like names, language, or nonexistent affiliations that will violate the state and federal advertising laws? Some examples include, but are not limited to:

(a) An official-looking emblem such as an eagle, the Statue of Liberty, or a crest or seal that resembles one used by any state or federal government agency.

(b) Images, including those in electronic format, designed to resemble official government communications, such as IRS or U.S. Treasury, or other government agencies.

(c) Warnings or notices citing government codes or form numbers not required by the U.S. Postmaster to be shown on the mailing.

(d) The use of the term "official business," or similar language implying official or government business, without also including the name of the sender.

(e) Any suggestion or representation that the solicitor is affiliated with any agency, bank, or other entity that it does not actually represent.

(3) Is it a violation to advertise that items or services are "free" when the licensee has paid for the items or services? Yes. Advertising using the term "free," or any other similar term or phrase that implies there is no cost to the applicant is deceptive because you can recover the cost of the purportedly "free" items or services through the negotiation process. See the Federal Trade Commission's Guide Concerning Use of the Word "Free" and Similar Representations (16 C.F.R. §251.1(g) (2003)) available at https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/guide-concerning-use-word-free-similar.

(4) When I am advertising interest rates, the act requires me to conspicuously disclose the annual percentage rate (APR) implied by the rate of interest. What does it mean to "conspicuously" disclose the APR? The required disclosures in your advertisements must be reasonably understandable. Consumers must be able to read or hear, and understand the information. Many factors, including the size, duration, and location of the required disclosures, and the background or other information in the advertisement, can affect whether the information is clear and conspicuous. The disclosure of the APR must be as prominent or more prominent than any other rates disclosed in the advertisement, regardless of the form of the advertisement.

(5) The act prohibits me from advertising an interest rate unless that rate is actually available at the time of the advertisement. How may I establish that an advertised interest rate was "actually available" at the time it was advertised? Whenever a specific interest rate is advertised, the mortgage broker must retain a copy of the lender's "rate sheet," or other supporting rate information, and the APR calculation for the advertised interest rate.

(6) Must I quote the annual percentage rate when discussing rates with a borrower? Yes. You must quote the annual percentage rate and other terms of the loan if you give an oral quote of an interest rate to the borrower. TILA's Regulation Z, 12 C.F.R., Part 1026.26 provides guidance for using the annual percentage rate in oral disclosures.

(7) May a mortgage broker or loan originator advertise rates or fees as the "lowest" or "best"? No. Rates or fees described as "lowest," "best," or other similar words cannot be proven to be actually available at the time they are advertised.

(8) When I present a business card to a potential borrower, must I make the disclosures required under RCW 19.146.030? No. You are not required to make those disclosures until you accept a residential mortgage loan application, or until you assist a borrower in preparing an application.

(9) May I solicit using advertising that suggests or represents that I am affiliated with a state or federal agency, municipality, federally insured financial institution, trust company, building and loan association, when I am not; or that I am an entity other than who I am? No. It is an unfair and deceptive act or practice and a violation of the act for you to suggest or represent that you are affiliated with a state or federal agency, municipality, federally insured financial institution, trust company, building and loan association, or other entity you do not actually represent; or to suggest or represent that you are any entity other than who you are.

(10) If I advertise using a borrower's current loan information, what must I disclose about that information? When an advertisement includes information about a borrower's current loan that you did not obtain from a solicitation, application, or loan, you must provide the borrower with:

(a) The name of the source of the information;

(b) A statement that you are not affiliated with the borrower's lender; and

(c) The information disclosed in (a) and (b) of this subsection must be in the same size type font as the rest of the information in the advertisement.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 19-21-142, § 208-660-440, filed 10/22/19, effective 11/24/19. Statutory Authority: Chapter 43.320 RCW, RCW 19.146.223. WSR 16-08-027, § 208-660-440, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 13-24-023, § 208-660-440, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 109. WSR 09-01-156, § 208-660-440, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040, 19.146.223. WSR 08-05-126, § 208-660-440, filed 2/20/08, effective 3/22/08. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-440, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-445 May I advertise over the internet using a URL address that is not my licensed business name?

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 19-21-142, § 208-660-445, filed 10/22/19, effective 11/24/19. Statutory Authority: RCW 43.320.040, 19.146.223, and 2010 c 35. WSR 10-20-125, § 208-660-445, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-660-446 When advertising using the internet or any electronic form (including, but not limited to, text messages), is there specific content the advertisements must contain?

(2) If loan originators are named, their license numbers must closely follow the names. An example of closely following is: Your license name followed by your title (if you use one) followed by your license number. See the definition of license number for examples of ways to display your license number. See WAC 208-660-350(25).

(3) If the company uses a DBA, the page must also contain the company's name as entered in the NMLS or license number.

(4) Compliance with other laws. Website content used to solicit Washington consumers must comply with all relevant Washington state and federal statutes for specific services and products advertised on the website.

(5) Oversight. The company is responsible for content displayed on all electronic advertisements used to solicit Washington consumers.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 19-21-142, § 208-660-446, filed 10/22/19, effective 11/24/19. Statutory Authority: Chapter 43.320 RCW, RCW 19.146.223. WSR 16-08-027, § 208-660-446, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 13-24-023, § 208-660-446, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.146.223, and 2010 c 35. WSR 10-20-125, § 208-660-446, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-660-450 Recordkeeping requirements.

(1) What business books and records must I keep to comply with the act? The following books and records for your business must be available to the department.

(a) Mortgage transaction documents.

(i) All forms of loan applications, written or electronic (the Fannie Mae 1003 is an example);

(ii) The initial rate sheet or other supporting rate information. The last rate sheet, or other supporting rate information, if there was a change in rates, terms, or conditions prior to settlement;

(iii) Correspondence with third parties requesting documents necessary to the transaction (and copies of the documents received as a result of that correspondence) including, but not limited to, credit, appraisal, title, verifications of employment and deposits, automated underwriting results, and any other notes or documents used to collect borrower and loan information to originate the loan;

(iv) All written disclosures required by the act and federal laws and regulations, including those provided to consumers by the lender. Some examples of federal law disclosures are: The good faith estimate or loan estimate, Equal Credit Opportunity Act disclosures, affiliated business arrangement disclosures, and RESPA servicing disclosure statement;

(v) Documents and records of compensation paid to employees and independent contractors;

(vi) An accounting of all funds received in connection with loans, including a trust account statement with supporting data;

(vii) Rate lock agreements and the supporting rate sheets or other rate supporting document;

(viii) Settlement statements (initial and final, if applicable);

(ix) Broker loan document requests (may also be known as loan document request or demand statements) that include any prepayment penalties, terms, fees, rates, credit or charge for the interest rate, loan type and terms;

(x) Records of any fees refunded to applicants for loans that did not close;

(xi) All file correspondence and logs;

(xii) All mortgage broker contracts with lenders and all other correspondence with the lenders; and

(xiii) The clear written explanation required under WAC 208-660-430 (11)(b).

(b) Advertisements. All advertisements placed by or at the request of the mortgage broker that mention rates or fees, and the corresponding rate sheets for the advertised rates. The copies must include newspaper and print advertising, scripts of radio and television advertising, telemarketing scripts, all direct mail advertising, and any advertising distributed directly by delivery, facsimile, or computer network. The record of each advertisement must include the date or dates of publication, the name of the publisher if advertised by newsprint, radio, television or telephone information line, or in the case of a flyer, the dates, methods and areas of distribution.

(d) Other. All other books, accounts, records, papers, documents, files, and other information relating to the mortgage broker operation. Examples include, but are not limited to, personnel files, company policy and procedure documents, training materials, records evidencing compliance with applicable federal laws and regulations, and complaint correspondence and supporting documents.

(2) What books and records must I keep for my trust account? See WAC 208-660-410 Trust accounting.

(3) How long must I keep my books and records to comply with the act?

(a) You must keep the books, accounts, records, papers, documents, files, and other information relating to the mortgage broker operation for a minimum of three years.

(b) You must keep the mortgage transaction documents described in subsection (1)(a) of this section for a minimum of three years. It may be a prudent business practice to keep your books and records longer. For example, if a consumer's loan becomes an adjustable rate mortgage, the consumer may become unhappy that the terms of their mortgage have changed and file a complaint against you. The department must begin an investigation into the complaint. If you do not have the records to show proof of proper disclosures and all other compliance with state and federal laws, the department may rely solely on the consumer's records as evidence in the case.

(4) Where must I keep my business records?

(a) You must keep all books and records in a location that is on file with and readily available to the department during normal business hours. In the event of a department examination, the location must have the work space and resources that are conducive to business operations. A readily available location may include places of business, personal residences, computers, safes, or vaults. See WAC 208-660-400(8) for the reporting requirements if the address changes.

(b) If your usual business location is outside of Washington, you may either maintain the books and records at a readily available location in Washington, or pay the department's expenses to travel to the location to examine the books and records stored out-of-state. Travel costs may include, but are not limited to, transportation costs, meals, and lodging.

(5) May I keep my books and records electronically? Yes. You may keep the required records described in subsection (1) of this section by electronic display equipment if you can meet all of the following requirements:

(a) The equipment must be made available to the department for the purposes of an examination or investigation;

(b) The records must be stored exclusively in a nonrewritable and nonerasable format;

(c) The hardware or software needed to display the records must be maintained during the required retention period under subsection (3) of this section.

If the department requests the books and records in hard copy, you must provide it in that form and within the time frame requested or directed by the department.

(6) Abandoned records. If you do not maintain your records as required, you are responsible for the costs of collection, storage, conversion to electronic format, and proper destruction of the records.

(7) Records disposal. You must have written policies and procedures for the destruction of records, including electronic records, when the retention period ends. The destruction of records must be accomplished so that the information cannot be reconstructed or read. The destruction of consumer credit report information must also comply with the federal Disposal Rule at 16 C.F.R. 682.

History

Statutory Authority: Chapter 43.320 RCW, RCW 19.146.223. WSR 16-08-027, § 208-660-450, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 13-24-023, § 208-660-450, filed 11/22/13, effective 1/1/14. Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. WSR 12-18-048, § 208-660-450, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-450, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-450, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-460 Information security program required by the federal Safeguards Rule implementing the Gramm-Leach-Bliley Act.

(2) Specifically, at a minimum the plan described in subsection (1) of this section must:

(a) Designate an employee or employees to coordinate the information security program;

(b) Identify and assess the risks to customer information;

(c) Design and implement information safeguards to control the risks identified in the risk assessment and regularly monitor and test the safeguards;

(d) Select service providers that can maintain appropriate safeguards and oversee their handling of customer information; and

(3) The information security plan must be maintained as part of your books and records.

(4) For more information access the FTC website on the Safeguard Rules at: https://www.ftc.gov/tips-advice/business-center/guidance/financial-institutions-customer-information-complying and see 16 C.F.R. 314.

History

Statutory Authority: Chapter 43.320 RCW, RCW 19.146.223. WSR 16-08-027, § 208-660-460, filed 3/30/16, effective 4/30/16.

Wash. Admin. Code § 208-660-470 Consumer financial information privacy under the Gramm-Leach-Bliley Act (GLBA) and Regulation P.

Licensees must comply with GLBA, as amended, and Regulation P.

(1) Unless subject to an exception under GLBA, as amended, licensees must, at a minimum:

(b) If licensees share certain customer information with particular types of third parties, the institutions are also required to provide notice to their customers and an opportunity to opt out of the sharing. If a licensee limits its types of sharing to those which do not trigger opt-out rights, it may provide a "simplified" annual privacy notice to its customers that does not include opt-out information. If a licensee's privacy policy has not changed, additional notices may not be required.

(2) See GLBA, as amended, and Regulation P at 12 C.F.R. 1016 for the required details.

History

Statutory Authority: Chapter 43.320 RCW, RCW 19.146.223. WSR 16-08-027, § 208-660-470, filed 3/30/16, effective 4/30/16.

Wash. Admin. Code § 208-660-480 Notice to consumers of data breach.

History

Statutory Authority: Chapter 43.320 RCW, RCW 19.146.223. WSR 16-08-027, § 208-660-480, filed 3/30/16, effective 4/30/16.

Wash. Admin. Code § 208-660-490 Business resumption plan.

Licensees must have a written plan that details the company's response and recovery to any event that results in damage to or destruction of books and records. The plan must be maintained as part of the licensee's books and records.

History

Statutory Authority: Chapter 43.320 RCW, RCW 19.146.223. WSR 16-08-027, § 208-660-490, filed 3/30/16, effective 4/30/16.

Wash. Admin. Code § 208-660-500 Prohibited practices.

(1) What may I request of an appraiser? You may request an area or market survey. While there are no strict definitions of these terms, generally they refer to general information regarding a region, area, or plat. The information usually includes the high, low and average sales price, numbers of properties available for sale or that have been sold within a set period, marketing times, days on market, absorption rate or the mixture of different property types in the specified area, among other possible components. An area survey does not contain sufficient information or is not so defining as to allow an appraiser or reader to determine the value of a specified property or property type.

(2) How may I discuss property values with an appraiser, prior to the appraisal, without the discussion constituting improperly influencing the appraiser? You may inform the appraiser of your opinion of value, the borrower's opinion of value, or the list or sales price of the property. You are prohibited from telling the appraiser the value you need or that is required for your loan to be successful.

(3) What business practices are prohibited? The following business practices are prohibited:

(a) Directly or indirectly employing any scheme, device, or artifice to defraud or mislead borrowers or lenders or to defraud any person.

(b) Engaging in any unfair or deceptive practice toward any person.

(d) Soliciting or entering into a contract with a borrower that provides in substance that the mortgage broker may earn a fee or commission through the mortgage broker's "best efforts" to obtain a loan even though no loan is actually obtained for the borrower.

(e) Charging discount points on a loan which does not result in a reduction of the interest rate. Some examples of discount point misrepresentations are:

(i) A mortgage broker or lender charging discount points on the good faith estimate, loan estimate, or settlement statement payable to the mortgage broker or any party that is not the actual lender on the resident mortgage loan.

(ii) Charging loan fees or mortgage broker fees that are represented to the borrower as discount points when such fees do not actually reduce the rate on the loan, or reflecting loan origination fees or mortgage broker fees as discount points.

(iii) Charging discount points that are not mathematically determinable as the same direct reduction of the rate available to any two borrowers with the same program and underwriting characteristics on the same date of disclosure.

(f) Failing to clearly and conspicuously disclose whether a payment advertised or offered for a residential mortgage loan includes amounts for taxes, insurance, or other products sold to the borrower. This prohibition includes the practice of misrepresenting, either orally, in writing, or in any advertising materials, a loan payment that includes only principal and interest as a loan payment that includes principal, interest, tax, and insurance.

(g) Making or funding a loan by any means other than table funding.

(h) Negligently making any false statement or willfully making any omission of material fact in connection with any application or any information filed by a licensee in connection with any application, examination or investigation conducted by the department. This includes leaving blanks on a document and instructing the borrower to sign the document with the blanks or providing the borrower with documents with blanks. You are not prohibited from marking some information blanks with "N/A" if the information is not applicable to the transaction.

(i) Willfully filing a lien on property without a legal basis to do so.

(j) Coercing, intimidating, or threatening borrowers in any way with the intent of forcing them to complete a loan transaction.

(k) Failing to make disclosures to loan applicants and noninstitutional investors as required by RCW 19.146.030 and any other applicable state or federal law.

(l) Making, in any manner, any false or deceptive statement or representation with regard to the rates, points, or other financing terms or conditions for a residential mortgage loan. An example is advertising a discounted rate without clearly and conspicuously disclosing in the advertisement the cost of the discount to the borrower and that the rate is discounted.

(m) Engage in bait and switch advertising.

Bait and switch means a deceptive practice of soliciting or promising a loan at favorable terms, but later "switching" or providing a loan at less favorable terms. While bait and switch will be determined by the facts of a case, the following examples, alone or in combination, may exhibit a bait and switch practice:

(i) A deceptive change of loan program from fixed to variable rate.

(ii) A deceptive increase in interest rate.

(iii) The misrepresentation of discount points. This may include discount points that have a different rate buydown effect than promised, or origination fees that a borrower has been led to believe are discount points affecting the rate.

(iv) A deceptive increase in fees or other costs.

(v) A deceptive disclosure of monthly payment amount. This practice may involve soliciting a loan with payments that do not include monthly amounts for taxes and insurance or other reserved items, while leading the borrower to believe that such amounts are included.

(vi) Additional undisclosed terms such as prepayment penalties or balloon payments, or deceiving borrowers about the effect of disclosed terms.

(vii) Additional layers of financing not previously disclosed that serve to increase the overall cost to the borrower. This practice may involve the surprise combination of first and second mortgages to achieve the originally promised loan amount.

(viii) Leading borrowers to believe that subsequent events will be possible or practical when in fact it is known that the events will not be possible or practical.

(ix) Advertising or offering rates, programs, or terms that are not actually available at the time. See WAC 208-660-440(5).

(n) Engage in unfair or deceptive advertising practices. Unfair advertising may include advertising that offends public policy, or causes substantial injury to consumers or to competition in the marketplace.

(o) Negligently making any false statement or knowingly and willfully make any omission of material fact in connection with any reports filed by a mortgage broker or in connection with any investigation conducted by the department.

(p) Making any payment, directly or indirectly, to any appraiser of a property, for the purposes of influencing the independent judgment of the appraiser with respect to the value of the property.

(q) Advertising a rate of interest without clearly and conspicuously disclosing the annual percentage rate implied by the rate of interest.

(r) Failing to comply with the federal statutes and regulations in RCW 19.146.0201(11).

(s) Failing to pay third-party providers within the applicable timelines.

(t) Collecting or charging, or attempting to collect or charge, or use or propose any agreement purporting to collect or charge any fees prohibited by the act.

(u) Acting as a loan originator and real estate broker or salesperson, or acting as a loan originator in a manner that violates RCW 19.146.0201(14).

(v) Failing to comply with any provision of RCW 19.146.030 through 19.146.080 or any rule adopted under those sections.

(w) Intentionally delay closing of a residential mortgage loan for the sole purpose of increasing interest, costs, fees, or charges payable by the borrower.

(x) Steering a borrower to less favorable terms in order to increase the compensation paid to the company or mortgage loan originator.

(y) Receiving compensation or any thing of value from any party for assisting in real estate "flopping." Flopping occurs during some short sales where the value of the property is misrepresented to the lender who then authorizes the sale of the property for less than market value. The property is then resold at market value or near market value for a profit. The failure to disclose the true value of the property to the lender constitutes fraud and is a violation of this chapter.

(z) Abandoning records. If you do not maintain your records as required, you are responsible for the costs of collection, storage, conversion to electronic format, or proper destruction of the records.

(4) What additional practices are prohibited when providing residential mortgage loan modification services? You are prohibited from:

(a) Collecting an advance fee;

(b) Charging total fees in excess of usual and customary charges, or total fees that are not reasonable in light of the service provided when providing residential mortgage loan modification services;

(c) Failing to provide a written fee agreement as prescribed by the director when providing residential mortgage modification services. See also WAC 208-660-430(23);

(d) As a condition to providing loan modification services requiring or encouraging a borrower to:

(i) Sign a waiver of his or her legal defenses, counterclaims, and other legal rights against the servicer for future acts;

(ii) Sign a waiver of his or her right to contest a future foreclosure;

(iii) Waive his or her right to receive notice before the owner or servicer of the loan initiates foreclosure proceedings;

(iv) Agree to pay charges not enumerated in any agreement between the borrower and the lender, servicer, or owner of the loan;

(v) Cease communication with the lender, investor, or loan servicer or stop or delay making regularly scheduled payments on an existing mortgage unless a mortgage loan modification is completely negotiated and executed with the lender or investor and the modification agreement itself provides for a cessation or delay in making regularly scheduled payments; or

(e) Entering into any contract or agreement to purchase a borrower's property;

(f) Failing in a timely manner to:

(i) Communicate with or on behalf of the borrower;

(ii) Act on any reasonable request from or take any reasonable action on behalf of a borrower;

(g) Engaging in false or misleading advertising. In addition to WAC 208-660-440, examples of false or misleading advertising include:

(i) Advertising which includes a "guarantee" unless there is a bona fide guarantee which will benefit a borrower;

(ii) Advertising which makes it appear that a licensee has a special relationship with lenders when no such relationship exists;

(h) Leading a borrower to believe that the borrower's credit record will not be negatively affected by a mortgage loan modification when the licensee has reason to believe that the borrower's credit record may be negatively affected by the mortgage loan modification.

(5) What federal guidance has the director adopted for use by the department in determining if a violation under subsection (3)(b) of this section has occurred? The director has adopted the following documents:

(a) The Conference of State Bank Supervisors and American Association of Residential Mortgage Regulators "Guidance on Nontraditional Mortgage Product Risks" (released November 14, 2006); and

(b) The Conference of State Bank Supervisors, American Association of Residential Mortgage Regulators, and National Association of Consumer Credit Administrators "Statement on Subprime Mortgage Lending," effective July 10, 2007 (published in the Federal Register at Vol. 72, No. 131).

(6) What must I do to comply with the federal guidelines on nontraditional mortgage loan product risks and statement on subprime lending? You must adopt written policies and procedures implementing the federal guidelines that are applicable to your mortgage broker business. The policies and procedures must be maintained as a part of your books and records and must be made available to the department upon request.

(7) When I develop policies and procedures to implement the federal guidelines, what topics must be included? The policies and procedures must include, at a minimum, the following:

(a) Consumer protection.

Communication with borrowers. Providers must focus on information important to consumer decision making; highlight key information so that it will be noticed; employ a user-friendly and readily navigable format for presenting the information; and use plain language, with concrete and realistic examples. Comparative tables and information describing key features of available loan products, including reduced documentation programs, also may be useful for consumers. Promotional materials and other product descriptions must provide information about the costs, terms, features, and risks of nontraditional mortgages that can assist consumers in their product selection decisions. Specifically:

• Borrowers must be advised of potential increases in payment obligations. The information should describe when structural payment changes will occur and what the new payment would be or how it was calculated. For example, loan products with low initial payments based on a fixed introductory rate that expires after a short time and then adjusts to a variable index rate plus a margin must be adequately described to the borrower. Because initial and subsequent monthly payments are based on these low introductory rates, a wide initial spread means that borrowers are more likely to experience negative amortization, severe payment shock, and an earlier than scheduled recasting of monthly payments.

• Borrowers must be advised as to the maximum amount their monthly payment may be if the interest rate increases to its maximum rate under the terms of the loan.

• Borrowers must be advised as to the maximum interest rate that can occur under the terms of the loan.

• Borrowers must be alerted to the fact that the loan has a prepayment penalty and the amount of the penalty.

• Borrowers must be made aware of any pricing premium based on reduced documentation.

(b) Control standards. Actual practices must be consistent with the written policies and procedures. Employees must be trained in the policies and procedures and performance monitored for compliance. Incentive programs should not produce high concentrations of nontraditional products. Performance measures and reporting systems should be designed to provide early warning of increased risk.

(8) May I charge a loan origination fee or discount points when I originate but do not make a loan? No. You may not charge a loan origination fee or discount points as described in Regulation X, Part 1024, Appendix A.

(9) What mortgage broker fees may I charge? You may charge a mortgage broker fee that was agreed upon between you and the borrower as stated on a good faith estimate, loan estimate, or similar document provided that such fee is disclosed in compliance with the act and these rules.

(10) How do I disclose my mortgage broker fees on the good faith estimate or loan estimate and settlement statement? You must disclose or direct the disclosure of your fees on the good faith estimate or loan estimate and settlement statement or similar document as required by the act and Regulations X or Z.

(11) May I charge the borrower a fee that exceeds the fee I initially disclosed to the borrower? Pursuant to RCW 19.146.030(4), you may not charge any fee that benefits you if it exceeds the fee you initially disclosed unless there is a valid change of circumstance as allowed under RESPA and:

(a) The need to charge the fee was not reasonably foreseeable at the time the initial disclosure was provided; and

(b) You have provided to the borrower, no less than three business days prior to the signing of the loan closing documents, a clear written explanation of the fee and the reason for charging a fee exceeding that which was previously disclosed. See WAC 208-660-430 for specific details, disclosures, and exceptions implementing RCW 19.146.030(4).

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 19-21-142, § 208-660-500, filed 10/22/19, effective 11/24/19. Statutory Authority: Chapter 43.320 RCW, RCW 19.146.223. WSR 16-08-027, § 208-660-500, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 13-24-023, § 208-660-500, filed 11/22/13, effective 1/1/14. Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. WSR 12-18-048, § 208-660-500, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2010 c 35. WSR 10-20-125, § 208-660-500, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-500, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 109. WSR 09-01-156, § 208-660-500, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040, 19.146.223. WSR 08-05-126, § 208-660-500, filed 2/20/08, effective 3/22/08. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-500, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-505 What is required for a Washington licensed loan originator to work from their residence without licensing the residence as a branch location?

A licensed company may permit a sponsored and licensed loan originator to work from the loan originator's residence without licensing it as a branch location under RCW 19.146.265 and subject to the following conditions:

(2) Access to the company platforms and customer information must be in accordance with the licensee's comprehensive written information security plan, as required by WAC 208-660-460, which must include safeguards that protect customer information.

(a) Conducting in-person customer interactions;

(b) Storing physical records containing customer information;

(d) Advertising the location as a licensed main or branch office.

(5) The NMLS record of the loan originator must designate the licensed main office headquarters or a licensed branch office as their registered location.

(6) The loan originator must use their registered location from NMLS in the "loan originator information" section on residential mortgage loan applications.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 22-24-049, § 208-660-505, filed 11/30/22, effective 12/31/22.

Wash. Admin. Code § 208-660-510 Director and department powers—Examination authority.

(1) Why is the department authorized to examine my business? The department is authorized to examine your business to determine your compliance with the act.

(2) When may the department examine my business? The department may examine your business at any time.

(3) Will the department give me advance notice of an examination?

(a) The department will generally give you advance notice of at least thirty days of a routine examination to allow you to compile the requested documents and prepare for the examiner's arrival. However, you and the department may agree on an earlier date for the examination. Extensions of time beyond that are at the director's discretion.

(b) The department will not give you advance notice of "for cause" examinations. "For cause" means the department may have reason to believe you have violated the act.

(4) What are the protocols for an examination of my business? The basic protocols include, but are not limited to:

(a) Frequency of examinations. The department's examination frequency will be determined using appropriate measurements of risk and random selection.

The primary purpose for measuring risk to determine the examination schedule and frequency cycle is to help the department identify those mortgage brokers whose compliance practices display potential weaknesses requiring examination attention. These same measurements of risk assist the department in determining the need for expanding the scope of an examination or expanding the initial examination time period. The protocols for measuring risk may include, but are not limited to:

(i) The history of licensing;

(ii) Known enforcement issues or problems;

(iii) The number and severity of complaints;

(iv) The licensee's responsiveness to department inquiries;

(v) The licensee's volume of loan activity;

(vi) The number of licensed locations and staff size;

(vii) Prior examination or investigation results; and

(viii) The existence of internal and external systems and controls to ensure compliance.

(b) Advance notice. You will generally receive a department notice listing the documents the department will examine at your business. Your preparation before the arrival of the department examiners will help the examination proceed more efficiently. The department will make every effort to minimize the impact of the examination on your business. Information requirements may change to accommodate changes to state or federal law or as risk factors dictate. Any data point compiling system you use should allow flexibility in reporting the data points to meet the changes.

(c) A preexamination meeting at your business. The department examiner(s) will meet with you upon arrival at your business location.

(d) The on-site review at your business. The department examiner will conduct the examination of your business. When directed to do so by the examiner, you must provide the examiner with requested information.

(e) An exit meeting after you have provided all the requested information, and the examiner has completed the preliminary analysis. The examiner(s) may request additional information from you. After receiving that information and completing the preliminary analysis, the examiner may discuss the preliminary analysis with you.

(f) Post examination work and report. The department examiner will prepare an examination report and submit the report and examination file to the review examiner. After making any necessary changes, the department will deliver the report to you unless the violations are deemed serious and the file is delivered to enforcement.

(g) Notification of violations and opportunity for response. The department will document in the examination report any violations or deficiencies identified during the examination. You will have an opportunity to respond to the examination findings and any violations or deficiencies unless the violations are deemed serious or are repeat violations and the file is delivered to enforcement.

(h) A possible referral to enforcement. While any violation of the act or these rules may be referred to enforcement, it is usually the case that only serious or repeat violations are referred. An enforcement action may result in any, or all, or any combination of the following: A suspension or revocation of your license, the imposition of fines, the payment of restitution, a ban from the mortgage broker industry.

(5) What is the scope of the examination of my business? In general, the scope of the examination will include, but is not limited to:

(a) Reviewing trust accounting compliance.

(b) Reviewing loan files.

(c) Conducting interviews to better understand the business, solicitation practices, transactional events, disclosure compliance, and complaint resolution.

(d) Reviewing the business books and records, including employee records.

(6) When would the department expand the scope of an examination of my business? If, during an examination, the department finds a clear need to expand the scope of the examination, it may do so. Two examples of a clear need to expand the scope of an examination are:

(a) When the department finds an apparent violation of trust accounting.

(b) When apparent violations of the prohibited practices section of the act are discovered. See RCW 19.146.0201 for prohibited practices.

These examples are illustrative only and do not limit the circumstances under which the department may decide to expand the scope of an examination.

(7) Will I receive notice if the department decides to expand the scope of the examination of my business? Yes. The department will provide you with five business days' written notice if examination findings clearly identify the need to expand the scope of the examination. See subsection (6) of this section for examples of when the department may decide to expand the scope of the examination.

The expanded examination may include a different location and may go beyond the initial five-year time limit.

(8) Will I have to pay for an examination of my business?

(a) If you are located in Washington, you do not have to pay for the costs of the examination.

(b) If you are located outside of Washington, you will have to pay for the examiner's travel costs. Travel costs include, but are not limited to, transportation costs, meals, and lodging. Travel reimbursement rates are established by the Washington state office of financial management.

(c) If your examination was the result of a referral from enforcement, the department may charge an investigative fee. The department will not charge an investigation fee in a complaint investigation or examination if it is determined that no violation occurred, or when the licensee implements a remedy satisfactory to the complainant and the department, and no department order has been issued.

The department will send you an invoice and you will have thirty days to reimburse the department for the examination and the travel costs. See WAC 208-660-550, Department fees and costs.

(9) May the department consider reports made by independent certified professionals instead of conducting their own examination of a mortgage broker business? Yes. Instead of examining a mortgage broker's business, the department may consider the reports of independent certified professionals who have examined the mortgage broker using the same standards used by the department (see the standards in the department's Mortgage Broker Examination Manual). The department may then prepare a report of examination that incorporates all or part of the independent certified professional's reports, or the examiner may expand the scope of the examination.

(10) What are the pros and cons of hiring my own independent certified professional versus waiting for a department examination? The department's cost of examination will not be charged to you directly, although you may experience some minor business interruption. If you hire your own independent certified professional, you will incur the cost of that examination; however, you will control the time and manner in which the examination is conducted. The greatest benefits you may derive from hiring your own independent certified professional are:

(a) Early notice of problems you may encounter during an examination;

(b) The ability to correct deficiencies or problems at an early stage when the greatest benefit of correction may be derived;

(d) The ability to control the timing for your convenience.

(11) If I want the department to consider an independent certified professional's report instead of examining my business, how must I make that request, and who submits the report to the department? When you receive notice from the department that your business is scheduled for an examination, you must notify the department that you wish the department to consider the report of an independent certified professional instead of the department examining your business. The independent certified professional must then submit their report directly to the department, in a form acceptable to the department.

(12) How may the department determine if the independent certified professional's report meets the standards of examination established by the department? The department will consider the sufficiency of the report submitted by the independent certified professional and may require the licensee to provide additional information.

(13) If the independent certified professional's report is missing information, how may the department obtain the missing information? The department may interview, obtain records from, or otherwise contact the licensee, or with the licensee's permission contact the independent certified professional, if additional information is required for the department's review of the report.

(14) What will the department do if the independent certified professional's report is not sufficient? If the department determines the report is not sufficient, the department will notify the licensee and schedule an examination of the business.

(15) What will the department do if the independent certified professional's report is sufficient? If the department determines the report is sufficient, the department will prepare a report of examination that incorporates all or part of the independent certified professional's report.

(16) May the department retain professionals or specialists to examine a licensee? Yes. The department, at its own expense, may retain attorneys, accountants, or other professionals or specialists as examiners, auditors, or investigators to examine a licensee.

(17) Do I receive any reports from the examination? Yes.

(a) When you have provided all the requested information, and the examiner has completed the preliminary analysis, the examiner will issue an exit report of examination containing preliminary examination findings.

(b) After additional department review, including the consideration of new information, if any, the department will issue a final report of examination.

(18) Must I do anything as a result of the examination? Yes. You will receive instructions from the department on the actions you must take. For example, if adverse findings or deficiencies were cited in the report of examination, you must respond to those findings.

(19) How do I respond to findings in a report of examination? You must respond in writing within thirty days of the date the department issues the report of examination. Your response must address any deficiencies noted in the report and describe the corrective actions you have taken.

(20) What will happen if I do not respond to the report of examination? If you fail to respond to the report of examination, you may be referred to enforcement where further administrative actions may be taken against you.

History

Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 13-24-023, § 208-660-510, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-510, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-510, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-520 Director and department powers—Investigation authority.

(1) What is an investigation? An investigation is an inquiry to determine compliance with the act and rules, to assess allegations of wrongdoing, or to evaluate the licensing qualifications of persons subject to the act. The inquiry may involve extensive research, fact gathering, the issuance of directives and subpoenas, witness interviews, and financial and legal analysis. Depending on the results of these efforts, an investigation may result in the pursuit of an enforcement action. An investigation may proceed at the same time as other matters and may continue during an enforcement action.

(2) How often may the department investigate my mortgage broker or loan originator operations? For the purpose of investigating violations or complaints, the department may investigate your business as often as necessary to carry out the purpose of the act.

(3) Will the department give advance notice before requiring me to make my books and records available for its investigation? The department is not required to give you advance notice before an investigation. However, the department may provide advance notice before an investigation if doing so would be in the best interests of all parties involved, including the department.

(4) From whom may the department obtain information in an investigation? The department may obtain information from any person whose information may be pertinent to the loans, business, or subject matter of an investigation.

(5) How may the department obtain information during an investigation? The department may direct, subpoena, or order a person to submit to a deposition, or produce written information.

(6) What information may the department obtain during an investigation? The department may obtain books, accounts, records, files, and any other documents the department deems relevant to the investigation.

(7) What businesses may the department investigate? The department may investigate the business of any person who is engaged in the business of mortgage brokering, whether the person is a licensee or whether the person acts or claims to act under, or without the authority of, the act.

(8) May the director retain professionals or specialists to assist in an investigation, and if so, will I have to pay for those services? Yes. The department may hire attorneys, accountants or other professionals as needed to conduct or assist in an investigation. The cost for these services will be assessed in accordance with WAC 208-660-550(5), Investigations.

(9) When may the department charge an investigation fee? The department may charge an investigation fee when it investigates the books and records of any licensee.

(10) Are there circumstances in which the department will investigate a licensee but will not charge an investigation fee? Yes. The department will not charge an investigation fee in a complaint investigation if it is determined that no violation occurred, or when the licensee implements a remedy satisfactory to the complainant and the department, and no department order has been issued.

(11) How is the amount of the investigation fee determined? The amount of the investigation fee is the number of hours expended by the examiner related to the investigation multiplied by an hourly rate established by the department. See WAC 208-660-550 Department fees and costs.

History

Statutory Authority: Chapter 43.320 RCW, RCW 19.146.223. WSR 16-08-027, § 208-660-520, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 19.146.225. WSR 13-24-023, § 208-660-520, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-520, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-530 Director and department powers—Enforcement authority.

(1) What is a directive? A directive is a formal request for information from the director. A directive may request the recipient to appear in person to testify or present specific documents or items. A directive may be entitled "directive" or "subpoena."

(2) What is an administrative enforcement action? An administrative enforcement action is a formal action, generally initiated by a statement of charges filed by the department against persons who allegedly violated the act. Enforcement actions seek various sanctions, including, but not limited to, license revocation or suspension, business practice prohibition, or fines; and may include ordering restitution for borrowers, recovery of the department's investigation costs, or all of the above.

(3) What other types of enforcement action may the department pursue against me or my license? The department may pursue criminal or civil referrals to the attorney general, prosecuting attorneys, or federal authorities, and may initiate civil actions in superior court.

(4) What does it mean to be found in violation of the act and rules? For the purposes of evaluating the licensing qualifications of an applicant, any of its principals, or the designated broker, "found in violation of the act and rules" means at least one of the following orders has been issued:

(a) A superior court order stating the applicant, any of its principals, or the designated broker violated any of the provisions of the act or rules; or

(b) A final administrative order after the completion of an administrative hearing and the filing of an initial decision of an administrative law judge stating the applicant, any of its principals, or the designated broker violated any of the provisions of the act or rules; or

(c) An administrative order stating the applicant, any of its principals, or the designated broker violated any of the provisions of the act or rules.

The order containing the finding described above must not have been entered within five years of the filing of the present application. However, if the violation resulted in a conviction of a gross misdemeanor involving dishonesty or financial misconduct, or a felony, the finding must not have been entered within seven years of the filing of the present application.

(5) May the department sanction me for committing violations in another jurisdiction? The department may seek sanctions against you for committing a violation in another jurisdiction if the violation could be a basis for the department to seek sanctions under the act or rules. Possible sanctions include those found in RCW 19.146.220.

(6) May I be subject to a daily fine for violating the act? Yes. Each licensed mortgage broker and each of its principals, officers, designated brokers, loan originators, employees, independent contractors, and agents must comply with the applicable provisions of the act. Each violation of any applicable provision of the act, or of any order, directive, or requirement of the director may, at the discretion of the director, subject the violator to a fine of up to one hundred dollars for each violation. Each day's continuance of the violation is a separate and distinct offense. In addition, the director may exercise discretion and by order assess other penalties for a violation of the act.

(7) Under what circumstances will the department hold a designated broker, principal, or owner who has supervisory authority responsible for the actions of others that violate the act? A designated broker, principal, or owner with supervisory authority is responsible for any conduct violating the act by a licensee, employee, or independent contractor if they:

(a) Directed or instructed the conduct that was in violation of the act, or had knowledge of the specific conduct, and approved or allowed the conduct; or

(b) Knew, or by the exercise of reasonable care and inquiry should have known, of the conduct in time to prevent it, or minimize the consequences, and did not.

(8) When conduct violating the act has occurred, what may the department consider when assessing the responsibility of the designated broker, principal, and owner with supervisory authority? The department may consider the following in an effort to determine who is responsible when a violation of the act has occurred. The following list is not limiting or exhaustive of the factors the department may consider:

(a) The adequacy of any background and experience investigation conducted prior to hiring or contracting with any person;

(b) The adoption of policies and procedures for:

(i) Supervision and training;

(ii) Regularly reviewing work performed;

(iii) Training in the requirements of the act and rules;

(iv) Monitoring continuing education requirements and compliance under the act;

(v) Acting on reports of alleged misconduct;

(d) Providing copies of the act and rules; and

(e) The frequency and completeness of review conducted on work performed by any person subject to the act.

The items listed in (a) through (e) of this subsection must be in writing, or compliance with them must be documented in writing, and all documents must be retained as part of the mortgage broker business records. See WAC 208-660-450.

(9) Do I have the right to have an attorney represent me at an adjudicative hearing and in any superior court proceeding? Yes. You may have an attorney represent you at your own expense, or you may represent yourself.

(10) Are there any criminal penalties related to violations of the act? Yes. Violations of RCW 19.146.050 are class C felonies with a maximum penalty of five years in prison or a fine of ten thousand dollars, or both. Violations of RCW 19.146.235(9) are class B felonies with a maximum penalty of ten years in prison or a fine of twenty thousand dollars, or both. All other violations of the act are misdemeanors with a maximum penalty of ninety days in jail or a fine of not more than one thousand dollars, or both.

(11) Under the act, is it a crime for any person subject to examination or investigation to knowingly withhold, abstract, remove, mutilate, destroy, or secrete any books, records, computer records, or other information? Yes. Knowingly withholding, abstracting, removing, mutilating, destroying, or secreting books, records, computer records, or other information is a class B felony punishable under RCW 9A.20.021 (1)(b).

(12) Is a mortgage broker responsible for the payment of third-party providers even if the borrower has agreed to pay the fee? Yes. If a mortgage broker or loan originator orders the third-party provider service, then the mortgage broker is responsible for paying for the service. However, the mortgage broker or loan originator is not responsible for paying the fee if the third-party provider agrees in writing to accept the fee from the borrower.

(13) When must third-party providers be paid? Third-party providers must be paid no later than thirty days after the related loan closing documents are filed, or within ninety days of the service, whichever is sooner, unless:

(a) The third-party provider agrees in writing to a different payment arrangement; or

(b) The third-party provider has been notified in writing that a bona fide dispute exists regarding the performance or quality of the third-party provider service.

(14) What is a "bona fide" dispute between a mortgage broker and third-party provider? A dispute related to the performance or quality of the third-party provider service that has been reported in writing to the third-party provider. The report must specify the disputed areas of performance or quality.

(15) When must a dispute regarding the performance or quality of a third-party provider be reported? The report of a dispute regarding the performance or quality of the third-party provider service must be made in writing and provided to the third-party provider before the payment for the services becomes due; that is, no later than thirty days after the related loan closing documents are filed, or within ninety days of the service, whichever is sooner.

(16) What is a temporary cease and desist order issued by the department? A temporary cease and desist order is an administrative enforcement action by the director, or designee, ordering a mortgage broker or loan originator to stop conducting business, or to stop doing some specific act.

(17) When does the department use temporary cease and desist orders? A temporary cease and desist order may be used when the department determines that a mortgage broker or loan originator is violating the act in a manner that is likely to cause substantial injury to the public.

(18) What happens to my mortgage broker or loan originator license if the department of social and health services (DSHS) certifies me as out of compliance with a support order under RCW 74.20A.320?

(a) The director will immediately suspend your license without the opportunity for a hearing if the department receives notice from DSHS that you are out of compliance with their support order regulations.

(b) The director will send you a document entitled "Notice of Suspension for Noncompliance with Child Support Order." Your license is suspended from the date of the notice. The suspension of your license remains in effect until the director is notified by DSHS of your compliance with their order. You must not perform any services under the act that require licensing while your license is suspended.

(19) If the director suspends my license after notice from DSHS that I am not in compliance with a support order, may my license be reinstated?

(a) The director will reinstate your license when the department has received written notice from DSHS of your compliance, and verified that you meet all licensing requirements under the act.

(b) The department will send you a notice entitled "Notice of Cancellation of Suspension for Noncompliance with Child Support Order." Your license is reinstated from the date of the notice.

(20) Who may I contact if I have questions about how DSHS determines I am out of compliance with a support order? Contact DSHS if you have questions about a DSHS certification of your noncompliance with a support order. Reference their case number when you contact them.

History

Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. WSR 12-18-048, § 208-660-530, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223. WSR 08-05-126, § 208-660-530, filed 2/20/08, effective 3/22/08. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-530, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-540 Director and department powers—General authority.

Reserved.

History

Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-540, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-550 Department fees and costs.

(1) Mortgage broker licenses.

| Mortgage broker - License application fee | $371.00 | | --- | --- | | Mortgage broker - Annual assessment (due upon initial licensing, then an annual renewal fee, per location) | $530.00 | | Mortgage broker late renewal assessment (fifty percent of annual assessment) | $265.00 | | Mortgage broker branch office - License application fee | $185.00 | | Mortgage broker branch office - Annual assessment (annual renewal fee, per location) | $530.00 | | Mortgage broker - License amendment | No fee | | Mortgage broker - Change of designated broker | $25.00 |

(2) Loan originator licenses.

| Loan originator - License application fee | $125.00 | | --- | --- | | Loan originator - Annual assessment (not due until first renewal; then an annual renewal fee) | $125.00 | | Loan originator late renewal assessment (fifty percent of annual assessment) | $62.50 | | Loan originator - Cancel association with any mortgage broker | No fee | | Loan originator - License amendment - Add a mortgage broker relationship | $50.00 | | Loan originator - License amendment - Other | No fee |

(3) Examinations.

(a) In Washington. The department does not charge a licensee located in Washington for the costs of an examination unless the examination is a referral from enforcement. See WAC 208-660-510(8).

(b) Outside of Washington. The department will charge the licensee for travel costs.

(c) If the department hires professionals, specialists, or both to examine an out-of-state licensee, the professional, specialist, or both will be considered examiners for the purpose of billing the licensee for travel costs.

(4) Investigations.

(a) The department will charge forty-eight dollars per hour for an examiner's time devoted to an investigation.

(b) The department will bill the licensee for the costs of services from attorneys, accountants, or other professionals or specialists retained by the director to aid in the investigation.

(5) Travel costs. If the mortgage business is out-of-state, the department will charge the business the travel costs associated with an examination or investigation. Travel costs include, but are not limited to, transportation costs (airfare, rental cars), meals, and lodging.

(6) How is the annual assessment calculated? The assessment is a flat rate per license.

(7) How does the department use license application fees? The fees collected by the department are used to pay the costs of administering the act.

History

Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-550, filed 12/1/09, effective 1/1/10. Statutory Authority: Chapters 43.320, 19.146 RCW. WSR 08-14-114, § 208-660-550, filed 6/30/08, effective 7/31/08. Statutory Authority: RCW 43.320.040, 19.146.223. WSR 08-05-126, § 208-660-550, filed 2/20/08, effective 3/22/08. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-550, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-600 Administration and facilitation of prelicensing and continuing education.

(1) Who may offer prelicensing and continuing education courses to principals, designated mortgage brokers, and loan originators? Prelicensing and continuing education is offered by course providers and courses approved through NMLS.

(2) On what topics of education will I be tested?

(a) Prelicensing education. The topics of education will be federal law and regulations, ethics (fraud, consumer protection, fair lending) and lending standards for the nontraditional mortgage marketplace.

(b) Continuing education. The topics of education will be the same as for prelicensing education, plus Washington specific topics.

(3) What specific topics should I study in preparation for any of the required tests?

(a) General.

(i) Ethics in the mortgage industry.

The responsibilities and liabilities of the profession including instruction on fraud, consumer protection, and fair lending issues.

(ii) Lending standards for nontraditional mortgage products.

(iii) Arithmetical computations common to mortgage lending including without limitation, the computation of annual percentage rate, finance charge, amount financed, payment and amortization.

(b) Compliance and internal audit standards.

Proper use and application of the department's published standards and guidelines for examinations.

Internal audit and compliance practices, standards, methods and procedures.

Developing policies and procedures for regulatory compliance.

Responding to regulatory inquiries, directives, subpoenas and enforcement orders.

Training and supervision of mortgage professionals.

Establishing, managing, reconciling and reviewing a trust account (trust account compliance under the act and these rules).

The Mortgage Broker Practices Act.

The Consumer Protection Act.

The Escrow Agent Registration Act.

The Usury Act.

Unfair practices with respect to real estate transactions (RCW 49.60.222).

Mortgage, deed of trust, and real estate contract statutes set forth in Title 61 RCW.

Real estate and appraisal law, including without limitation, the provisions of chapters 18.85 and 18.140 RCW.

Washington principal and agent law.

Any subsequent act or regulation applying to mortgage brokers.

(d) Federal law and associated regulations.

The Real Estate Settlement Procedures Act.

Truth in Lending Act.

Equal Credit Opportunity Act.

Fair Credit Reporting Act.

Fair Housing Act.

Home Mortgage Disclosure Act.

Community Reinvestment Act.

Gramm-Leach-Bliley Act.

Home Ownership Protection Act.

Bank Secrecy Act.

Appraisal regulations.

Underwriting.

The S.A.F.E. Act (Title V of the Housing and Economic Reform Act of 2008 ("HERA")) Public Law No. 110-289.

Any subsequent act or regulation applying to mortgage brokers.

(e) Mortgage services and products.

Conventional.

Reverse mortgages.

FHA mortgages.

VA mortgages.

Nonprime mortgages.

History

Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. WSR 12-18-048, § 208-660-600, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. WSR 09-24-091, § 208-660-600, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 109. WSR 09-01-156, § 208-660-600, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040, 19.146.223. WSR 08-05-126, § 208-660-600, filed 2/20/08, effective 3/22/08. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-600, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-700 Mortgage broker commission.

(1) What is the role of the mortgage broker commission (commission)? The commission acts in an advisory capacity to the director on mortgage broker issues. The commission advises the director on the characteristics and needs of the mortgage broker profession.

(2) Who serves on the commission?

(a) The director appoints the seven members of the commission for two-year terms. Commission members must have at least five years' experience in the business of residential mortgage lending. The experience must be within the past five years from the date of appointment. When appointing a commission member, the director will consider the recommendations from professional organizations that represent mortgage brokers and loan originators.

(b) Of the seven voting members of the commission, at least three members of the commission must be licensed mortgage brokers, at least two must be licensed loan originators who are not designated brokers, and at least one must be a mortgage broker who is exempt from licensure under RCW 19.146.020(1).

(3) How do interested parties apply for a position on the commission? In November of each year the department sends a notification to all mortgage brokers to advise them that the director is accepting applications for appointment to the commission. The director will accept applications in the form of a cover letter and resume until December 15th. The director will select the number of applicants needed to fill the vacancies by January 31st so the appointee(s) can attend the February meeting of the commission.

(4) What are some of the actions the commission may take? The commission may:

(a) Adopt and meet according to a regular schedule;

(b) Attend special meetings if called by the chairperson;

(d) Advise the director on the licensing of mortgage brokers and loan originators.

History

Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-700, filed 11/21/06, effective 1/1/07.

Wash. Admin. Code § 208-660-800 Forms.

Reserved.

History

Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. WSR 06-23-137, § 208-660-800, filed 11/21/06, effective 1/1/07.

Chapter 208-680 Escrow Agent Registration Act.

Wash. Admin. Code § 208-680-030 Definitions.

What definitions are applicable to these rules? Unless the context clearly requires otherwise, the definitions in this section apply throughout these rules.

"Act" means the Escrow Agent Registration Act, codified under chapter 18.44 RCW.

"Applicant" means any person applying for an escrow officer license or any person or group of persons applying for an escrow agent license. The term "applicant" includes the principal officers and controlling persons of the applicant, as well as any escrow officer seeking to become an escrow agent's designated escrow officer or branch designated escrow officer.

"Branch designated escrow officer" means any licensed escrow officer designated by a licensed escrow agent and approved by the director to supervise a specific branch office. The branch designated escrow officer is responsible for supervising an escrow agent's handling of escrow transactions, management of the escrow agent's branch trust account, and supervision of all licensed escrow officers and other persons employed by the escrow agent at his or her branch designated office.

"Cash deposit" means funds deposited, in lieu of an errors and omissions policy, in an account in a recognized Washington state depository which account is maintained separate and apart from the escrow agent's own funds. The funds shall be deposited in such a manner to permit only the director to withdraw from the principal amount. The escrow agent may withdraw any interest accumulated to the account.

"Closing" means the transfer of title of real or personal property or execution of a deed, bill of sale or real estate contract, whichever event occurs first.

"Department" means the department of financial institutions.

"Designated escrow officer" means any licensed escrow officer designated by a licensed escrow agent and approved by the director as the licensed escrow officer responsible for supervising that escrow agent's handling of escrow transactions, management of the escrow agent's trust account, and supervision of all licensed escrow officers and other persons employed by the escrow agent.

"Director" means the director of the department of financial institutions or his or her duly authorized representative. For purposes of this act, the division of consumer services is deemed to be the director's authorized representative.

"Escrow" means the same as in RCW 18.44.011.

"Escrow instructions" are the instructions, signed by the principal parties to the transaction that identify the duties and responsibilities of the escrow agent in carrying out the escrow, that identify the thing or things of value held by the escrow agent and the specified condition or set of conditions under which the thing or things of value are to be transferred.

"Good funds" means funds in a bank account that are immediately usable by the owner of the account. Good funds may be derived from the monetary instruments described in RCW 18.44.400(3).

"Handling escrow transactions" means participating in escrow transactions. It includes, but is not limited to, having access to a client's: Personal information, financial records, or funds. Employees that perform administrative functions like payroll or human resources services are not handling escrow transactions unless such persons also perform duties meeting this definition.

"Investigation" means an inquiry undertaken for the purpose of detection of violations of the act and these rules or securing information lawfully required under the act and these rules. The director may conduct private or public investigations.

"Overdue instrument" means a negotiable instrument that is overdue as defined in RCW 62A.3-304.

"Permanent record" means any record required to be kept under RCW 18.44.400 for a period of six years from the completion of the escrow transaction.

"Principal officers" means natural person applicants for escrow agent licenses including corporate officers vice president and above; directors, shareholders, members, or anyone else who owns ten percent or more of the escrow agent's equity; general or managing partners; sole proprietors and spouses of sole proprietors; designated and branch designated escrow officers; and any person defined as a "controlling person" in RCW 18.44.011(2).

"Principal parties" means the buyers and sellers in a purchase transaction, and the borrower and lender in a refinance transaction.

"Providing escrow services" means conducting transactions, except the acts of a qualified intermediary in facilitating an exchange under section 1031 of the Internal Revenue Code, wherein any person or persons, for the purpose of effecting and closing the sale, purchase, exchange, transfer, encumbrance, or lease of real or personal property to another person or persons, delivers any written instrument, money, evidence of title to real or personal property, or other thing of value to a third person to be held by such third person until the happening of a specified event or the performance of a prescribed condition or conditions, when it is then to be delivered by such third person, in compliance with instructions under which he or she is to act, to a grantee, grantor, promisee, promisor, obligee, obligor, lessee, lessor, bailee, bailor, or any agent or employee thereof.

"Reconveyance" means an instrument used to transfer title from an individual holding such title in trust to the equitable owner of real estate, when title is held as collateral security for a debt.

"Third party to the transaction" means those persons providing professional services necessary for the closing of the escrow, including, but not limited to: Real estate brokers, lenders, mortgage brokers, attorneys, tax facilitators and underlying lien holders.

"Transfer of title" occurs at the time the seller executes a deed or bill of sale and such is delivered to the purchaser or recorded.

"Trust" means a fiduciary relationship whereby a thing of value is delivered to an escrow agent with the intention that such thing of value be administered by the escrow agent for the benefit of the principal parties to the transaction.

"Trust account" means a bank account holding funds of any party to the transaction.

"Unclaimed funds" means any funds that are abandoned under the Uniform Unclaimed Property Act, chapter 63.29 RCW.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-030, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-030, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-040 Exceptions—General.

(1) Do I need an escrow license to provide escrow services? Unless you fall into one of the exceptions in RCW 18.44.021, you must have a license under the act before providing escrow services.

(2) I only plan on performing one or two escrow transactions. Do I need an escrow license? Yes. You must license unless you meet one of the above exceptions. There is no exception under the act for persons performing limited numbers of transactions.

History

Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-040, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-045 Exceptions—Attorneys.

(1) I am licensed to practice law in Washington. Am I excepted from licensing as an escrow agent? Yes, as long as you only perform escrow services as part of your law practice. You are excepted from licensure as an escrow agent while you are engaged in the practice of law, but you are required to apply for and receive an escrow license before you perform escrow services outside of your legal practice. Your attorney exception may be extended to your bona fide legal practice, but is otherwise an individual exception and may not be extended to a separate business entity. Your exception may not be extended to nonattorney individuals unless they are employees of your bona fide law practice and you supervise all of their transactions.

You or your attorney-owned business entity will be required to license as an escrow agent if you or your business entity do one or more of the following:

(a) Principally provide escrow services, not including escrow services provided incidentally to the practice of law;

(b) Advertise yourself or your business entity as providing the services of an escrow agent without identifying yourself or your business entity as an attorney or law practice;

(c) Receive compensation or gain for providing escrow services through a business entity other than a bona fide law practice; or

(d) Permit nonattorney associates or employees to conduct escrow transactions without either a valid escrow officer license or an attorney's supervision. See RCW 18.44.021(2).

(2) I am licensed to practice law in Washington. Am I subject to the department's investigative authority? Yes. The department has broad investigative authority under the act and these rules, and its investigatory authority is not restricted to persons who are required to obtain a license. The department has the power to investigate unlicensed persons and entities at least to the extent necessary to determine whether a violation of the act or these rules has occurred. This includes preliminary investigations of attorneys and business entities claiming the attorney exception from licensure.

Among other actions, the department may:

(a) Compel written statements from or subpoena any person with relevant information;

(b) Compel production of written materials and take evidence; and

For further information on the department's investigative authority, see RCW 18.44.420 and WAC 208-680-620.

(3) I am licensed to practice law in Washington. Am I subject to the department's examination authority? Generally, no. Unless the department determines that the attorney exception from licensure does not apply to you or your business, you will not be subject to the department's examination authority under WAC 208-680-610. If the department has determined that the exception does not apply, you will be required to license the escrow portion of your business and it may be subject to regular examinations.

(4) I am licensed to practice law in Washington and excepted from licensing under the act. Am I subject to other provisions of the act? You may be subject to other provisions of the act for services you provide outside the practice of law. The attorney exception is a limited, individual exception from the act's licensure provision for actions undertaken while engaged in your professional, legal duties, and is not a general exemption from the act.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-045, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-045, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-110 Credit and character report.

What kinds of credit and character reports must I provide with my escrow agent application?

(1) If you are applying for an escrow officer license you must provide:

(a) Proof that you have passed the escrow officer test; and

(b) Satisfactory proof of your good character; and

(c) Satisfactory proof of your credit rating, as evidenced by a report from a recognized credit-reporting agency, and in a form approved by the director.

(2) If you are applying for an escrow agent license, you must provide satisfactory proof of character and a credit rating for all principal officers. If your applicant is a business entity and not a natural person, you must provide satisfactory proof of your entity's credit rating as evidenced by a report from a recognized credit-reporting agency, and in a form approved by the director.

(3) If you are reporting a change in principal officer, you must provide an escrow agent amendment application, and for any new principal officer:

(a) Satisfactory proof of his or her good character; and

(b) Satisfactory proof of his or her credit rating as evidenced by a report from a recognized credit-reporting agency, and in a form approved by the director.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-110, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-110, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-125 Licenses not transferable.

(1) Can I transfer my escrow agent or escrow officer license to another person or entity? No. Neither an escrow agent license nor an escrow officer's license may be transferred.

(2) Can all or substantially all of the assets of an escrow agent be transferred to another person? Yes. A licensed escrow agent may transfer all or substantially all of its assets to another person as long as the transfer is approved by the department pursuant to subsection (3) of this section and the receiving party (the transferee) has been issued an escrow agent license under the act prior to the transfer.

(3) If I am transferring my assets to another escrow agent, what notification must I provide to the department? You must provide written notice to the department at least thirty days before the effective date of the transfer. The written notice must include a copy of the signed transfer agreement that contains, at a minimum:

(a) A stipulation that the transferee is responsible for obtaining an escrow agent license before completion of the transfer;

(b) A stipulation that the transferee is either restricted from using or authorized to use, your escrow agent's business name, unless this requirement is waived by the director; and

(i) Make all payments due to principal parties on or before the effective date of the transfer;

(ii) Be responsible for the existing trust account funds;

(iii) Maintain and preserve the accounting and other records as required by RCW 18.44.400 and WAC 208-680-520 and 208-680-530; and

(iv) Provide notice of the transfer to all principal parties who have pending escrows or deposited funds with the escrow agent, or who have executed some other form of written agreement with the escrow agent. Such notice must be provided within five days of your notice to the department, and must comply with RCW 18.44.465.

(4) If I am acquiring all or substantially all of the assets of an escrow agent, what information must I provide to the department? The department treats this as a change in a principal officer. If you do not have an escrow agent license, you must apply for and receive one. If you already have an escrow agent license, at least thirty days before you acquire all or substantially all of the assets of an escrow agent you must provide the department with all the information required of a principal officer or controlling person as if you were applying for a new license. The change of control transaction may not be completed until the transferee has either received a license or provided the department with the required information.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-125, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-125, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-130 What kind of background check and fingerprinting information may the department require with my application for an escrow agent license?

(1) If you are applying for an escrow agent license:

(a) You must submit fingerprint identification for the natural person making the application, and for your principal officers, designated escrow officer or branch designated escrow officers, and any controlling person. This identification must be submitted on standard Federal Bureau of Investigation fingerprint cardstock or another form acceptable to the department.

(b) You may be required, at the department's discretion, to provide additional background information any applicant, principal officer, designated escrow officer, controlling person, or partner. This may include any information the department deems necessary to satisfy the director that the requirements under RCW 18.44.031(2) have been met. The director may require that such information be reported in writing and signed by the reporting individuals.

(c) If you have been issued an escrow agent license and experience a change in one or more principal officers or controlling persons, you must submit fingerprints and such other information as the director may request under (b) of this subsection to the department thirty days prior to the effective date of the change in principal officer or controlling person.

(2) The department will collect a fingerprinting fee from you equal to the department's cost for processing fingerprints through the Washington state patrol.

History

Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-130, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-135 What kind of background check and fingerprinting information may the department require with my application for an escrow officer license?

(1) If you are applying for an escrow officer license:

(a) You must submit fingerprint identification on standard Federal Bureau of Investigation fingerprint cardstock or another form acceptable to the department.

(b) You may be required, at the department's discretion, to provide additional background information about yourself to ascertain your honesty, truthfulness, and reputation. This information may include, but is not limited to: Residential address and telephone number, qualifications, employment history, a personal credit report, and other information that the director may deem appropriate under RCW 18.44.031(2).

(2) The department will collect a fingerprinting fee from you equal to the department's cost for processing fingerprints through the Washington state patrol.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-135, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-135, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-145 Escrow officer test.

(1) How do I take the escrow officer test? While the director determines the form and content of the escrow officer test with the advice of the escrow committee, the test is administered by a third-party company under a contract with the department. It is given at least annually. For information about the test process and available dates, applicants should consult the department's website, which will redirect them to the current testing service provider for more detailed information.

(2) Do I need to take and pass the escrow officer test before filing my application and paying my application fee to the department? Yes. You must submit a copy of your test pass certificate with your application to the department. You must have passed the escrow test no more than one year before your initial application for a license. If your initial license is not issued within two years of your successful completion of the test, you may be required to retake the test.

(3) Will the department review my application before I take the test to see if I meet the other requirements? No. Due to volume and resource limitations, the department does not review escrow officer applications unless they are accompanied by a test pass certificate.

(4) I am an attorney licensed to practice law in Washington. If I am required to license as an escrow officer, will I be required to take and pass the escrow officer test? No, the department will accept membership in the Washington bar in lieu of taking and passing the escrow officer test.

(5) The company I work for only provides payment collection and processing and the performance of related services on seller financed loans secured by real or personal property (contract collection). Must I take the escrow officer test? If the escrow agent applicant satisfactorily demonstrates during the license application process that the escrow agent only provides contract collection services you will not be required to take the escrow officer test. You are prohibited from holding yourself out as being licensed to provide escrow services on residential mortgage loan transactions. You are subject to all other provisions of the act.

(6) The company I work for only provides escrow services on personal property transactions. Must I take the escrow officer test? If the escrow agent applicant satisfactorily demonstrates during the license application process that the escrow agent only provides escrow services on personal property transactions you will not be required to take the escrow officer test. You are prohibited from holding yourself out as being licensed to provide escrow services for residential mortgage transaction. You are subject to all other provisions of the act.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-145, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-145, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-155 What escrow officer and agent fees will I be required to pay?

(1) Escrow officer and agent fees charged by DFI:

| Title of Fee | Fee | | | --- | --- | --- | | Escrow officer: | | | | | First test | $168.00 | | | Subsequent tests | 168.00 | | | Application | 179.26 | | | License renewal | 179.26 | | | Transfer of license to a new escrow agent, name or address change, or license activation | 28.01 | | | Duplicate license | 28.01 | | Escrow agent: | | | | | Application | 386.55 | | | Renewal | 386.55 | | | Late renewal with penalty | 579.81 | | | Change of designated escrow officer, or name or address change, per license generated | 28.01 | | | Duplicate license | 28.01 | | Escrow agent branch office: | | | | | Application and original license | 386.55 | | | Renewal | 386.55 | | | Late renewal with penalty | 579.81 | | | Change of branch designated escrow officer, or name or address change, per license generated | 28.01 | | | Duplicate license | 28.01 | | | Fingerprints | |

(2) If your license is managed on a multistate licensing system pursuant to RCW 18.44.023, you may be charged system fees by the licensing system, including a fee for fingerprints managed through the system.

(3) You will be charged an hourly fee of $62.50 for examinations and investigations.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-155, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-155, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-165 May the director waive fees under the act?

Yes. The director may waive any or all of the fees and assessments imposed under WAC 208-680-155, in whole or in part, when he or she determines that both of the following factors are present:

(1) The consumer services program fund exceeds the projected acceptable minimum fund balance level approved by the office of financial management;

(2) The fees paid by escrow agents equals or exceeds the costs of the licensing, examinations, and enforcement escrow program; and

(3) That such course of action would be fiscally prudent.

History

Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-165, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-170 What happens if my check is dishonored or my payment of an escrow fee is insufficient?

Payment of any fee required under chapter 18.44 RCW by a check that is dishonored or is an insufficient payment will be considered nonpayment. The license action for which the dishonored check or insufficient payment was tendered will not be completed by the department, and a nonsufficient funds fee may be charged.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-170, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-170, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-174 What are the designated escrow officer's responsibilities?

(1) The designated escrow officer is responsible for the custody, safety, and accuracy of entries of all required escrow records. He or she retains this responsibility even if he or she has assigned the duties of preparation, custody, recording or disbursing to another person or persons.

(2) The designated escrow officer is responsible for the actions of all employees and the supervision of escrow officers, limited practice officers, and other employees handling escrow transactions. This supervisory responsibility must be exercised within reasonable parameters. For example, a designated escrow officer who is on extended leave may not be reasonably available to supervise the activities of the escrow agent and its employees.

(3) The branch designated escrow officer is responsible for the custody, safety and accuracy of entries of all required escrow records at his or her assigned branch office and at his or her branch is responsible for the actions of the escrow agent and all employees and the supervision of escrow officers, limited practice officers, and other employees handling escrow transactions. The designated escrow officer bears responsibility for all actions of the branch designated escrow officer.

(4) Before issuing a new license reflecting a change of the designated escrow officer or branch designated escrow officer of a licensed escrow agent, the department must receive evidence that the responsibility for preexisting escrows is being transferred to the incoming designated escrow officer or incoming branch designated escrow officer. Such evidence must be demonstrated by a statement signed by both the outgoing and incoming designated escrow officers or branch designated escrow officers that lists all outstanding trust liabilities and certifies that funds in the trust account maintained by the agent are adequate to meet all trust liabilities. This statement must be received by the department before the changeover can occur.

(5) In the event that the outgoing designated escrow officer or branch designated escrow officer is not available to sign the required statement, another principal officer of the escrow agent may sign the statement.

(6) If the department is concerned that the licensee's trust accounting records may not comply with the requirements of WAC 208-680-410, and before accepting a new designated escrow officer or branch designated escrow officer, the department may retain or instruct the licensee to retain a certified public accountant, or other person acceptable to the department, to reconcile the trust account or accounts and report whether they have been maintained in compliance with WAC 208-680-410 and to report on the adequacy of the licensee's internal routines and controls to ensure continuing compliance with WAC 208-680-410.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-174, filed 11/22/13, effective 1/1/14.

Wash. Admin. Code § 208-680-175 May my designated escrow officer or branch designated escrow officer supervise more than one of my locations?

Yes, with the director's prior written consent designated escrow officers and branch designated escrow officers may supervise more than one location.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-175, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-175, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-176 What must I do if my designated escrow officer or branch designated escrow officer leaves?

(1)(a) You must notify the department within one business day of the loss of or change of your designated escrow officer and provide the department with the identity your proposed replacement designated escrow officer within five business days.

(b) You may not accept new clients or new files until the proposed designated escrow officer has been approved by the department or the department has otherwise authorized new activities. Your employees may continue to handle escrow transactions and provide escrow services on existing client files to the extent necessary to avoid prejudicing those existing clients and files.

(c) You must apply to the department for approval of the proposed designated escrow officer. The proposed designated escrow officer must meet the requirements of WAC 208-680-110 and 208-680-135.

If you need more than five days to identify your proposed replacement designated escrow officer, you must seek approval from the department. If your identified proposed replacement is rejected by the department, you will have an additional thirty days to provide the department with the identity of the proposed replacement designated escrow officer.

(d) Failure to identify and replace your designated escrow officer, or to receive approval from the director for an extension, may result in an enforcement action against you and the suspension or revocation of your license.

(2)(a) You must notify the department within one business day of the loss of or change of a branch designated escrow officer, and provide the department with the identity your proposed replacement branch designated escrow officer within five business days.

(b) The branch office may accept new clients and new files under the supervision of your designated escrow officer until the proposed branch designated escrow officer has been approved by the department or the department has otherwise authorized new activities. Your branch may continue to handle escrow transactions and provide escrow services on existing client files under the supervision of your designated escrow officer.

(c) You must apply to the department for approval of the proposed branch designated escrow officer. The proposed branch designated escrow officer must meet the requirements of WAC 208-680-110 and 208-680-135.

(d) If you need more than five days to identify your proposed replacement branch designated escrow officer, you must seek approval from the department. If your proposed identified replacement is rejected by the department, you will have an additional thirty days to provide the department with the identity of a new proposed replacement branch designated escrow officer.

(e) Failure to identify and replace your branch designated escrow officer, or to receive approval from the director for an extension, may result in an enforcement action against you and the suspension or revocation of your license.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-176, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-176, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-180 May a designated escrow officer or a branch designated escrow officer work for two or more licensed escrow agents?

Yes, under certain circumstances. If the director agrees with the escrow agent's need for this arrangement and with the director's prior written consent a designated escrow officer or branch designated escrow officer may provide escrow services and may supervise employees for more than one licensed escrow agent.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-180, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-180, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-185 What constitutes the misuse of my escrow officer license?

Regardless of whether or not you are compensated, it is misuse of your escrow license to:

(1) Allow another person to use it to establish and carry on an escrow agent business over which you do not have full management and supervisory responsibilities; or

(2) Fail to adequately supervise any individual conducting escrow or assisting in escrow under the authority of your license.

History

Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-185, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-195 Can an escrow agent prohibit its designated escrow officer from accessing its trust account books and records?

No. Pursuant to WAC 208-680-174 and 208-680-410, the designated escrow agent is primarily responsible for the custody, safety, and accuracy of entries of all required escrow records, including the trust account books and records, and must have signatory authority on all trust accounts. Accordingly, an escrow agent must remove and replace a designated escrow officer if the escrow agent wants to prohibit the designated escrow officer from accessing its trust account books and records. See WAC 208-680-176.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-195, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-195, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-210 How must I identify my office location or locations?

Any main or branch office of an escrow agent must be identified by displaying the escrow agent's name in a manner visible to the public. The displayed name must be the name recorded on the license for that particular office location. Any physical office location where an escrow agent holds itself out to the public as able to provide escrow services as defined under RCW 18.44.011(8) is considered an office for the purposes of this section.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-210, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-210, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-225 Must I display my licenses?

Yes. You must prominently display all licenses in their associated locations, including branches.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-225, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-225, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-235 How must I notify the department if I move the location of one or more of my offices?

You must notify the department of any change of the location or mailing address of your main or branch offices before engaging in business at your new locations or addresses. You must file an escrow agent amendment application form as prescribed by the director at least ten business days before the change in business location or address. The application and required attachments must be accompanied by all applicable fees specified under WAC 208-680-155.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-235, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-235, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-240 Escrow agent renewal and reinstatement.

(1) When does the escrow agent license expire? All escrow agent licenses expire on December 31st of every year.

(2) How do I renew my escrow agent license? Escrow agent licenses may be renewed by filing for renewal and paying the applicable fee to the department.

(3) I did not renew my escrow agent license on time, did not pay my escrow agent renewal fee by my renewal date, or my renewal fee payment was rejected. Can I still provide escrow services? No. Your escrow agent license is now expired, and any escrow services you provide are considered unlicensed activities and are in violation of the act. If you continue to provide escrow services after expiration of your license, the department may investigate and bring an enforcement proceeding against you.

For information about failed payments, see WAC 208-680-170.

(4) Can my licensed escrow officers provide escrow services if my license is expired? No. If your licensed escrow officers continue to provide escrow services on your behalf after your license has expired, the department may investigate and bring an enforcement action against them.

(5) I did not renew my escrow agent license on time. Can I still renew my license, or do I need to file a new application? Once your license has expired you have thirty days to file for renewal and to pay the renewal fee and any late renewal penalty. If you do not renew the license within thirty days the license will be canceled on the thirty-first day. A canceled license will not be renewed or reinstated. If your escrow agent license is canceled and you wish to provide escrow services, you must apply for a new escrow agent license. Any escrow services your escrow officers provide after your license is canceled are unlicensed activities and are in violation of the act.

Even if you renew your license before it is canceled, you (and your licensed escrow officers) are still liable for any unlicensed services you provided while your license was expired.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-240, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-240, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-243 Escrow officer license renewal and reinstatement.

(1) For how long is an escrow officer license valid? Escrow officer licenses are valid for one year from the date of issuance.

(2) Can I renew my escrow officer license? Yes. Escrow officer licenses may be renewed by completing the online renewal application and paying the annual renewal license fee specified under WAC 208-680-155 by your renewal date. Your renewal date is the date one year after the day your license was issued.

(3) I did not complete the online escrow officer renewal process, did not pay my renewal fee by my renewal date, or my renewal fee payment was rejected. Can I still provide escrow services? No. Your license is now expired, and any escrow services you perform are considered unlicensed activities and are in violation of the act. If you continue to perform escrow services after expiration of your license, the department may investigate and bring an enforcement proceeding against you.

For information about failed payments, see WAC 208-680-170.

(4) I did not complete the online escrow officer form and pay my renewal fee by my renewal date. Can I still renew my license, or do I need to reapply? Once your license has expired you have sixty days to file for renewal and to pay the renewal fee and any late renewal penalty. If you do not renew your license will be canceled on the sixty-first day. A canceled license cannot be renewed or reinstated. If your license is canceled and you wish to provide escrow services, you will have to apply for a new license. You should note that if your new license is not issued within two years of your passing the escrow test, you may have to take the escrow test again.

Even if you renew your license before it is canceled, you are still liable for any unlicensed services you provided while your license was expired.

For the renewal fee structure, see WAC 208-680-155.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-243, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-243, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-245 Closure of office.

(1) If I close my main office, what effect does that have on any other offices? When the main office of an escrow agent closes, all branch offices must close.

(2) What are my notification requirements to the department when I plan to close my business? Thirty days prior to the planned closure, the designated escrow officer or a controlling person must provide the department with notice of the closure. After closure you must provide the department with the following within fifteen days:

(a) An itemized accounting of funds held in trust at the time of closure, including the names of the principal parties to the transaction, the escrow number, the amount of funds held and the purpose of the funds. If the trust account balance is zero, the escrow agent must provide a reconciliation of the trial balance supporting the zero balance;

(b) The most recent completed three-month reconciliation;

(d) The street address and telephone number where the records are located;

(e) An itemized list of your retained records, specifying their location and quantity, including the number of files and the number of boxes they are stored in; and

(f) A records retention plan that identifies the ways that you will store, retrieve, and destroy your required records in compliance with the act and this section. Your plan must identify how you will continue to pay any costs associated with your storage location.

(3) For how long must I maintain records after my company closes?

(a) You must maintain the records for at least six years. The records must be maintained in the state of Washington. They must be available upon demand of the department during business hours and must be maintained in a readily retrievable manner. Closing one or more of your branch offices does not discharge your obligation to retain your records.

(b) Your records must be stored, retrievable, and destroyed in accordance with the records retention plan you have submitted to the department.

(4) What are my obligations regarding my trust account after I close my main office? If your trust account contained client funds at the time of closure, the designated escrow officer or a controlling person must provide the department with monthly reports and reconciliations of the trust bank account to the trial balance, in compliance with WAC 208-680-410(9), until the trust bank account balance is zero. These reconciliations are due within thirty days of the end of the preceding month.

(5) If I close my main office, what obligation do I have regarding winding up my business? You must wind up your business in a reasonably prompt manner. Until your trust account balance is zero, you must also maintain your fidelity and surety bonds under WAC 208-680-310 and your errors and omissions policy under WAC 208-680-320.

(6) If I close one of my branch offices, what are my notification requirements? When a branch office of an escrow agent closes, the branch designated escrow officer, designated escrow officer, or a controlling person are jointly and severally obliged to notify the department within twenty-four hours of closure. In addition to notifying the department, if the closed branch office had an associated trust account that contained client funds at the time of closure, the branch designated escrow officer responsible for that location must provide the department with monthly reports and reconciliations of the trust account to the trial balance, in compliance with WAC 208-680-410(9), until the trust bank account balance is zero. These reconciliations are due within thirty days of the end of the preceding month. If the branch designated escrow officer is no longer with the escrow agent, either the designated escrow officer or a principal officer must file the monthly reports and reconciliations.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-245, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-245, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-255 Deceptive names prohibited.

What restrictions affect the name I may use for my business? At the discretion of the director, an escrow agent may not receive a license or advertise in any manner using names or trade styles which: Are similar to current licensees; imply that the agent is a nonprofit organization, research organization, title insurance company, public bureau or public group; or are otherwise deceptive or in violation of RCW 30.04.020, 31.12.025, 32.04.020(2), 33.08.010, or any other statute that limits the use of names. A bona fide franchisee may be issued a license using the name of the franchisor with the firm name of the franchisee. Licensees and applicants should be aware that other statutes may further restrict the trade names that they may use.

History

Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-255, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-265 Reporting significant events.

What significant events am I required to report to the department, and how quickly must I report them? Depending on the significant event, you will have different reporting periods.

(1) Ten-day prenotification required. You must report to the director, in writing, changes to the following information at least ten days before they occur:

(a) Your location or mailing address. See RCW 18.44.061 and WAC 208-680-235;

(b) The form of your business organization or its place of organization. For example, if your business is changing from a sole proprietorship to a corporation, or from a corporation to a limited liability corporation, you must notify the department and may be required to file a new escrow agent application;

(d) Your legal or trade name.

(2) Twenty-four hour post-notification required.

(a) You must notify the director in writing within twenty-four hours of any change to the trust status of your trust account. For example, if you use an interest-bearing trust account because you are required to under a limited practice officer or attorney license, and the status of your interest-bearing account changes for any reason, you must notify the department in writing within twenty-four hours. This notification does not affect your responsibility to comply at all times with the trust account requirements of the act and WAC 208-680-410.

(b) You must notify the director in writing within twenty-four hours of receiving any information from a financial institution that your trust account is overdrawn. The notice to the director must contain the name of the financial institution holding the trust account and the trust account number. The notice must also contain a detailed written statement signed by the designated escrow officer explaining the insufficiency in your trust account and a copy of any information received from the financial institution, including, if applicable, a copy of any items returned for insufficient funds.

(c) You must notify the director in writing within twenty-four hours of receiving service of or within the discovery of the initiation of a civil lawsuit, criminal complaint or administrative action against you, your escrow officers or employees providing escrow services or with access to the trust account. See WAC 208-680-570.

(3) Ten-day post-notification required. You are required to notify the director in writing within ten days of the occurrence of any of the following:

(a) The cancellation or expiration of your Washington state master business license;

(b) For an in-state escrow agent, a change in your standing with the Washington secretary of state, including the resignation or change of your registered agent. If you are an out-of-state escrow agent, you are subject to subsection (1) of this section, which requires ten-day prenotification;

(d) The personal bankruptcy filing of one or more of your principal officers, controlling persons, licensed escrow officers, designated escrow officers, or branch designated escrow officers; or

(e) Any change in a principal officer, if no other reporting period is specified in the act or these rules. This includes changes in ownership affecting ten percent or more of the escrow agent's equity.

(4) Other notification requirements. In addition to the notice requirements under this section, you are required to follow any other notification requirements in the act or in these rules. These include, but are not limited to:

(a) For an escrow office closure, see WAC 208-680-245.

(b) For a transfer involving all or substantially all of its assets, the escrow agent must comply with WAC 208-680-125.

(c) For a change in principal officer or controlling person of a licensed escrow agent, the escrow agent must comply with WAC 208-680-125 and 208-680-110 and may be required to file a new application for an escrow agent license.

(d) For changes in designated escrow officer or branch designated escrow officer, see WAC 208-680-174.

(e) For termination of a licensed escrow or limited practice officer, the escrow agent must notify the department within three business days that the escrow or limited practice officer no longer represents the escrow agent. If the escrow or limited practice officer was terminated for dishonesty or financial misconduct involving the business, the escrow agent must provide the department with a detailed written statement signed by the designated escrow officer explaining the dishonesty or financial misconduct; a copy of any information provided to the police; and a copy of any claim filed under your surety bond or errors and omissions policy.

Within ten business days of the termination, the escrow agent must deliver the escrow officer's license to the department. See RCW 18.44.101. If the terminated escrow officer was the escrow agent's designated escrow officer, see WAC 208-680-176 for additional notification requirements.

(f) For the filing of quarterly reports, see WAC 208-680-425.

(g) For civil lawsuit, criminal complaint or administrative action notification see WAC 208-680-570.

(h) Within five business days of the escrow agent's license being revoked, surrendered, suspended, or the license expiring, the escrow agent shall notify the principal parties of preexisting escrows of the action. The contents of the notification must comply with RCW 18.44.465.

(i) Within forty-five days of a data breach you must notify the director in writing. This notification requirement may change based on directives or recommendations from law enforcement. See also WAC 208-680-533.

History

Statutory Authority: Chapter 43.320 RCW, RCW 18.44.410. WSR 16-08-028, § 208-680-265, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-265, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-265, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-275 Employment restrictions.

(1) What criminal background restrictions are there on the persons I may employ? You may not employ any person to provide escrow services or handle escrow transactions who has been convicted of or plead no contest within the last seven years to either:

(a) A felony; or

(b) A gross misdemeanor involving dishonesty.

(2) What financial responsibility restrictions are there on the persons I may employ to handle client funds? In addition to the criminal background restrictions that apply to all employees handling escrow transactions, an employee that receives money, disburses funds, or acts as a signatory on any trust accounts may not have demonstrated disregard in the management of his or her financial condition in the last three years. Disregard for his or her financial condition may be shown by, but is not limited to:

(a) Being subject to an administrative action issued pursuant to the Consumer Loan Act, the Consumer Protection Act, the Mortgage Broker Practices Act, the Insurance Code, the Securities Act, the Check Cashers and Sellers Act, or other similar laws in this or another state;

(b) An independent credit report issued by a recognized credit reporting agency that indicates the person has a history of unpaid debts; or

(c) Any other demonstration of his or her inability to appropriately manage his or her personal finances in a way that may endanger the funds of either the escrow agent or the escrow agent's client.

(3) Do I need to review my current employees' backgrounds to ensure that I am in compliance with this requirement? Yes. The restrictions apply to all employees, not just new hires. Your policy and procedures manual should provide for self-reporting by employees as well as regular background reviews.

(4) How will the department enforce these provisions?

(a) Each escrow agent must develop written policies and procedures to document its efforts to comply with RCW 18.44.311 and this section. You must make your policies and procedures available to the department upon request, and they must be maintained as part of your books and records;

(b) Your actual practices must be consistent with your written policies and procedures and your employees must be trained in those policies and procedures;

(c) Each year, each escrow agent's designated escrow officer must submit to the department a statement along with the agent's renewal paperwork attesting to its compliance with its internal policies and procedures. Failure to truthfully submit this statement is a violation of the act. A branch designated escrow officer may sign and submit the statement of compliance for a branch office; and

(d) The department reserves the right to perform its own background checks on escrow agent employees to determine compliance during examinations, investigations, and enforcement proceedings.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-275, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-275, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-310 Fidelity and surety bonds.

(1) What is a fidelity bond under the act? For purposes of the act, a fidelity bond is a primary commercial blanket bond or an equivalent bond or a combination of more than one bond acceptable to the department, regardless of the name used to identify the specific insurance product. A bond or bond combination is an acceptable equivalent if it meets the requirements of the act. At a minimum, the fidelity bond or equivalent or bond combination must:

(a) Provide an aggregate minimum coverage of one million dollars;

(b) Have a deductible of no more than ten thousand dollars;

(c) Cover fraudulent or dishonest acts committed by one or more principal officers, partners, sole practitioners, escrow officers, and employees, acting alone or in concert; and

(d) Run to the benefit of the escrow agent, unless the fraudulent or dishonest act is committed by one or more principal officers, partners, or sole practitioners, in which case it runs to the benefit of the harmed consumer(s).

(2) If my fidelity bond does not cover principal officers, partners, or sole proprietors, or limits coverage for the fraudulent or dishonest acts committed by them, is it compliant with the act? No, not unless the principal officers, partners, or sole proprietors are also employees as defined in the policy and covered by the policy. If your policy does not cover or limits coverage for principal officers, partners or sole practitioners, the department may require that you provide a declaration confirming the employment status of those individuals. Not providing the declaration may result in the department's rejection of the bond. The declaration may also require that you certify that any employees not included in the declaration are not providing escrow services and have no involvement with the day-to-day operations of the escrow agent or trust account.

(3) I am unable to find a fidelity bond that permits third parties to claim on the bond. Can I use a bond that does not allow a third party to claim on the bond? If you make a good faith effort to find a bond that complies with the statutory and regulatory requirements, and are unable to do so, the department may accept a bond that meets the other fidelity requirements but does not permit third-party claims. The department may relax this requirement only until a determination can be made about the general availability of conforming bonds.

Licensees that use a nonconforming bond as authorized under this subsection should be aware that the department may consider a refusal to file a claim on a fidelity bond for fraudulent or dishonest acts committed by a principal officer, partner, or sole practitioner, to be conducting business in an unsafe or unsound manner under RCW 18.44.455 and WAC 208-680-645.

(4) Am I required to maintain any other kind of bond? If your fidelity bond has a deductible, you must maintain a surety bond in the amount of ten thousand dollars. The surety bond is a promise to pay the ten thousand dollar deductible in the event there is a claim on the fidelity bond and must run to the benefit of the state and any person harmed by an escrow agent or its employees. The surety bond must be an original signed and sealed document with power of attorney attached, not a certificate of insurance.

(5) How long must I maintain my bonds? All bonds must be kept in effect while you are providing escrow services. Additionally, after closure of your office you must maintain your fidelity bond and surety bond if applicable until your escrow trust accounts have been reconciled and all trust account balances are zero.

(6) How do I demonstrate compliance with the bond requirements? Along with your application or renewal, you must provide the department with a certificate of insurance. You must also provide coverage information to the department upon demand. The certificate of insurance does not need to be entitled certificate of insurance, but must include at a minimum:

(a) Your escrow agent's name;

(b) The insurer's name;

(d) The amount of any deductible.

To ensure compliance with the bonding requirements, you must provide a copy of the full bond language to the department during your first year of compliance, and then upon demand in subsequent years.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-310, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-310, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-320 Errors and omissions insurance.

(1) What errors and omissions insurance must I carry? You must carry an errors and omissions policy in the minimum aggregate amount of fifty thousand dollars or provide the department with a cash or securities alternative as described in subsection (2) of this section. Either a bond or the cash or securities deposit must be maintained until you have closed your office, all of your accounts have been reconciled, and all balances are zero.

(2) If I want to use a securities alternative to the errors and omissions bond requirement in RCW 18.44.201 (1)(b), what are the requirements?

(a) Cash used as an alternative to the errors and omissions insurance requirement requires a cash deposit of fifty thousand dollars made in a recognized Washington state depository which account is maintained separate and apart from the escrow agent's own funds. The funds shall be deposited in such a manner to permit only the director to withdraw from the principal amount. The escrow agent may withdraw any interest accumulated to the account.

(b) Securities used as an alternative to an errors and omissions policy must be effectively delivered to the director along with a properly executed irrevocable assignment and any supporting documentation as required by the director.

(c) Only those securities that meet the definition of "investment securities" under chapter 208-512 WAC may be used to satisfy RCW 18.44.201. Securities issued by the licensed escrow agent or its affiliates are not acceptable securities for the purposes of fulfilling the requirements of RCW 18.44.201.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-320, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-320, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-330 When will the cash deposit or securities I used in lieu of an errors and omissions insurance policy be returned to me?

(1) If you are closing the business, they will be returned to you the later of:

(a) One year from the date of the expiration, cancellation, surrender, or revocation of your license, unless there are any pending actions commenced under WAC 208-680-340; or

(b) The day all trust accounts have been reconciled, and all trust account balances are zero.

(2) If you have now obtained an errors and omissions insurance policy to replace them, your deposit or securities will be returned within thirty days of you providing the department with proof that you have obtained an errors and omissions policy.

(3) If your cash deposit or securities were provided to the department as part of a licensing application, they will be returned to you within thirty days of the department's denial of your application for an escrow agent license.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-330, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-330, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-340 How are claims filed on my cash deposit or securities in lieu of an errors and omissions policy?

(1) Upon receipt of notification of a legal action for which notice is required to be given to the department under WAC 208-680-570, the department will notify the complaining party of the existence of any cash deposit or securities and the provisions of this chapter.

(2) A claim against the cash deposit or securities must be in the form of certified copy of a final judgment from a court of competent jurisdiction. Upon receipt of a claim in the proper form, the department will release the amount of cash deposit or securities sufficient to pay the final judgment.

(3) The department will notify the escrow agent of the receipt of the claim and advise the escrow agent that it must deposit additional cash or securities with the department to maintain the required principal amount after payment of the claim.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-340, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-340, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-350 How long do I have to maintain my cash deposit and securities, and what are the consequences of failure to do so?

If you assign, transfer, or set over a cash or securities deposit in lieu of an errors and omissions policy, you must keep the deposit in full force and effect at all times as a condition precedent to your authority to transact escrow business. Your deposit or securities must at all times be at least the principal amount of fifty thousand dollars.

Failure to maintain the deposit or securities at the minimum level is sufficient grounds for the suspension or revocation of your license.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-350, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-350, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-360 What happens if my errors and omissions policy or my fidelity or surety bonds expire or are canceled?

In the event of cancellation or expiration of your errors and omissions policy or your fidelity or surety bonds, you must file satisfactory evidence of a new policy, bond, or reinstatement with the director before conducting any escrow business. Failure to file a new policy, bond, or reinstatement is sufficient grounds for the suspension or revocation of your license. During the time you do not have full insurance and bonding coverage in effect, you may not transact escrow business.

History

Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-360, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-410 Administration of funds held in trust.

(1) Who is responsible for funds deposited to and disbursed from an escrow trust account? The escrow agent must establish a trust account or accounts in a recognized Washington state depository. The escrow agent, through the designated escrow officer, is responsible for depositing, holding, disbursing, and accounting for funds in the trust account as provided in the act and the rules, regardless of how they are received or disbursed. The designated escrow officer or branch designated escrow officer must hold the funds in trust for the purposes of the transaction or agreement and must not utilize such funds for the benefit of the agent or any person not entitled to such benefit. For branch offices, the branch designated escrow officer is also responsible for depositing, holding, disbursing, and accounting for funds in the branch's trust account. The escrow agent is ultimately responsible for all the actions of the designated escrow officer or branch designated escrow officer.

(2) What kind of an account can I use as a trust account for my escrow services? Your trust account or accounts must be designated as a trust account or accounts in the licensed name of the escrow agent. Your trust accounts must be noninterest bearing demand deposit accounts unless they are one of the following:

(a) An interest-bearing trust account or dividend earning investment account containing funds pertaining to an individual escrow transaction or escrow collection account, if directed to use one by a written agreement between and signed by all principal parties to the transaction. The agreement must specify the manner of distribution of accumulated interest to the parties to the transaction;

(b) An interest-bearing trust account or dividend-earning investment account containing only funds held on behalf of an owner, vendor, lessor, etc., involving escrow collections, if directed to use one by a written agreement or directive signed by the principal parties. The agreement must specify the manner of distribution of accumulated interest to the parties to the transaction;

(c) An interest-bearing trust account containing funds related to transactions in which a limited practice officer has prepared documents under authorization set forth in APR 12(h); or

(d) An interest-bearing trust account containing funds related to transactions in which a licensed attorney has prepared documents. Your trust account must not be used for any purpose other than that specified in the act or rules. You must not use the trust account for the receipt or disbursement of funds for any business other than that conducted under the act.

(3) What information do I need to provide to the department regarding my trust account? Each time you renew your escrow agent license, you must provide the department with an authorization to examine your trust account. This authorization must be on a form specified by the department, signed by a representative of the bank, and notarized.

(4) Can I set up a system of records and procedures that varies from this section? No. You must establish and maintain a system of records and procedures as provided in this section unless you receive advance approval from the department.

(5) Who may have signatory authority over trust account disbursements? The designated escrow officer must have signatory authority on all trust accounts, and he or she may authorize any employee that he or she supervises to sign disbursements by including them on a bank account signature card. Branch designated escrow officers must have signature authority for trust accounts at their branch, and may have signature authority for other branches if the designated escrow officer authorizes it on either a temporary or permanent basis. The signatory authority of any employee other than a designated or branch designated escrow officer is discretionary, may be conditional or temporary, and may be revoked by the designated escrow officer at any time.

(6) When must my client's funds be deposited into a trust account? You must deposit any funds you receive for an escrow transaction or collection account into the escrow agent's trust account on the first banking day following receipt.

This requirement does not apply to funds owned exclusively by the agent.

(7) What do I need to do when I receive escrow funds?

(a) When you receive funds, you must record the date, amount, source, and purpose on either a cash receipts journal or duplicate receipt. If you use a duplicate receipt, you must keep it as a permanent record.

(b) When you deposit funds into your trust account or accounts, the deposit must be documented by:

(i) For traditionally deposited funds, a duplicate bank deposit slip that is validated by bank imprint or an attached deposit receipt that bears the signature of the authorized representative of the agent indicating that the funds were actually deposited into the proper trust account;

(ii) For funds received via wire transfer, posting of the deposit in the same manner as other receipts with a traceable identifying name or number supplied by the financial institution or transferring entity. You must also make arrangements for a follow-up "hard copy" receipt for the deposit; or

(iii) For remotely deposited funds, a follow-up "hard copy" receipt for the deposit.

(c) The traceable identifying name or number supplied by the financial institution in (b) of this subsection does not need to be a name or number you use to identify the transaction, but must be enough to allow the department to track and verify the transfer.

(8) What are my responsibilities regarding my individual client ledgers? You must maintain an individual client ledger for each escrow transaction or collection account for which funds are received in trust. All receipts and disbursements must be posted in the individual client ledger. Your client ledgers are subject to the following requirements:

(a) Credit entries must show the date of deposit, amount, and name of remitter.

(b) Debit entries must show the date of check, check number (if funds are disbursed via check), amount of check, and name of payee.

(c) You must prepare monthly trial balances of each client ledger. You must reconcile the ledger with both the trust account bank statement and the trust account receipts and disbursement records. The reconciliation must be signed by the designated escrow officer or branch designated escrow officer, and must be maintained as permanent records.

(9) What are my obligations regarding a reconciled trust account? Your reconciled trust account or accounts must be equal at all times to your outstanding trust liability to clients. Your outstanding trust liability to clients must equal the trial balance of all of your escrows with undisbursed balances.

(10) What requirements must I meet for disbursements of trust funds?

(a) Disbursed funds must be good funds.

(b) Unless otherwise authorized by (c) of this subsection, in the escrow instructions, you must make trust fund disbursements by check or cashier's check. Checks must be drawn on your trust account or accounts, and must identify which specific escrow transaction or collection account the disbursement relates to. Cashier's checks may be issued by the financial institution and drawn upon the trust account. The number of each check and its amount, date, payee, and the specific client's ledger sheet debited must be shown in the cash register or cash disbursement journal. All data must agree exactly with the check as written.

(i) You have made arrangements with the financial institution that holds your trust account or accounts to provide you with a follow-up "hard copy" debit memo when funds are disbursed via wire transfer; and

(ii) You retain in the transaction file a copy of instructions signed by the owner of the funds to be wire transferred identifying the receiving entity and account number.

(d) You may make disbursements via ACH if both of the following are true:

(i) The ACH disbursements are restricted to fees payable to the escrow agent and reoccurring payments made to payees in the escrow transaction. See subsection (13) of this section for further restrictions on escrow agent fees; and

(ii) You print and retain the ACH confirmation or a copy of the confirmation screen. The retained documentation must, at a minimum, include payee, payment date, escrow trust account number debited, and confirmation number assigned to the ACH transaction.

(e) You may make appropriate transfers between escrow accounts by ledger entries alone if you use either:

(i) A transfer form containing the date of the transfer, the amount being transferred, the identity of the accounts being debited and credited, and the signature of a person authorized to approve disbursements; or

(ii) An intrabank debit memo transfer form, and all escrow accounts involved in the transaction are closed through the same bank account.

(f) If you are making recurring transfers between collection escrows, they must be authorized by standing escrow instructions on file from all appropriate parties.

(g) See also WAC 208-680-560.

(11) I have a voided check written on the trust account. What do I need to do with it? You must permanently deface the check and retain it as a permanent record in the individual escrow or collection account file.

(12) What are my obligations regarding fees payable to me for my escrow services? You must be paid via a separate check or bank transfer, drawn on the trust account and bearing the escrow or transaction number, for escrow and service fees. This payment must be provided for in the escrow instructions. All of your fees relating to a transaction may be combined in a single check, or transfer, but the settlement statement or an addendum signed by the principal parties must itemize the included charges.

(13) What are my obligations regarding fees payable to me for my collection account services? Your collection account fees may be paid with a single check for each collection period as long as such a check is supported by a schedule of fees and identified to each individual account. Your fees must be paid monthly unless the collection contract agreement provides a longer collection period.

(14) May I have funds in my Washington trust account that are not related to a Washington escrow transaction or collection account? No. Only funds related to the services you provide under the authority of your Washington license may be placed in your trust account. No other funds may be in the trust account for any reason.

(15) What kinds of disbursements am I not allowed to make from my trust account? You may only make disbursements from your trust account for authorized purposes. Specifically, you may not make disbursements:

(a) For items not related to a specific escrow transaction or escrow collection account;

(b) To any person or for any reason before the closing of an escrow transaction, or before the happening of a triggering condition set forth in the escrow instructions. You may make a disbursement before the closing of a transaction or before a triggering condition if you receive a written release from all principal parties of the escrow transaction or collection account. Unless the disbursement is disputed under WAC 208-680-560, you are permitted to disburse earnest money funds without a written release if the earnest money agreement terminates according to its own terms prior to closing and provides for such disbursement;

(c) Relating to a specific escrow transaction or collection account in excess of the actual amount held in your trust account in connection with such transaction or collection account;

(d) To pay any fee owed to you, your employees or for your own business expenses. Such fees or expenses must be paid from your own general business operating account and not from your trust account or accounts;

(e) For bank charges of any nature. You must make arrangements with your bank to have any bank charges applicable to the trust accounts charged to your regular business bank account, or to provide a separate statement of bank charges so they may be paid from your regular business bank account. However, you may pay bank charges from the interest you receive on trust accounts allowed under subsection (2)(c) or (d) of this section;

(f) If the Washington financial institution's trust account does not have the ability to automatically charge fees to another account, or does not provide a separate statement for the service fees as required by (e) of this subsection, and the account is debited for service fees, you must deposit funds from your general business or other nontrust account to cover the service fee charged within one banking day after receipt of notice of the charge;

(g) On lease or rental contract collection account for preauthorization of payments by the financial institution for recurring expenses such as mortgage payments on behalf of the owner if the account contains tenant security deposits or funds belonging to more than one client;

(h) On lease or rental contract collection accounts, of funds received as a damage or security deposit involving a lease or rental contract, to the property owner or any other person or persons, without the written authority of the lessee. You must hold these funds until the end of the tenancy, at which point you must disburse them to the person or persons entitled to the funds under the terms of the rental or lease agreement, and as consistent with the provisions of RCW 59.18.270, Residential Landlord-Tenant Act, or other appropriate statute.

(16) If I choose to use a computer accounting system, what additional requirements do I need to meet? The provisions of this section apply to both manual and computerized accounting systems. However, there are some additional requirements if you choose to use a computer accounting system.

(a) Your computer accounting system must provide a capability to back-up all data files;

(b) You must print receipt and check registers at least once monthly. You must retain printed records as permanent records. Reconciliations and trial balances must be conducted at least once monthly, and then printed and retained as a permanent record;

(d) If your computer accounting system has the ability to write checks by filling in fields on existing checks, the check number must be preprinted on the check or a voucher copy retained by the supplier. Your computer accounting system may assign suffixes or subaccount codes before or after the check number for identification purposes;

(e) If your computer accounting system has the ability to print entire checks on blank check stock using MICR toner or a similar system, it must track all checks that are printed. Those checks must be verifiable against your check register to ensure no duplication or skipping of check numbers;

(f) The check number must appear in the magnetic coding which also identifies the account number for readability by the financial institution's computer; and

(g) All checks you write must be included within the computer accounting system.

(17) I have unclaimed funds in my trust account. What do I need to do with them? Unclaimed funds are governed by and defined in the Uniform Unclaimed Property Act of 1983, chapter 63.29 RCW. If you have unclaimed funds in your trust account, your designated escrow officer or branch designated escrow officer must contact the department of revenue for disposition instructions. You must maintain a record of the correspondence relating to unclaimed funds for at least six years.

You must dispose of unclaimed funds in accordance with this section on a rolling basis. You must examine your books at least once a year to determine if you have unclaimed funds. If you have unclaimed funds in your trust account, they must be disposed of pursuant to chapter 63.29 RCW. See also WAC 208-680-425.

History

Statutory Authority: Chapter 43.320 RCW, RCW 18.44.410. WSR 16-08-028, § 208-680-410, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-410, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-410, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-425 What are the requirements for my quarterly reports?

(1) In order to determine compliance with chapter 18.44 RCW and chapter 208-680 WAC, each escrow agent must file with the director, within thirty days following the end of each fiscal quarter, the following documents in a form prescribed by the director:

(a) A report concerning its operations, including the number of escrow transactions conducted and the total dollar volume of those transactions;

(b) A report concerning the trust account administration;

(d) Such other reports or documents in support of the reports as requested by the department. At a minimum, you must provide copies of your bank statements in support of (c) of this subsection.

(2) A complete three way reconciliation that demonstrates:

(a) Any unclaimed funds in your trust account are in compliance with WAC 208-680-410(17);

(b) You have no overdue negotiable instruments as defined in RCW 62A.3-304;

(d) You have no outstanding balances more than nine months old, unless:

(i) The outstanding balance is authorized by valid instructions from the principal parties stating a finite period the funds should be held; or

(ii) You certify to the department that you have conducted a quarterly examination of your records to ensure compliance with the Uniform Unclaimed Property Act of 1983, chapter 63.29 RCW.

(3) Your designated escrow officer or principal officer of the escrow agent must certify that he or she has reviewed the quarterly reports and any documents filed with it, and that the information contained in the quarterly report and documents is true and correct. This certification must be made under penalty of perjury in a manner consistent with RCW 9A.72.085. In the event the designated escrow officer or a principal officer is not available, a knowledgeable person acceptable to the director may certify the information on the quarterly report.

(4) Failure to file the quarterly reports within the time period specified in this rule is a violation of RCW 18.44.301 and provides grounds under RCW 18.44.430 for legal action against the escrow agent by the department. False certifications of the quarterly report may result in revocation of your license and referral to a prosecuting attorney.

History

Statutory Authority: Chapter 43.320 RCW, RCW 18.44.410. WSR 16-08-028, § 208-680-425, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-425, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-425, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-520 What trust account records am I required to keep?

You are required to keep the following trust account records:

(1) Legible copies of all deposits made to the trust account including duplicate deposit slips validated by the bank or bearing the signature of the designated escrow officer or branch designated escrow officer, and including the date of actual deposit, wires, separate receipts, or other evidence of the deposit of funds into the trust account;

(2) Legible copies of all disbursements made from the trust account, including checks, wires, or other evidence of any disbursement from the trust account;

(3) Legible copies of all bank statements for the trust account, including all paid checks or copies of paid checks, electronic or otherwise, provided that such copies are made in such a manner that the endorsement on the paid check is visible and readable;

(4) A client's ledger containing an individual ledger sheet for each escrow transaction or collection account, unless you use a computer accounting system. If you use a computer accounting system, an individual ledger sheet does not need to be maintained in the transaction files until the closing of the escrow transaction or collection account as long as the computer accounting system records provide the status of the escrow transaction or collection account funds on a daily basis;

(5) Legible copies of all written receipts and prenumbered checks, if you use a manual trust accounting system to administer the trust account.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-520, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-520, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-530 Records.

What are the additional records requirements? (1) In addition to trust account records, you are required to keep additional records, including:

(a) Transaction files containing all agreements, contracts, documents, leases, escrow instructions, settlement statements and correspondence for each transaction;

(b) Reconciled bank statements and canceled checks for all bank accounts of the escrow agent including, but not limited to, the trust accounts, individual trust accounts, and general business operating accounts of the agent;

(c) All checks and receipts produced by any computer accounting system. These checks and receipts must be sequentially numbered. You must retain the original of any voided or incomplete sequentially numbered check or receipt which was not issued.

(2) All records other than the reconciled bank statements must identify the transaction they relate to, either by escrow number or some other clear identifying information.

(3) All of your records must be accurate, posted, and kept current to the date of the most recent activity.

(4) How long must I retain my records? You must keep required records and make them available for inspection by the department for a minimum of six years from completion of a transaction. Records must be retained in their original format until the related transaction is completed and the client's trust account balance is zero after which time they may be converted to electronic format pursuant to subsection (6) of this section.

(5) Where must I retain my records? You must at all times maintain your records in a location that is reasonably likely to preserve them. For the first year after completion, records of a transaction must be maintained at an address where you are licensed to maintain an escrow office. Records of transactions that have been completed for more than one year may be stored at another location within the state of Washington. Records stored at a remote location must be available during business hours upon demand of the department and must be maintained in a manner that is readily retrievable. You must not store records at a remote location if funds related to the transaction remain in the trust account.

(6) When can I convert my records to an electronic format? Once a transaction is completed and a client's trust account balance is zero, you may convert that client's file into a permanent storage format and destroy the originals. You must not store records electronically if funds related to the transaction remain the trust account.

(7) How can I store my records electronically? Records stored electronically must be electronically imaged and stored on permanent storage media like optical disks or microfilm. The storage media must meet the following requirements:

(a) The retrieval process must provide the ability to view and print the records on-site in their original form, including any signatures or other writings placed on the records prior to imaging;

(b) The equipment must be made available on- and off-site to the department for the purposes of an examination or investigation;

(d) The hardware and software necessary to display and print the records must be maintained by the escrow agent during the required retention period under subsection (4) of this section.

Permanent storage does not affect your duties under subsection (5) of this section to maintain files in your licensed location for the first year.

(8) I am closing my escrow agent business. What are my obligations regarding my records? You must ensure that all records retention requirements are met and that records are properly destroyed when appropriate. You also have an ongoing duty to ensure the department is informed about who has your records and where they are being maintained.

(9) Records disposal. You must have written policies and procedures for the destruction of records, including electronic records, when the retention period ends. The destruction of records must be accomplished so that the information cannot be reconstructed or read. The destruction of consumer credit report information must also comply with the federal Disposal Rule at 16 C.F.R. 682.

History

Statutory Authority: Chapter 43.320 RCW, RCW 18.44.410. WSR 16-08-028, § 208-680-530, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-530, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-530, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-532 Information security program required by the federal Safeguards Rule implementing the Gramm-Leach-Bliley Act.

(2) Specifically, at a minimum the program described in subsection (1) of this section must:

(a) Designate an employee or employees to coordinate the information security program;

(b) Identify and assess the risks to customer information;

(c) Design and implement information safeguards to control the risks identified in the risk assessment and regularly monitor and test the safeguards;

(d) Select service providers that can maintain appropriate safeguards and oversee their handling of customer information; and

(3) The information security program must be maintained as part of your books and records.

History

Statutory Authority: Chapter 43.320 RCW, RCW 18.44.410. WSR 16-08-028, § 208-680-532, filed 3/30/16, effective 4/30/16.

Wash. Admin. Code § 208-680-534 Consumer financial information privacy under the Gramm-Leach-Bliley Act (GLBA) and Regulation P.

(1) Licensees must comply with GLBA, as amended, and Regulation P. Unless subject to an exception under GLBA, as amended, licensees must, at a minimum:

(2) See GLBA, as amended, and Regulation P at 12 C.F.R. 1016 for the required details.

History

Statutory Authority: Chapter 43.320 RCW, RCW 18.44.410. WSR 16-08-028, § 208-680-534, filed 3/30/16, effective 4/30/16.

Wash. Admin. Code § 208-680-536 Notice to consumers of data breach.

History

Statutory Authority: Chapter 43.320 RCW, RCW 18.44.410. WSR 16-08-028, § 208-680-536, filed 3/30/16, effective 4/30/16.

Wash. Admin. Code § 208-680-538 Business resumption plan.

History

Statutory Authority: Chapter 43.320 RCW, RCW 18.44.410. WSR 16-08-028, § 208-680-538, filed 3/30/16, effective 4/30/16.

Wash. Admin. Code § 208-680-540 What are my obligations regarding escrow transactions?

The escrow agent is responsible for providing escrow services between the principal parties. In addition to complying with the act and these rules, an escrow agent must at a minimum:

(1) Escrow instructions.

(a) Prepare or accept an instrument of escrow instructions from and agreed to by the principal parties and the escrow agent. The escrow instructions must be signed by the principal parties. Escrow instructions must contain any and all agreements between the principal parties and the escrow agent or incorporate other written agreements by reference. The escrow instructions must not be modified except by written agreement signed by all principal parties and accepted by the escrow agent.

(b) Comply with the escrow instructions for completing the settlement statement. All funds disbursed on the settlement statement should be bona fide and supported with adequate documents.

(2) Fee disclosures. Disclose in writing to the principal parties when fees for services provided may be earned by the escrow agent. The disclosure must specifically identify the fees using the same terminology as that provided on the settlement statement (both the estimated and final) provided for any transaction subject to the act, and reflect the dollar amount associated with each item identified as a fee payable to the escrow agent. For purposes of this section, fees payable to the escrow agent mean any item payable directly to the escrow agent whether accounted for by the escrow agent as profit, potential for profit, or the offset of justifiable costs.

(3) Justifiable fees. Ensure that all fees are for bona fide services and bear a reasonable relationship in value to the services performed, regardless of whether the services are performed by the escrow agent or by a third party under contract with the escrow agent. No charges known at the time of closing for services performed by a third party to the transaction may exceed the actual cost of the third-party service. When the cost of a third-party service cannot be known with certainty at the time of closing, an escrow agent may:

(a) Provide an estimate of the charge for the third-party service on the preliminary settlement statement, disclose the actual charge for the third-party service on the final disclosure statement, and refund any amounts collected in excess of the actual charge for the third-party service to the principal parties;

(b) Assume responsibility for performing the service and charge the principal parties a one-time fee for performing the service. The one-time fee must be reasonably related to the value of the service provided. The escrow agent may contract with a third party to perform the service. The escrow agent must disclose to the principal parties in the preliminary and final settlement statement that the fee is being paid to the escrow agent. The escrow agent may transfer such fees earned into the general account in compliance with WAC 208-680-410; or

(c) If conducting a subescrow transaction, charge the principal parties the average charges as determined by the master escrow agent or title insurance company.

(4) Recordkeeping. Maintain copies of the escrow instructions and settlement statement in the escrow transaction file.

(5) Addendums. Require an addendum to the purchase agreement for any and all material changes in the terms of the escrow transaction including, but not limited to, changes in the financing of the transaction.

(6) Settlement statements.

(a) Provide a complete detailed settlement statement as it applies to each principal at the time the transaction is closed.

(b) Provide copies of the final settlement statement to each real estate broker or agent involved with the transaction.

(c) The escrow agent must retain a copy of all settlement statements in the transaction file, even if funds are not handled by the agent. The settlement statements must show, at a minimum:

(i) The date of closing;

(ii) The total purchase price;

(iii) An itemization of all adjustments, moneys or things of value received or paid in compliance with requirements of the Real Estate Settlement Procedures Act, 12 U.S.C. Section 2601, and Regulation X, 24 C.F.R. Section 3500, and all other applicable rules and regulations. Such itemization must include the name of the person or company to whom each individual amount is paid, or from whom each individual amount is received. If there is not enough room on the settlement statement for a full itemization, itemization may be provided on an addendum as long as a copy of the addendum was also provided to the principal parties and is included in the transaction file;

(iv) A detail of debits and credits identified to each principal party; and

(v) Names of payees, makers and assignees of all notes paid, made or assumed.

(7) Payment of proceeds. Pay the net proceeds of sale directly to the seller unless otherwise provided in writing by the seller or a court of competent jurisdiction.

(8) Obtain signatures. Obtain original signatures of the principal parties on either the preliminary or final settlement statement and maintain a copy of the signed settlement statement in the escrow transaction file, unless the escrow instructions authorize use of faxed or electronic signatures. If an escrow agent completes a transaction based on faxed signatures in accordance with the escrow instructions, it must obtain original signatures for the file only if the escrow instructions so require.

History

Statutory Authority: Chapter 43.320 RCW, RCW 18.44.410. WSR 16-08-028, § 208-680-540, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-540, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-540, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-550 Am I obligated to provide escrow services within the time period specified in the escrow instructions?

Yes. An escrow agent must perform all acts required of the escrow agent as expeditiously as possible and within any time period identified in the escrow instructions. Intentional or negligent delay in such performance is a violation of RCW 18.44.301, and provides grounds under RCW 18.44.430 (1)(h) and (i) for legal action against the escrow agent by the department.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-550, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-550, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-560 What requirements must I follow when disbursing funds or other things of value?

(1) The escrow agent must disburse funds as set forth in the escrow instructions or collection agreement. Not doing so is a violation of RCW 18.44.430 (1)(e). Funds and other items or documents must be paid and/or disbursed immediately upon closing of the transaction or as specifically agreed to in writing by the principal parties, and all funds must be disbursed in compliance with RCW 18.44.400(3) and these rules.

(2)(a) Upon written notice from any principal party that the ownership of the funds is in dispute or is unclear based on the written agreements of the parties, the escrow agent must hold such funds until it receives written notice from all principal parties that the dispute has been resolved. In lieu of holding such funds, the escrow agent may interplead the funds into a court of competent jurisdiction pursuant to chapter 4.08 RCW.

(b) For purposes of complying with (a) of this subsection, escrow agents should construe "written notice from any principal party that the ownership of the funds is in dispute" broadly so that many various written forms evidencing one party's or the other's belief in ownership of the subject funds is included.

(c) So too should the escrow agent construe "written demand" in RCW 64.04.220(2) broadly to include various forms of written correspondence and documents.

(d) Upon notification of a dispute between the principal parties, the department may, at its discretion, order the escrow agent to interplead the funds into a court of competent jurisdiction. If the department orders an escrow agent to interplead funds, the escrow agent may deduct only the actual costs of interpleading from the escrow funds.

(3) Except as provided otherwise in this section, at no time may an escrow agent disburse or delay the disbursement of funds without the written consent of the principal parties unless the delay is necessary to ensure the funds being disbursed are good funds.

(4) See also WAC 208-680-410 (1), (7), (11), and (16).

History

Statutory Authority: Chapter 43.320 RCW, RCW 18.44.410. WSR 16-08-028, § 208-680-560, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-560, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-560, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-570 When must I notify the department about a civil lawsuit, criminal complaint, or administrative action against me or my escrow officers or employees?

You must, within twenty-four hours after service or discovery of a civil lawsuit, criminal complaint, or administrative action, notify the department. The notices must contain the following:

(1) For any civil lawsuit, the subject matter of the lawsuit. You must provide the department with a copy of the lawsuit when one becomes available, regardless of any pending appeal.

(2) For any criminal complaint, information, indictment, or conviction (including a plea of guilty or nolo contendere) for a felony or a gross misdemeanor involving dishonesty, the subject matter of the action. You must provide the department with a copy of the criminal complaint, information, indictment, or conviction when one becomes available, regardless of any pending appeal.

(3) For the entry of a civil court order, verdict, or judgment, against you in any court of competent jurisdiction in which the subject matter involves any escrow or business related activity, the subject matter of the action, regardless of any pending appeal.

(4) For any administrative action or Washington state bar association disciplinary action taken against you, an escrow officer or any of your employees for subject matter involving escrow or related business activities, the subject matter of the action. You must provide the department with a copy of the action when one becomes available, regardless of any pending appeal.

(5) If any of the above described actions involves your employee notifying the department under this section does not change your responsibilities under WAC 208-680-275.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-570, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-570, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-580 What are the responsibilities of a licensed escrow officer?

Every licensed escrow officer must:

(1) Be knowledgeable of, keep current with, and comply with chapter 18.44 RCW and the rules;

(2) Keep the department informed of his or her current home address;

(3) Ensure accessibility of the escrow agent's offices and records to representatives of the department; and

(4) Promptly inform the department if he or she loses his or her affiliation with an escrow agent, and to stop providing escrow services until he or she associates with a licensed escrow agent.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-580, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-580, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-590 What conduct violates the act?

It is a violation of the act for you, any controlling person, principal officer, designated escrow officer, independent contractor, employee or other person subject to this chapter to:

(1) Directly or indirectly employ any scheme, device, or artifice to defraud or mislead borrowers or lenders or to defraud any person;

(2) Directly or indirectly engage in any unfair or deceptive practice toward any person;

(3) Directly or indirectly obtain property by fraud or misrepresentation;

(4) Knowingly make, publish, or disseminate any false, deceptive, or misleading information in the conduct of the business of escrow, or relative to the business of escrow or relative to any person engaged therein;

(5) Knowingly receive or take possession for personal use of any property of any escrow business, other than in payment authorized by this chapter, and with intent to defraud, omit to make, or cause or direct to be made, a full and true entry thereof in the books and accounts of the business;

(6) Make or concur in making any false entry, or omit or concur in omitting to make any material entry, in its books or accounts;

(7) Knowingly make or publish, or concur in making or publishing, any written report, exhibit, or statement of its affairs or pecuniary condition containing any material statement which is false, or omit or concur in omitting any statement required by law to be contained therein;

(8) Willfully fail to make any proper entry in the books of the escrow business required by law;

(9) Fail to disclose in a timely manner to the other officers, directors, controlling persons, designated escrow officer, or other licensed escrow officers the receipt of service of a notice of an application for an injunction or other legal process affecting the property or business of an escrow agent, including in the case of a licensed escrow agent an order to cease and desist or other order of the director;

(10) Fail to make any report or statement lawfully required by the director or other public official;

(11) Fail to comply with any requirement of any applicable federal or state act as described in RCW 18.44.301;

(12) Collect a fee for tracking unclaimed funds that is not a bona fide out-of-pocket expense;

(13) Convert unclaimed funds for personal use; or

(14) Receive compensation or any value from any party for assisting in "real estate flopping." "Real estate flopping" is a short sale transaction where the value of a property is misrepresented to the lender, who then authorizes sale of the property for less than market value. The property is resold to another person at market value or closer to market value, creating a profit. The failure to disclose the nature of the transactions or the true value of the property to the lender constitutes fraud on the lender, the original property owner, or the second buyer, and is a violation of this chapter.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-590, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-590, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-610 What are the department's examination powers under the act?

(1) For the purposes of determining compliance with chapter 18.44 RCW and chapter 208-680 WAC, the department may examine, wherever located, the records used in the business of every licensee and any person subject to the act.

(2) The department may make necessary inquiry of the business or personal affairs of each person identified in subsection (1) of this section for the purposes of determining compliance with the act and these rules. In conducting examinations, the department may:

(a) Access, during reasonable business hours, the offices and places of business, books, accounts, papers, files, records, including electronic records, computers, safes, and vaults of all such persons. Access must be given to both the trust account records and general business operating account records;

(b) Interview or take sworn testimony of any person subject to RCW 18.44.021, or any employee or independent contractor of any person subject to RCW 18.44.021;

(d) Require the filing of statements in writing by any person, under oath or otherwise, as to all facts and circumstances concerning the matters under examination;

(e) Copy, or request to be copied, any items described in this section;

(f) Analyze and review any items described in this section;

(g) Require assistance, as necessary, from any employee or person subject to the act;

(h) Conduct meetings and exit reviews with owners, management, officers, or employees of any person subject to the act;

(i) Prepare and deliver, as necessary, a report of examination requiring a response from the recipient; and

(j) Retain attorneys, appraisers, independent certified public accountants, or other professionals and specialists as examiners, auditors, or investigators. The cost of the services provided must be paid by the person who is the subject of the examination or investigation.

(3) The department may make examinations as frequently as it deems necessary or appropriate; and

(4) The department may charge an hourly fee for an examination. See RCW 18.44.121 (1)(e).

History

Statutory Authority: Chapter 43.320 RCW, RCW 18.44.410. WSR 16-08-028, § 208-680-610, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-610, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-610, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-620 What are the department's investigatory powers under the act?

(1) The department may conduct investigations at any time to determine whether any person has violated or is about to violate chapter 18.44 RCW, or any rule, regulation, or order under chapter 18.44 RCW, or to aid in the enforcement of chapter 18.44 RCW. For that purpose, the department may conduct inquiries, interviews, and examinations of any person deemed relevant to the investigation.

(2) The department may investigate the escrow business or other business or personal financial records of any person subject to investigation under subsection (1) of this section. In conducting investigations, the department may:

(a) Access, during reasonable business hours, any location where any escrow business records are or may be located, including offices, places of business, personal residences, storage facilities, computers, safes, and vaults, for the purposes of obtaining, reviewing, or copying books, accounts, papers, files, or records, including electronic records, or records stored in any format;

(b) Administer oaths or affirmations;

(d) Subpoena the production of any evidence or matter which is relevant to the investigation, including the taking of such evidence;

(e) Subpoena any person to determine the existence, description, nature, custody, condition, and location of any books, documents, or other tangible things and the identity and location of persons having knowledge or relevant facts, or any other matter reasonably calculated to lead to the discovery of material evidence;

(f) Interview, publicly or privately, under administration of oath or otherwise, or take the sworn testimony of: Any principal party, escrow agent, employee, or independent contractor, of any person subject to the act, or any other person whose testimony is deemed relevant to the department's investigation;

(g) Require the filing of statements, affidavits, or declarations in writing by any person, under administration of oath, notary or otherwise, as to all facts and circumstances concerning the matters under investigation;

(h) Copy, or request to be copied, any items described in this section, or if the department makes a determination that there is a danger that original records may be destroyed, altered, or removed to deny the director access, or that original documents are necessary for the preparation of a criminal referral, the department may take originals of any items described in this section, regardless of the source of such items. Originals and copies taken by the department may be held, returned, or forwarded to other regulatory or law enforcement officials as deemed necessary;

(i) Analyze and review any items described in this section;

(j) Receive assistance, as necessary, from any employee or other person subject to RCW 18.44.021;

(k) Conduct meetings with owners, management, officers, or employees of any person subject to RCW 18.44.021;

(l) Conduct meetings and share information with other regulatory or law enforcement agencies;

(m) Prepare and deliver, as necessary, a report of investigation requiring a response from the recipient.

(3) For purposes of this section and RCW 18.44.420(1), "public" means open to the public as determined by the department.

(4) For purposes of this section and RCW 18.44.420(1), "private" means closed to the public or any person, including attorneys for witnesses, as determined by the department.

History

Statutory Authority: Chapter 43.320 RCW, RCW 18.44.410. WSR 16-08-028, § 208-680-620, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-620, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-620, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-630 What are the department's enforcement powers under the act?

The department may conduct enforcement activities that include, but are not limited to:

(1) Enter orders, including temporary orders to cease and desist, compelling any person to cease and desist from an unlawful practice, and to take such affirmative action as in the judgment of the department will carry out the purposes of this chapter;

(2) Enter charges for violations of chapter 18.44 RCW and chapter 208-680 WAC;

(3) Bring an action, with or without prior administrative proceedings, in the superior court to enjoin conduct or to enforce compliance with chapter 18.44 RCW, or any rule, regulation, or order of the department;

(4) Appoint a receiver or conservator to take over, operate, or liquidate any licensed escrow agent;

(5) Hold hearings;

(6) Make referrals to other regulatory or law enforcement agencies; or

(7) Under specific circumstances, take possession of the property and escrow business of a licensed escrow agent. See WAC 208-680-645.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-630, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-630, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-640 What sanctions may the department impose on a licensed escrow agent or escrow officer?

(1) The department may take any or all of the following actions:

(a) Deny, suspend, or revoke an escrow agent or escrow officer license for any violation of RCW 18.44.430;

(b) Remove or prohibit any principal officer, controlling person, director, employee, or licensed escrow officer from participation in the conduct of the affairs of any licensed escrow agent;

(d) Impose a fine of up to one hundred dollars per day against any escrow officer or agent for each day's violation of chapter 18.44 RCW or these rules.

(2) I work as an escrow agent, but I am excepted from licensure. What sanctions may the department impose on me for violations of the act? The department may deny a future application for a license under the act.

(3) I have been sanctioned in the past for providing unlicensed escrow services in Washington. May I apply for an escrow agent or escrow officer license? Yes, if you were sanctioned more than five years ago. Under RCW 18.44.430, the department may deny a license to anyone who has violated the act or its implementing rules, including the licensure requirements. The department will not issue a license to a person who has provided unlicensed escrow services within the last five years, but may at its discretion issue a license to a person whose unlicensed activity took place more than five years before his or her application. If your unlicensed activity was particularly widespread or egregious, or if it posed a particular risk to the public interest, the department may still deny you an escrow agent or escrow officer license even if your unlicensed activity took place more than five years before your application.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-640, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-640, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-645 Possession of escrow agent property and business.

(1) When may the department take control of my escrow agent property and business? The department may take control of a licensed escrow agent if, as a result of an examination, report, investigation, or complaint, it appears to the department that the licensed escrow agent:

(a) Is conducting business in an unsafe and unsound manner that poses a risk to the public;

(b) Has suspended payment of its trust obligations;

(2) What actions can the department take once it has taken possession of an escrow agent's property and business? The department may take any action to protect consumers. At a minimum, the department may:

(a) Work with other licensees to complete pending escrow transactions;

(b) Discontinue unsafe or unsound practices and violations of laws or regulations;

(d) Make claims against the licensee's fidelity or surety bonds or errors and omissions insurance to make whole consumers who have been harmed by employee activities;

(e) Make restitution to injured parties;

(f) Renew the licensee's license;

(g) Renew or make premium payments to maintain the licensee's bonds and insurance; and

(h) Where it is clear that the escrow agent's business cannot be safely operated, take the necessary steps to wind down the business of the escrow agent including seizing the operating and escrow trust accounts; hiring and firing employees; changing locks and passwords; taking control of the escrow agent's internet website; and turning over operations to a court-appointed receiver.

(3) How long may the department keep control of a business? The department may maintain control over a business until the licensee is able to resume business or the business is liquidated by a receiver appointed pursuant to RCW 18.44.470.

(4) I also conduct nonescrow business through my licensed escrow agent business. If the department seizes my escrow business, will it also seize these other areas of business? When possible, the department will only take control of the portion of a business related to escrow. If the portions of a business are not clearly divisible, the department will determine its actions on a case-by-case basis, based in part on the relationship between and degree of commingling of the business lines.

(5) I am an attorney whose law practice is licensed as an escrow agent. Will the department seize my law practice under this section? Where an attorney's law practice is excepted from licensure, the law practice is not subject to seizure under the act. For attorneys with a business entity licensed under the act, the department will generally not exercise its seizure authority against a business entity or portion of a business entity supervised by the Washington state bar association. In any event, the department will only take control of the portion of a business related to escrow as set forth in subsection (4) of the section.

History

Statutory Authority: Chapter 43.320 RCW, RCW 18.44.410. WSR 16-08-028, § 208-680-645, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-645, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-645, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-647 Seizure of escrow agent property business by the department—Notice to licensee.

Under the circumstances set forth in WAC 208-680-645, the department may give the licensee notice and opportunity to correct an unsafe or unsound condition. If the licensee fails to immediately comply with the terms of the notice or within such time as the department may allow, then the department may take possession of the escrow agent property and business.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-647, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-647, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-648 What are my rights if the department takes possession of my escrow agent property business without cause?

You may challenge the department's decision under the Administrative Procedure Act, chapter 34.05 RCW.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-648, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-648, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-650 What are the fees I must pay for examinations and investigations?

(1) You will be charged $62.50 per hour for an examination or investigation or both pursuant to WAC 208-680-610 or 208-680-620.

(2) You will also be charged the expenses of an examination or investigation or both. The expenses may include, but are not limited to, staff time, travel, lodging, per diem, and any other expenses. At a reasonable time following each examination or investigation performed, the director must provide the person examined with an invoice for the expenses incurred during the examination or investigation. Payment of the invoiced amount must be made within thirty days of the date of the invoice to avoid the addition of interest charges to the amount due.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-650, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-650, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-660 Abandoned escrow records.

What happens if I fail to maintain my records after closing? If you do not maintain your records as required, you are responsible for the costs of collection, storage, conversion to electronic formats, and proper destruction.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-660, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-660, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-710 Organization of committee.

(1) What is the escrow committee, and what are its duties? The escrow committee is composed of the director or his or her designee and five board members appointed by the director. The committee provides advice on the escrow officer test, acts in an advisory capacity to the department regarding the activities of escrow agents and escrow officers, and performs such other duties and functions as prescribed by chapter 18.44 RCW.

(2) Are escrow committee meetings open to the public? Yes. Meetings of the escrow committee are open to the public. Records, minutes, and recordings of each meeting are also available on the department's website, www.dfi.wa.gov.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-710, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-710, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-680-720 Escrow committee meeting notice.

I would like to know when the next meeting of the escrow committee will be held. How can I get this information? If you would like to know about the date, time, place and agenda of the escrow committee meetings, you may make a request of the department, or may join the department's escrow email distribution list, the listserv, at http://dfi.wa.gov/about/listservs.htm.

Dates and times of the escrow committee's meetings are also posted on the department's website, www.dfi.wa.gov.

History

Statutory Authority: RCW 43.320.040 and 18.44.410. WSR 13-24-022, § 208-680-720, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040 and chapter 18.44 RCW (as amended by 2010 c 34). WSR 10-20-124, § 208-680-720, filed 10/5/10, effective 11/5/10.

Chapter 208-690 Regulation of money services providers.

Wash. Admin. Code § 208-690-010 Definitions.

What definitions are applicable to these rules? In addition to the definitions herein, the definitions in chapter 19.230 RCW apply throughout this chapter unless the context clearly requires otherwise.

"Act" means the Uniform Money Services Act, chapter 19.230 RCW.

"Advertise, advertising, or advertising material" means any form of sales or promotional materials used in connection with the business. Advertising material includes, but is not limited to, newspapers, magazines, leaflets, flyers, direct mail, indoor or outdoor signs or displays, point-of-sale literature or educational materials, other printed materials; radio, television, public address system, or other audio broadcasts; internet pages, social media pages, instant messages, or electronic bulletin boards.

"AML compliance officer" means the individual(s) employed by the licensee or licensee's parent or affiliate designated to implement the anti-money laundering (AML) program.

"Audited financial statement" means a statement prepared by an independent accountant according to generally accepted accounting principles.

"Bill payment" service means a type of money transmission when an intermediary accepts funds from a consumer for transmission to a merchant for payment on a consumer's account. The intermediary may or may not charge a fee for this service.

"Department" means the department of financial institutions.

"Funds" means money or its equivalent value.

"NMLS" means a multistate licensing system developed and maintained by the Conference of State Bank Supervisors for licensing and registration.

"Online currency exchanger" means a currency exchanger who transacts business over the internet or other electronic medium, regardless of whether the currency exchanger also has a physical location in Washington state.

"Principal" means any person who controls, directly or indirectly through one or more intermediaries, alone or in concert with others, a ten percent or greater interest in a partnership, company, corporation, or association, or the owner of a sole proprietorship.

"RCW" means the Revised Code of Washington.

"Virtual currency storage" means storing access to virtual currency owned by another person.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-010, filed 6/19/18, effective 8/1/18
WSR 16-14-022, § 208-690-010, filed 6/27/16, effective 8/1/16
WSR 13-24-021, § 208-690-010, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-010, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 19.230.310 and 43.320.040. WSR 04-15-005, § 208-690-010, filed 7/7/04, effective 8/7/04.

Wash. Admin. Code § 208-690-014 How does the department interpret the definitions in RCW 19.230.010?

(1) "Currency exchange." For purposes of RCW 19.230.010 (8)(b), "investment" means an investment that is not money of a government.

(2) "Responsible individual." The responsible individual must:

(a) Be a citizen of the United States or have legal immigration status to work in the United States;

(b) Hold W-2 employee status with the licensee;

(d) Be responsible for the company's compliance with applicable state and federal laws, rules and regulations.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 16-14-022, § 208-690-014, filed 6/27/16, effective 8/1/16
WSR 13-24-021, § 208-690-014, filed 11/22/13, effective 1/1/14.

Wash. Admin. Code § 208-690-015 What activities are excluded from the act?

(1) See also RCW 19.230.020.

(2) The issuance, sale, use, redemption, or exchange of closed-loop prepaid access.

(3) The issuance or sale of open-loop prepaid access when the value is covered by federal deposit insurance immediately upon sale or issue. See the Federal Deposit Insurance Corporation (FDIC) Financial Institution Letter 129-2008 dated November 13, 2008, to determine if the underlying funds are covered by FDIC insurance immediately upon sale or issue.

(4) Storage of virtual currency by a person when the virtual currency is owned by others and the person storing the virtual currency does not have the unilateral ability to transmit the value being stored.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-015, filed 6/19/18, effective 8/1/18
WSR 16-14-022, § 208-690-015, filed 6/27/16, effective 8/1/16
WSR 13-24-021, § 208-690-015, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-015, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-690-016 Can the director waive the licensing provisions of the act?

Yes. The director has the authority to waive the licensing provisions of the act upon a determination the waiver facilitates commerce and protects consumers.

History

Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-016, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-690-018 How does the department interpret the activities that are excluded in RCW 19.230.020?

The following are excluded:

(1) Pursuant to RCW 19.230.020 (6) and (7):

(a) Activities regulated by the Commodities Futures Trading Commission (CFTC) or exempt from registration with the CFTC;

(b) Clearance or settlement services provided by a person to a board of trade as designated by the CFTC.

(2) Pursuant to RCW 19.230.020(8), activities by persons providing clearance or settlement services under a registration as a clearing agency, or an exemption from that registration granted under the federal securities laws. The exclusion applies only to those activities.

(3) Payment processing by a person meeting the requirements in RCW 19.230.020(9), but not persons engaged in payment processing activities:

(a) Using virtual currencies;

(b) For the marijuana industry; or

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-018, filed 6/19/18, effective 8/1/18.

Wash. Admin. Code § 208-690-020 Voluntary license application.

(1) Any person otherwise exempt from licensing under the provisions of the act may voluntarily submit an application to the director for a money transmitter or currency exchange license. The director shall review such application and may grant or deny licenses to such applicants upon the same grounds and subject to payment of the same fees as are applicable to persons required to be licensed.

(2) Upon receipt of a license under this section, the licensee is required to maintain a valid license and is subject to all the provisions of the act and these rules until the license is surrendered or revoked.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 16-14-022, § 208-690-020, filed 6/27/16, effective 8/1/16. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-020, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 19.230.310 and 43.320.040. WSR 04-15-005, § 208-690-020, filed 7/7/04, effective 8/7/04.

Wash. Admin. Code § 208-690-030 License application.

What must I do to apply for a license? You must file:

(1) A completed application in a form and in a medium prescribed by the director through the NMLS. See RCW 19.230.040 for the required contents of the application. In addition, the application must contain:

(a) The fingerprints of the proposed responsible individual and a personal credit report from a recognized independent credit reporting agency on the proposed responsible individual;

(b) A list of the applicant's proposed authorized delegates including the business name and any additional names by which the business may be known, the business address and name of the primary contact person for each authorized delegate, and the locations in this state where the applicant and its authorized delegates propose to engage in the provision of money services;

(c) A full description of the screening process used by the applicant in selecting authorized delegates, including a sample of any forms used, and the method used to screen for criminal history; and

(d) Identification of the bank account established for the business including, but not limited to, the bank name, address, account number, and account type.

(2) If the applicant is a corporation, limited liability company, partnership, or other entity, the applicant must also provide:

(a) The legal name, any fictitious or trade name, all business and residential addresses, date of birth, Social Security number, and employment history in the ten-year period preceding the submission of the application for each AML compliance officer;

(b) If the applicant or its corporate parent is not a publicly traded entity, the fingerprints of each executive officer, board director, AML compliance officer or other person that has control of the applicant; and

(c) A list of any criminal convictions, material litigation, and any litigation related to the provision of money services, in the ten-year period preceding the submission of the application in which any AML compliance officer has been involved.

(3) Surety bonds as required by WAC 208-690-040 or 208-690-041.

(4) An application fee as prescribed by WAC 208-690-130(1). The application fee is not refundable. The director may require all fees to be paid through the NMLS.

(5) An additional license fee as prescribed by WAC 208-690-130(2).

(6) If the application is for money transmission, a certification that the applicant's investment portfolio, if maintained as permissible investments for outstanding transmission liabilities, includes only the permissible investments under RCW 19.230.200 and 19.230.210.

(7) If you are engaged in virtual currency storage, an information security audit report which at a minimum: Occurred within one year of the date of an application submission; and was completed by a company or individual with information security credentials acceptable to the director.

(8) Application for a proposed license or trade name. The application may be denied if the proposed name is similar to a currently existing licensee name, including trade names, is prohibited because it is deceptive or in violation of any other statute that limits the use of names, or is otherwise likely to cause confusion as to the identity of the true service provider.

The director may waive one or more requirements of this section or permit an applicant to submit other information in lieu of the required information.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-030, filed 6/19/18, effective 8/1/18
WSR 16-14-022, § 208-690-030, filed 6/27/16, effective 8/1/16
WSR 13-24-021, § 208-690-030, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-030, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 19.230.310 and 43.320.040. WSR 04-15-005, § 208-690-030, filed 7/7/04, effective 8/7/04.

Wash. Admin. Code § 208-690-031 What will happen if I abandon my license application?

If you do not respond as directed within forty-five days to the department's request for additional required information, your money transmission or currency exchange license application is considered abandoned and you forfeit all fees paid. Failure to provide the requested information will not affect new applications filed after the abandonment. You may reapply by submitting a new application package and new application fee.

History

Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-031, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-690-035 Authorized delegates.

What are the rules I must comply with when I have authorized delegates?

(1) Only a licensee may designate an authorized delegate.

(2) A person accepting consumers' funds for transmission through an exempt or excluded entity under RCW 19.230.020 is not an authorized delegate but is a money transmitter and must be licensed under the act.

(3) Any person you designate to provide money services on your behalf is an authorized delegate, regardless of whether that person would be exempt or excluded from the application of chapter 19.230 RCW if they provided money services on their own behalf.

(4) Your authorized delegates must be physically located in the state of Washington unless you have received prior approval from the director to designate an authorized delegate physically located outside of the state of Washington.

(5) The licensee has supervisory authority over the actions of the authorized delegate when providing services on behalf of the licensee. The department may take action against a licensee and/or the authorized delegate for any actions by the authorized delegate on behalf of the licensee in violation of the act or rules.

(6) A written contract between you and an authorized delegate must contain, among all the other contract provisions, provisions with language substantially similar to the following:

(a) The authorized delegate must operate in full compliance with chapter 19.230 RCW and the rules adopted under this chapter.

(b) The authorized delegate is prohibited from using subdelegates or conducting business from locations not authorized by the department.

(7) The authorized delegate may only conduct activities authorized by you in the written agreement, unless the authorized delegate is also a licensee.

(8) You may contract with another licensee to use that other licensee's existing authorized delegates to load funds onto your existing open-loop prepaid access product. If the shared authorized delegate sells new open-loop prepaid access product for you, you must add the authorized delegate to your authorized delegate roster.

(9) The authorized delegate must include the licensee's name along with the other applicable requirements of RCW 19.230.330(2) on any disclosures or receipts.

(10) The licensee's bond covers the actions of the authorized delegate while the authorized delegate is providing money services on behalf of the licensee pursuant to the written contract.

(11) You must maintain your authorized delegate agreements and contracts with other licensees to share existing authorized delegates as part of your books and records pursuant to RCW 19.230.170 and make them available to the department upon request.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-035, filed 6/19/18, effective 8/1/18
WSR 16-14-022, § 208-690-035, filed 6/27/16, effective 8/1/16
WSR 13-24-021, § 208-690-035, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-035, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 19.230.310 and 43.320.040. WSR 04-15-005, § 208-690-035, filed 7/7/04, effective 8/7/04.

Wash. Admin. Code § 208-690-036 Authorized delegate advertising.

An authorized delegate must not advertise or provide money services under its own name without an equally prominent display of the licensee's name, in close proximity, on all advertising, including websites. An authorized delegate must not use its name alone when advertising money services provided on behalf of the licensee.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 16-14-022, § 208-690-036, filed 6/27/16, effective 8/1/16.

Wash. Admin. Code § 208-690-040 Surety bond—Money transmitters.

What are the bonding requirements?

(1) You must continuously maintain a surety bond as required by RCW 19.230.050, issued by a company authorized to do surety business in this state, as a surety. The surety may not be a wholly owned subsidiary or affiliate of the applicant or licensee.

(2) The penal sum of the bond must be calculated quarterly during the first year of licensing and thereafter annually. The calculation must be based on the previous twelve months' money transmission and payment instrument dollar volume. The bond amount must be calculated at ten thousand dollars for every one million dollars of money transmission and payment instrument dollar volume. The minimum surety bond amount is ten thousand dollars. The maximum surety bond amount is five hundred fifty thousand dollars.

(3) The initial bond amount will be ten thousand dollars and must be reevaluated based on the schedule set forth in subsection (2) of this section.

(4) Depending on the financial services you provide, you may be required to hold the bond for up to five years after the date you cease to provide money services in this state.

(5) The director may provide an alternative to a bond under certain circumstances that would not compromise consumer protection or allow the company to operate in an unsafe or unsound manner.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-040, filed 6/19/18, effective 8/1/18
WSR 16-14-022, § 208-690-040, filed 6/27/16, effective 8/1/16
WSR 13-24-021, § 208-690-040, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-040, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 19.230.310 and 43.320.040. WSR 04-15-005, § 208-690-040, filed 7/7/04, effective 8/7/04.

Wash. Admin. Code § 208-690-041 Surety bond—Online currency exchangers.

What are the bonding requirements?

(1) You must continuously maintain a surety bond as required by RCW 19.230.055, issued by a company authorized to do surety business in this state, as a surety. The surety may not be a wholly owned subsidiary or affiliate of the applicant or licensee.

(2) The penal sum of the bond must be calculated quarterly during the first year of licensing and thereafter annually. The calculation must be based on the previous twelve months' online currency exchange dollar volume. The bond amount must be calculated at ten thousand dollars for every one million dollars of currency exchange dollar volume. The minimum surety bond amount is ten thousand dollars. The maximum surety bond amount is fifty thousand dollars.

(3) The initial bond amount will be ten thousand dollars and must be reevaluated based on the schedule set forth in subsection (2) of this section.

(4) The bond must cover claims for at least one year after the date of an online currency exchanger licensee's violation of the chapter or the licensee ceases to provide online currency exchange services in this state, whichever is longer.

(5) The director may provide an alternative to a bond under certain circumstances.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-041, filed 6/19/18, effective 8/1/18.

Wash. Admin. Code § 208-690-050 Increase of surety bond.

Will the department ever require an increase in the amount of the surety bond? The director may increase the amount of the surety bond, to a maximum of one million dollars, if the financial condition of a money transmitter or online currency exchanger applicant or licensee so requires. The director may consider, without limitation, the following criteria:

(1) Significant reduction of net worth.

(2) Financial losses.

(3) Potential losses resulting from violations of chapter 19.230 RCW, or these rules.

(4) Licensee filing for bankruptcy.

(5) The initiation of any proceedings against the licensee in any state, by any federal agency, or in any foreign country. This includes the filing of material litigation.

(6) The filing of a state or federal criminal charge against the licensee, person in control, responsible individual, executive officer, board director, AML compliance officer, employee, authorized delegate or principal, based on conduct related to providing money services or money laundering.

(7) A licensee, executive officer, board director, AML compliance officer, other person in control, responsible individual, principal or authorized delegate being convicted of a crime.

(8) Any unsafe or unsound practice.

(9) A judicial or administrative finding against a money transmitter licensee under chapter 19.86 RCW, or an examination report finding that the money transmitter licensee engaged in an unfair or deceptive act or practice in the conduct of its business.

(10) The nature and volume of the projected or established business activities.

(11) Other events and circumstances that, in the judgment of the director, impair the ability of the licensee to meet its obligations to its money services customers.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-050, filed 6/19/18, effective 8/1/18
WSR 16-14-022, § 208-690-050, filed 6/27/16, effective 8/1/16
WSR 13-24-021, § 208-690-050, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-050, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 19.230.310 and 43.320.040. WSR 04-15-005, § 208-690-050, filed 7/7/04, effective 8/7/04.

Wash. Admin. Code § 208-690-060 Tangible net worth.

What are the rules for my tangible net worth requirements?

(1) A money transmitter applicant or licensee must demonstrate and maintain tangible net worth calculated at ten thousand dollars for every one million dollars of total company-wide money transmission and payment instrument dollar volume over the previous twelve months. The minimum tangible net worth is ten thousand dollars; the maximum required amount is three million dollars.

(2) The minimum tangible net worth if the company provides virtual currency storage is one hundred thousand dollars. See the definition of virtual currency storage.

(3) The director may increase the amounts specified in subsections (1) and (2) of this section up to a maximum of three million dollars if the director determines that a higher net worth is necessary to achieve the purposes of this chapter based on the:

(a) Nature and volume of the projected or established business activities;

(b) Amount, nature, quality, and liquidity of the company's assets;

(d) History of the company's operations and prospects for earning and retaining income;

(e) Quality of the company's operations;

(f) Quality of the company's management;

(g) Nature and quality of the company's principals, responsible individuals, and persons in control;

(h) History of the company's compliance with applicable state and federal law; and

(i) Any other factor the director considers relevant.

(4) Determinations of tangible net worth must be made according to generally accepted accounting principles.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-060, filed 6/19/18, effective 8/1/18
WSR 16-14-022, § 208-690-060, filed 6/27/16, effective 8/1/16
WSR 13-24-021, § 208-690-060, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-060, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 19.230.310 and 43.320.040. WSR 04-15-005, § 208-690-060, filed 7/7/04, effective 8/7/04.

Wash. Admin. Code § 208-690-070 License denial.

When may the department deny my license application?

(1) Director may deny a money services license if the director determines that:

(a) The application is incomplete;

(b) The surety bond or net worth requirements of WAC 208-690-040 through 208-690-060 have not been met;

(c) The general fitness and character requirements of RCW 19.230.070 or 19.230.100 have not been met as demonstrated by findings including, but not limited to, the following:

(i) The applicant, an executive officer, proposed responsible individual, board director, AML compliance officer, other person in control or authorized delegate has been convicted of any felony within the past ten years;

(ii) The applicant, an executive officer, proposed responsible individual, board director, AML compliance officer, other person in control or authorized delegate has been convicted of a crime involving a financial transaction within the past ten years;

(iii) The applicant, an executive officer, proposed responsible individual, board director, AML compliance officer or other person in control has criminal, civil, or administrative charges issued against him/them in any jurisdiction for violations relating to a financial transaction(s) within the past ten years;

(iv) The applicant, an executive officer, proposed responsible individual, board director, AML compliance officer or other person in control has falsified any information supplied in connection with the application;

(v) The applicant, or any proposed authorized delegate thereof, has had an adverse action taken against any business license related to providing financial services by a jurisdiction within the United States within the past five years;

(vi) The applicant has allowed a business under its control to deteriorate to a condition of insolvency determined by the fact that its liabilities exceed its assets or it cannot meet its liabilities as they mature;

(d) The applicant, or any authorized delegate thereof, fails to respond to a request for information from the director;

(e) The description of the screening process used by the applicant in selecting authorized delegates supplied by the applicant describes a process that is ineffective in determining the fitness of proposed authorized delegates;

(f) The applicant has failed to register with the United States Department of the Treasury as required by 31 U.S.C. Section 5330;

(g) The applicant, an executive officer, proposed responsible individual, board director, AML compliance officer or other person in control is listed on the specially designated nationals and blocked persons list prepared by the United States Department of the Treasury as a potential threat to commit terrorist acts or to finance terrorist acts.

(2) In lieu of denying an application as authorized by any of the findings in subsection (1) of this section, the director may issue a conditional license, return the application, or extend the review period if the director determines that the condition or circumstances that would likely lead to denial may be temporary and resolved satisfactorily within a reasonable period of time. The director may resume processing the application if the director determines that a favorable resolution of the disqualifying condition has occurred.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 16-14-022, § 208-690-070, filed 6/27/16, effective 8/1/16
WSR 13-24-021, § 208-690-070, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-070, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 19.230.310 and 43.320.040. WSR 04-15-005, § 208-690-070, filed 7/7/04, effective 8/7/04.

Wash. Admin. Code § 208-690-071 Other license actions.

When may the department take other action against my license? The director may revoke or suspend a license and issue an order to cease and desist operations as a money services licensee if:

(1) Another jurisdiction initiates an adverse action against the money services license of the licensee;

(2) Upon finding the existence of any condition or fact that would have led to denial of a license if known by the director during the processing of the application; or

(3) The licensee violates the act.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 16-14-022, § 208-690-071, filed 6/27/16, effective 8/1/16.

Wash. Admin. Code § 208-690-075 Books and records.

(1) In addition to the records required to be retained under RCW 19.230.170, you must keep records in compliance with federal law. You must maintain a record of money transmittals in accordance with applicable sections of Financial Recordkeeping and Reporting of Currency and Foreign Transactions, Title 31, Code of Federal Regulations, Part 103, as now appearing or hereafter amended.

(2) Abandoned records. If records are not maintained as required, the licensee is responsible for the costs of collection, storage, conversion to electronic format, or proper destruction of the records.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 16-14-022, § 208-690-075, filed 6/27/16, effective 8/1/16
WSR 13-24-021, § 208-690-075, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-075, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 19.230.310 and 43.320.040. WSR 04-15-005, § 208-690-075, filed 7/7/04, effective 8/7/04.

Wash. Admin. Code § 208-690-080 Audited annual financial statement.

When must I provide audited financial statements?

(1) You are required to have an audited financial statement prepared annually by a licensed or certified individual or firm in accordance with generally accepted accounting principles. The financials must be submitted prior to or with the annual assessment. The financials may be submitted through the NMLS. The director may waive the requirements of this subsection for licensees with minimal or no business activity conducted under their license.

(2) Applicants with no business operations prior to application must submit a copy of unconsolidated financial statements for the current fiscal year, whether audited or not. Audited annual financial statements are required in all future years of operation.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-080, filed 6/19/18, effective 8/1/18
WSR 16-14-022, § 208-690-080, filed 6/27/16, effective 8/1/16
WSR 13-24-021, § 208-690-080, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-080, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 19.230.310 and 43.320.040. WSR 04-15-005, § 208-690-080, filed 7/7/04, effective 8/7/04.

Wash. Admin. Code § 208-690-085 Permissible investments.

(1) You must maintain permissible investment levels pursuant to RCW 19.230.200.

(2) In addition to the permissible investments allowed in RCW 19.230.210(2), a permissible investment may also include receivables from banks and credit cards.

(3) Monthly reports about permissible investments must include the monthly calculation of the average daily transmission liability. Average daily transmission liability means the sum of the daily amounts of a licensee's outstanding money transmission, as computed each day of the month divided by the number of days in the month.

(4) A licensee transmitting virtual currencies must hold virtual currencies of the same kind and volume (like-kind) as that held by the licensee but which is obligated to consumers. For example: A licensee transmitting 100 Bitcoins and 50 Ether on behalf of consumers must be able to demonstrate it possesses at least 100 Bitcoins and 50 Ether.

(5) A licensee transmitting both money and virtual currency must maintain volumes and types of permissible investments as described in subsections (3) and (4) of this section.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-085, filed 6/19/18, effective 8/1/18
WSR 16-14-022, § 208-690-085, filed 6/27/16, effective 8/1/16
WSR 13-24-021, § 208-690-085, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-085, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-690-090 Annual report and annual assessment.

What are the annual report and assessment requirements? Every licensee must submit a completed annual report and annual license assessment fee prescribed by WAC 208-690-140. The completed report and the fee must be received in the department office no later than 5:00 p.m. July 1, or 5:00 p.m. the next business day if July 1 is not a business day. A form for the preparation of the annual report and license assessment will be made available by the department by electronic transmission or mailed upon request. The report must include the following:

(1) If the licensee is a money transmitter, a copy of the licensee's most recent audited annual financial statement or, if the licensee is a wholly owned subsidiary of another corporation, the most recent audited consolidated annual financial statement of the parent company.

(2) Verification that authorized delegate information in the NMLS is current.

(3) If the licensee is a money transmitter, verification that the licensee meets permissible investment requirements under RCW 19.230.200 and 19.230.210.

(4) If the licensee is a money transmitter or online currency exchanger, verification that the licensee has an adequate surety bond as required by WAC 208-690-040 through 208-690-050.

(5) Verification that material changes, as defined by WAC 208-690-110, have been reported through the NMLS and are current.

(6) The annual report and assessment fee may be submitted through the NMLS.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-090, filed 6/19/18, effective 8/1/18
WSR 16-14-022, § 208-690-090, filed 6/27/16, effective 8/1/16
WSR 13-24-021, § 208-690-090, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-090, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 19.230.310 and 43.320.040. WSR 04-15-005, § 208-690-090, filed 7/7/04, effective 8/7/04.

Wash. Admin. Code § 208-690-100 Is there a penalty for not filing my annual report and annual assessment on time?

(1) If you fail to submit the required annual report and annual assessment fee by July 1, each year, the director may suspend your license and assess a late fee. The late fee is ten percent of the annual assessment if submitted thirty or fewer days late and twenty-five percent of the annual assessment if submitted more than thirty days late. The annual report and annual assessment fee are not considered to be submitted until the date both have been submitted. If your license has been suspended under this section and you submit a completed annual report, the annual assessment and the late fee to the department office no later than 5:00 p.m., thirty calendar days after the original due date, the license suspension may be removed. If the delay extends past thirty days, your license has expired effective thirty-one days after the original due date.

(2) The director may reinstate an expired license under this section if, within twenty days after the license expiration, you:

(a) File the complete annual report and pay both the annual license assessment and the late fee; and

(b) You or your delegates did not engage in providing money services during the period the license was expired.

(3) If any of the deadlines in this section occur on a day that is not a business day, the deadline shall be the next business day.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-100, filed 6/19/18, effective 8/1/18
WSR 16-14-022, § 208-690-100, filed 6/27/16, effective 8/1/16
WSR 13-24-021, § 208-690-100, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, chapter 19.230 RCW, and 2010 c 73. WSR 10-12-038, § 208-690-100, filed 5/25/10, effective 6/25/10. Statutory Authority: RCW 19.230.310 and 43.320.040. WSR 04-15-005, § 208-690-100, filed 7/7/04, effective 8/7/04.

Wash. Admin. Code § 208-690-103 How is the annual assessment calculated and when is the annual assessment due?

(1) The annual assessment is calculated by multiplying 0.0004 by the previous year's adjusted Washington volume of money transmission, currency exchange, prepaid access sales, and payment instrument sales, with a minimum assessment of one thousand dollars and a maximum assessment of one hundred thousand dollars.

For purposes of this section, "adjusted Washington volume" means:

(a) For money transmission, ninety-five percent of all funds transmitted;

(b) For currency exchange, five percent of all currency exchanged;

(d) For payment instrument sales, seventy percent of the first ten million dollars of payment instrument sales, twenty percent of the volume over ten million through five hundred million dollars, and one percent of any amount over five hundred million dollars.

(2) The annual assessment is due no later than 5:00 p.m. July 1st each year or the next business day if July 1st is not a business day.

(3) If thirty days after the due date the annual assessment or any late fee for failure to report or pay the annual assessment is not paid, the department may make a claim against the surety bond.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-103, filed 6/19/18, effective 8/1/18.

Wash. Admin. Code § 208-690-105 What are my quarterly call report filing requirements?

You are required to file accurate and complete call reports on the dates and in a form prescribed by the NMLS.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-105, filed 6/19/18, effective 8/1/18.

Wash. Admin. Code § 208-690-110 Report of material change.

What must I report to the department if something about my business changes? Material changes described in this section must be reported to the director through the NMLS within thirty days of the occurrence of the change. "Material change" means any change that is not trivial, and that, if not reported, would cause an investigation or examination to be misled or delayed. Such changes include, but are not limited to:

(1) A change of the licensee's physical, mailing, or email address. Additionally, a change to the physical, mailing, or emailing address of authorized delegates;

(2) A change of the responsible individual, AML compliance officer, executive officers or board members, or other person in control;

(3) A change of the licensee's name or DBA (doing business as);

(4) A change in the location where the records of the licensee that are required to be retained under RCW 19.230.170 are kept;

(5) The obtaining, revocation or surrender of a money services license in any other jurisdiction;

(6) The conviction of the licensee, an executive officer, responsible individual, board director, AML compliance officer, principal, or other person in control of a misdemeanor or gross misdemeanor involving a financial transaction;

(7) A change in your business bank account including its closure or a change in the location or identity of the bank holding the account;

(8) A change in the business plan from that submitted at application;

(9) Other similar activities or events affecting the business or executive officers or other persons in control;

(10) Changes of control. See WAC 208-690-115; and

(11) Data breach. This notification requirement may change based on directives or recommendations from law enforcement. See also WAC 208-690-270.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-110, filed 6/19/18, effective 8/1/18
WSR 16-14-022, § 208-690-110, filed 6/27/16, effective 8/1/16
WSR 13-24-021, § 208-690-110, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-110, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 19.230.310 and 43.320.040. WSR 04-15-005, § 208-690-110, filed 7/7/04, effective 8/7/04.

Wash. Admin. Code § 208-690-112 Other reports.

What events about my business must I report to the department? You must file a report with the director within one business day after you have reason to know of the occurrence of any of the following events:

(1) The filing of a petition by or against the licensee, or any authorized delegate of the licensee, under the United States Bankruptcy Code (11 U.S.C. 101-110) for bankruptcy or reorganization;

(2) The filing of a petition by or against the licensee, or any authorized delegate of the licensee, for receivership, the commencement of any other judicial or administrative proceeding for its dissolution or reorganization, or the making of a general assignment for the benefit of creditors;

(3) The commencement of a proceeding to revoke, suspend, restrict, or condition its license, or otherwise discipline or sanction the licensee, in a state or country in which the licensee engages in business or is licensed;

(4) The filing of any material litigation against the licensee or any authorized delegate of the licensee;

(5) The cancellation or other impairment of the licensee's bond or other security;

(6) A charge or conviction of the licensee or of an executive officer, responsible individual, board director, principal, AML compliance officer or other person in control of the licensee, for a felony; or

(7) A charge or conviction of an authorized delegate for a felony.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 16-14-022, § 208-690-112, filed 6/27/16, effective 8/1/16
WSR 13-24-021, § 208-690-112, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-112, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 19.230.310 and 43.320.040. WSR 04-15-005, § 208-690-112, filed 7/7/04, effective 8/7/04.

Wash. Admin. Code § 208-690-115 Request for approval of change of control.

What must I do to request approval for a change of control of my business? You must request approval of a change of control at least thirty days prior to the proposed change of control. The request for approval must include:

(1) A comprehensive description of the proposed change that sets forth:

(a) The identity of all persons acquiring control under the proposed change;

(b) The ownership interest and managerial authority of all persons in control under the proposed change.

(2) For each new person in control under the proposed change:

(a) Biographical information, including employment history for the immediate previous five years;

(b) A personal credit report issued by a recognized independent credit reporting agency;

(3) A transaction fee as prescribed by WAC 208-690-150.

(4) The change of control may result in a requirement for the filing of a new application.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 13-24-021, § 208-690-115, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-115, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 19.230.310 and 43.320.040. WSR 04-15-005, § 208-690-115, filed 7/7/04, effective 8/7/04.

Wash. Admin. Code § 208-690-120 When must I update information about licensee branch locations and authorized delegates?

You must update your NMLS record within thirty days of the following:

(1) Obtaining an additional licensee branch location to provide money services in Washington.

(2) Contracting with a new authorized delegate.

(3) Closing a licensee branch location.

(4) Terminating an authorized delegate relationship.

(5) See WAC 208-690-150 for fees.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 16-14-022, § 208-690-120, filed 6/27/16, effective 8/1/16
WSR 13-24-021, § 208-690-120, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-120, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 19.230.310 and 43.320.040. WSR 04-15-005, § 208-690-120, filed 7/7/04, effective 8/7/04.

Wash. Admin. Code § 208-690-125 Records disposal.

Licensees must have written policies and procedures for the destruction of records maintained pursuant to the act, including electronic records. The destruction of records must be accomplished so that the information cannot be reconstructed or read. The destruction of consumer credit report information must also comply with the federal disposal rule at 16 C.F.R. 682.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 16-14-022, § 208-690-125, filed 6/27/16, effective 8/1/16.

Wash. Admin. Code § 208-690-130 License fees.

What are the fees I must pay to get a license? You must pay the following fees:

(1) A application fee of one thousand dollars.

(2) An additional fee of one hundred dollars for each additional location where you or an authorized delegate will provide money services, up to a maximum of five thousand dollars.

(3) The license fee in subsection (1) of this section may be partially refundable if the application is withdrawn or denied.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 16-14-022, § 208-690-130, filed 6/27/16, effective 8/1/16. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-130, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 19.230.310 and 43.320.040. WSR 04-15-005, § 208-690-130, filed 7/7/04, effective 8/7/04.

Wash. Admin. Code § 208-690-150 Transaction fee.

What fees must I pay to make changes to my license?

(1) You must pay fifty dollars to add an authorized delegate to your roster of authorized delegates. The fee for adding authorized delegates is capped at five thousand dollars per quarter.

(2) You must pay thirty dollars for the following changes to your license:

(a) Change of physical address, name or trade name (DBA or doing business as);

(b) Request for approval of a change in control;

(d) Addition of principal, executive officer, board member, or other person in control; or

(e) Change in registered agent.

(3) Transaction fees are separate, distinct from, and in addition to investigation and examination fees under WAC 208-690-170.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-150, filed 6/19/18, effective 8/1/18
WSR 13-24-021, § 208-690-150, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-150, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 19.230.310 and 43.320.040. WSR 04-15-005, § 208-690-150, filed 7/7/04, effective 8/7/04.

Wash. Admin. Code § 208-690-170 Investigation and examination fees.

What fees will I be charged if the department investigates or examines my business?

(1) The director will collect fees of seventy-five dollars per hour for investigations.

(2) The licensee, applicant or person subject to licensing under this chapter who is the subject of an examination or investigation must pay the actual expenses of required out-of-state travel including, but not limited to, travel, lodging and per diem expense.

(3) Investigation and examination fees are separate, distinct from, and in addition to transaction fees imposed by WAC 208-690-150.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 16-14-022, § 208-690-170, filed 6/27/16, effective 8/1/16. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-170, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 19.230.310 and 43.320.040. WSR 04-15-005, § 208-690-170, filed 7/7/04, effective 8/7/04.

Wash. Admin. Code § 208-690-180 Authority to conduct examinations and investigations.

(1) When may the department examine or investigate my business? See RCW 19.230.130(1).

(2) If the director determines that there is a danger that original records may be destroyed, altered, or removed to deny access, or hinder an examination or investigation, or that original documents are necessary for the preparation of a criminal referral, the director may take possession of originals of any items described in this section, regardless of the source of such items. Originals and copies taken by the director may be held, returned, or forwarded to other regulatory or law enforcement officials as determined necessary by the director.

(3) The licensee, applicant, or person subject to licensing under this chapter must pay the cost of examinations and investigations as specified in RCW 19.230.320 and WAC 208-690-170.

(4) The director may retain attorneys, accountants, or other professionals and specialists as examiners, auditors or investigators, to conduct or assist in the conduct or examinations or investigations. The cost of these services must be borne by the person who is the subject of the examination or investigation.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-180, filed 6/19/18, effective 8/1/18
WSR 16-14-022, § 208-690-180, filed 6/27/16, effective 8/1/16
WSR 13-24-021, § 208-690-180, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-180, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 19.230.310 and 43.320.040. WSR 04-15-005, § 208-690-180, filed 7/7/04, effective 8/7/04.

Wash. Admin. Code § 208-690-200 What information must receipts contain to be in compliance with RCW 19.230.330(2)?

(1) For general money transmission transactions, the receipt must include your name, physical or mailing address, and phone number in addition to the fee and exchange rate disclosure information as required by RCW 19.230.330 (2)(a). A website address may be used in lieu of a physical or mailing address for transactions conducted solely over the internet.

(2) For prepaid access transactions the receipt may include the name, address, and telephone number of the authorized delegate, provided that your contact information is provided in or on the prepaid access packaging or on the prepaid access product.

(3) For bill payment transactions, the receipt may include the name, address, and telephone number of the authorized delegate; provided your name accompanies the authorized delegate's information on the receipt.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-200, filed 6/19/18, effective 8/1/18
WSR 16-14-022, § 208-690-200, filed 6/27/16, effective 8/1/16
WSR 13-24-021, § 208-690-200, filed 11/22/13, effective 1/1/14. Statutory Authority: RCW 43.320.040, 19.230.310, 2010 c 37. WSR 10-20-123, § 208-690-200, filed 10/5/10, effective 11/5/10.

Wash. Admin. Code § 208-690-205 What disclosures must I provide to consumers?

(1) Disclosures may be provided electronically.

(2) For all transactions. You must disclose to the consumer prior to the transaction that fraudulent transactions may result in the loss of their money with no recourse.

(3) For virtual currency transactions. When applicable, you must make the following disclosures in a clear and conspicuous manner:

(a) A schedule of all fees and charges you may assess on a transaction, how the fees and charges will be calculated if not set in advance and disclosed, and the timing of the fees and charges.

(b) Whether the product or service provided is insured or guaranteed by an agency of the United States, such as the federal deposit insurance corporation or the securities investor protection corporation or by private insurance against theft or loss, including cyber theft or theft by other means.

(c) A notice that the transfer of virtual currency or digital units is irrevocable and any exception to the irrevocability of transfer.

(d) A notice describing your liability for unauthorized, mistaken, or accidental transfers and, describing the consumer's responsibility for providing notice of such mistake to you, and the general error-resolution rights applicable to any transaction.

(e) A disclosure prior to the transaction that informs the consumer that the nature of virtual currency may lead to an increased risk of fraud or cyber attack and the consumer's virtual currency value may be irretrievably stolen. See also WAC 208-690-270.

(f) The disclosures required in (a) through (e) of this subsection may be disclosed together but must be disclosed separately from any other information required.

(4) For currency exchange transactions. If the currency being sought has limited convertibility, you must provide a disclosure to the consumer indicating the limited convertibility.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-205, filed 6/19/18, effective 8/1/18.

Wash. Admin. Code § 208-690-210 In addition to the Uniform Money Services Act, what other laws do I have to comply with?

You must ensure you are in compliance with all applicable state and federal laws, rules, and regulations.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 16-14-022, § 208-690-210, filed 6/27/16, effective 8/1/16.

Wash. Admin. Code § 208-690-220 Restrictions on business name.

The director may deny a request for a proposed business name or trade name if the name is similar to a currently existing licensee name, contains the word bank or any derivative of the word bank, or is otherwise deceptive.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 16-14-022, § 208-690-220, filed 6/27/16, effective 8/1/16.

Wash. Admin. Code § 208-690-230 How do I use a name other than the company's legal name?

You may use a trade or other name under the following circumstances:

(1) You have input the proposed trade or other name into the NMLS.

(2) You have received approval from the department.

(3)(a) You have clearly and conspicuously disclosed the company's legal name and NMLS number in addition to the trade or other name;

(b) In any electronic environment, including the internet or mobile devices, the clear and conspicuous disclosure required in (a) of this subsection must be disclosed on the home or menu page and on any page on which the consumer enters or approves previously entered payment information.

(4) Your company's legal name appears on any agreements you enter into with consumers.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 16-14-022, § 208-690-230, filed 6/27/16, effective 8/1/16.

Wash. Admin. Code § 208-690-240 Information security program.

Each licensee shall establish and maintain an information security program to ensure the availability and functionality of the licensee's electronic systems and to protect those systems and any sensitive data stored on those systems from unauthorized access, use, or tampering. The program may be established and maintained by a parent or affiliate as long as the licensee has adopted the program and it is available to the department for review.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-240, filed 6/19/18, effective 8/1/18
WSR 16-14-022, § 208-690-240, filed 6/27/16, effective 8/1/16.

Wash. Admin. Code § 208-690-250 Information security program required by the federal Safeguards Rule implementing the Gramm-Leach-Bliley Act (GLBA).

(2) The information security plan must be maintained as part of your books and records.

(3) For more information access the FTC website on the Safeguards Rule at: https://www.ftc.gov/tips-advice/business-center/guidance/financial-institutions-customer-information-complying and see 16 C.F.R. 314.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-250, filed 6/19/18, effective 8/1/18
WSR 16-14-022, § 208-690-250, filed 6/27/16, effective 8/1/16.

Wash. Admin. Code § 208-690-260 Consumer financial information privacy under the Gramm-Leach-Bliley Act (GLBA) and Regulation P.

(1) You must comply with GLBA, as amended, and Regulation P. If the GLBA amendment applies to you, you may be able to provide fewer notices regarding your privacy policies.

Privacy policies describe whether and how you share consumers' nonpublic personal information, including personally identifiable financial information, with other entities.

(2) Compliance with GLBA and Regulation P, 12 C.F.R. Part 1016, will be deemed compliance with this subsection.

(3) See GLBA, as amended, and Regulation P at 12 C.F.R. Part 1016 for the required details.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 16-14-022, § 208-690-260, filed 6/27/16, effective 8/1/16.

Wash. Admin. Code § 208-690-270 Notice to consumers of data breach.

If your data is compromised, you may be subject to chapter 19.255 RCW and may have to provide notices to consumers whose information was acquired. Under certain circumstances notice of the breach may also be required by the attorney general's office.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 16-14-022, § 208-690-270, filed 6/27/16, effective 8/1/16.

Wash. Admin. Code § 208-690-280 Business resumption plan.

You must have a written plan that details the company's response and recovery to any event that results in damage to or destruction of books and records or a data breach. The plan must be maintained as part of your books and records.

History

Statutory Authority: RCW 43.320.040 and 19.230.310. WSR 18-13-108, § 208-690-280, filed 6/19/18, effective 8/1/18
WSR 16-14-022, § 208-690-280, filed 6/27/16, effective 8/1/16.

Chapter 208-700 Processing applications for grants from the mortgage lending fraud prosecution account.

Wash. Admin. Code § 208-700-010 Definitions.

The definitions in this section apply throughout the chapter unless the context clearly requires otherwise.

(1) "Department" means the department of financial institutions.

(2) "Director" means the director of the department.

(3) "Mortgage lending fraud prosecution account" or "account" means the account established under RCW 36.22.181, and 43.32.140 (chapter 289, Laws of 2003).

(4) "Mortgage lending process" means the process through which a person seeks or obtains a residential mortgage loan or residential mortgage loan modification including, but not limited to, solicitation, application, or origination; negotiation of terms; third-party provider services; underwriting; signing and closing; and funding of the loan. Documents involved in the mortgage lending process include, but are not limited to, uniform residential loan applications or other loan applications, appraisal reports, settlement statements, supporting personal documentation for loan applications such as W-2 forms, verifications of income and employment, bank statements, tax returns, payroll stubs, and any required disclosures.

(5) "Person" means a natural person, corporation, company, limited liability corporation, partnership, or association.

(6) "Prosecutorial agency" means the office of the Washington attorney general, the office of the United States Attorney, or the office of any county prosecutor in the state of Washington.

(7) "Residential mortgage loan" means any loan primarily for personal, family, or household use secured by a mortgage or deed of trust on residential real estate upon which is constructed or intended to be constructed a single family dwelling or multiple family dwelling of four or fewer units.

(8) "Third-party provider" means any person other than a mortgage broker or lender who provides goods or services in connection with the preparation of a borrower's loan and includes, but is not limited to, credit reporting agencies, title companies, appraisers, structural and pest inspectors, or escrow companies.

History

Statutory Authority: Chapter 43.320 RCW. WSR 16-08-030, § 208-700-010, filed 3/30/16, effective 4/30/16. Statutory Authority: RCW 43.320.040, 36.22.181. WSR 04-02-008, § 208-700-010, filed 12/29/03, effective 1/29/04.

Wash. Admin. Code § 208-700-020 Authorization for use of funds.

The director is authorized to disburse funds held under this chapter to cover the expenses of any prosecutorial agency for the purposes of prosecuting fraudulent activities in the mortgage lending process, whether the knowledge of such activity arises from a direct complaint or the independent investigation of the department of any law enforcement agency. Such prosecution expenses may include, but are not limited to:

(1) Training.

(2) Investigation.

(3) Discovery.

(4) Trial preparation and trial.

(5) Witness expenses.

(6) Sentencing.

(7) Appeal.

History

Statutory Authority: RCW 43.320.040, 36.22.181. WSR 04-02-008, § 208-700-020, filed 12/29/03, effective 1/29/04.

Wash. Admin. Code § 208-700-030 Application and approval for disbursement of funds.

(1) At the director's discretion, the department may establish any of the following means for application, approval and disbursement of funds:

a. A written agreement or memorandum of understanding with a prosecutorial agency covering expenses for a set period of time or the expenses for a particular prosecution. Each agreement or memorandum of understanding shall identify the effective period, the expenses to be covered, the dollar limit, the manner and form of billing expenses and the process for disbursement of the funds, and shall be signed by an authorized representative of the prosecutorial agency, and the director or the director's designee.

b. A written application submitted to the department for payment of prosecution expenses. Such written application shall be in a form acceptable to the director and shall include at a minimum the following information:

i. The prosecutorial agency applicant name, address and contact information.

ii. The case name and description including the details of persons and crimes under consideration.

iii. The court and county where the charges are or may be filed.

iv. The expenses or range of expenses to be reimbursed.

c. An invoice and voucher submitted after the prosecutorial expenses have been incurred, which shall include all the information required under "b," above.

(2) The department will approve or deny the application in a written letter. The letter of approval shall contain the terms of payment including the maximum amount to be reimbursed, the billing process to be followed by the prosecutorial agency, reporting requirements to the department and the procedures by which the department shall disburse the funds.

(3) A completed invoice or voucher in a form acceptable to the director shall be submitted for all prosecution expenses for which payment or reimbursement from the account is sought.

History

Statutory Authority: RCW 43.320.040, 36.22.181. WSR 04-02-008, § 208-700-030, filed 12/29/03, effective 1/29/04.

Wash. Admin. Code § 208-700-040 Disbursement limitation.

The director is not required to disburse any funds unless the mortgage lending fraud prosecution account contains sufficient funds to cover planned disbursements under an agreement, memorandum of understanding or approved application. At no time shall the director or the department be required to make disbursements from the department's own operating funds.

History

Statutory Authority: RCW 43.320.040, 36.22.181. WSR 04-02-008, § 208-700-040, filed 12/29/03, effective 1/29/04.

Chapter 208-705 Processing applications for grants from the securities prosecution fund.

Wash. Admin. Code § 208-705-010 Securities prosecution fund.

(1) Pursuant to RCW 43.320.115, the department of financial institutions maintains a securities prosecution fund. Moneys from the securities prosecution fund may be available for payment of costs, expenses and charges incurred in the preparation, initiation and prosecution of criminal charges arising under the Securities Act, the Commodities Transaction Act, the Franchise Investment Protection Act, and the Business Opportunity Fraud Act. The attorney general or prosecuting attorney may apply to the director of the department of financial institutions for expenditures from the securities prosecution fund.

(2) Application process.

(a) An applicant shall complete an application form provided by the securities division of the department of financial institutions.

(b) If the director or his or her designee approves the application, the applicant may be required to complete and submit additional forms and information. If an application is denied, an applicant may submit a request for reconsideration, but the director or his or her designee's subsequent decision is final.

(c) The attorney general or prosecuting attorney requesting fund expenditures related to a criminal investigation or prosecution must maintain books, records, documents, and other evidence that sufficiently and accurately reflect those expenditures.

(d) At the closing of each case for which fund expenditures have been approved, the attorney general or prosecuting attorney must submit a closing report to the department of financial institutions. The closing report shall provide an accounting for fund expenditures, summarize the outcome of the case, and certify that all funds have been used for the purpose requested. The closing report shall be submitted within one hundred twenty days of the applicant's fiscal year end. If a closing report is not filed, or if the closing report indicates that funds were not used for the purpose requested, the attorney general or prosecuting attorney is required to repay the funds received from the securities prosecution fund.

History

Statutory Authority: RCW 43.320.115. WSR 08-16-023, § 208-705-010, filed 7/28/08, effective 8/28/08.

Chapter 208-710 Washington small business retirement marketplace.

Wash. Admin. Code § 208-710-010 Application of rules.

The rules in this chapter implement the provisions of the Washington small business retirement marketplace, RCW 43.330.730 through 43.330.750, and 43.320.180, as they relate to the department of financial institutions.

The legislature created the Washington small business retirement marketplace in order to address the retirement savings access gap in Washington. The purpose of the Washington small business retirement marketplace is to educate small employers on retirement plan availability and promote qualified, low-cost, low-burden retirement savings vehicles and myRa accounts without mandating participation by either employers or employees.

The Washington department of commerce is responsible for the operation of the Washington small business retirement marketplace. The department of commerce will approve retirement plans for inclusion on the Washington small business retirement marketplace provided that the Washington department of financial institutions has verified that the retirement plan and the financial services firm offering it meet the requirements set forth in RCW 43.330.732(7) and 43.330.735.

Financial services firms seeking verification for their retirement plans from the department of financial institutions for the purpose of inclusion on the Washington small business retirement marketplace must follow the application procedures set forth in this chapter.

History

Statutory Authority: RCW 43.330.732, 43.330.735, 43.330.750, and 43.320.180. WSR 17-21-082, § 208-710-010, filed 10/16/17, effective 11/16/17
WSR 16-13-016, § 208-710-010, filed 6/3/16, effective 7/4/16.

Wash. Admin. Code § 208-710-020 Eligibility to apply for verification with the department of financial institutions.

Financial services firms that are regulated by the department of financial institutions or by a federal agency with authority over banking, securities, or broker-dealer firms, and that meet all federal laws and regulations to offer retirement plans, are eligible to apply to the department of financial institutions for verification that their retirement plans meet the requirements set forth in RCW 43.330.732(7) and 43.330.735 for inclusion on the Washington small business retirement marketplace.

History

Statutory Authority: RCW 430.330.732 [43.330.732], 43.330.735, 43.330.750, and 43.320.180. WSR 16-13-016, § 208-710-020, filed 6/3/16, effective 7/4/16.

Wash. Admin. Code § 208-710-030 Verification process.

(1) Financial services firms that are eligible under WAC 208-710-020 to apply for verification from the department of financial institutions may do so by submitting an application for verification as described in WAC 208-710-040, 208-710-060, or 208-710-070.

(2) The department of financial institutions will review and process initial, renewal, and amendment applications for verification. The department of financial institutions will issue a verification letter for retirement plans that meet the requirements set forth in RCW 43.330.732(7) and 43.330.735. The verification letter will be effective for one year for initial and renewal applications. For amendment applications, the verification letter will be effective for the remainder of the current one-year verification period.

(3) Pursuant to RCW 43.330.735(11), a financial services firm may charge retirement plan enrollees a de minimis fee for new and/or low balance accounts in excess of one hundred basis points in total annual fees only if the department of commerce and the financial services firm negotiate and agree upon the amount of the de minimis fee prior to the issuance of the verification letter.

(4) A financial services firm may withdraw its application for verification at any time by submitting a written request to withdraw to the department of financial institutions.

History

Statutory Authority: RCW 43.330.732, 43.330.735, 43.330.750, and 43.320.180. WSR 17-21-082, § 208-710-030, filed 10/16/17, effective 11/16/17
WSR 16-13-016, § 208-710-030, filed 6/3/16, effective 7/4/16.

Wash. Admin. Code § 208-710-040 Initial application requirements.

Financial service firms that seek verification of retirement plans from the department of financial institutions for inclusion on the Washington small business retirement marketplace must submit a separate application for each retirement plan for which verification is sought. The following initial application materials must be submitted to the department of financial institutions:

(1) A completed application for verification form marked "initial";

(2) A copy of the retirement plan agreement;

(3) A copy of the materials routinely used to market the retirement plan to eligible employers;

(4) Any additional documents necessary to identify the funds and other investment products to be offered under the plan, specify the plan's fees and roll-over options, and disclose historical investment performance for the investment products in the plan;

(5) The prospectus for each balanced fund and target date fund or other similar fund offered under the retirement plan; and

(6) A summary of the retirement plan's investment options, fees, and other features. The summary should include, but not necessarily be limited to, the following:

(a) The type of retirement plan (e.g., SIMPLE IRA);

(b) The investment options available in the retirement plan;

(c) The fee structure applicable to the different investment options in the retirement plan (including fees payable to the financial services firm offering the retirement plan and any other service providers);

(d) The identity of the custodian of enrollee accounts;

(e) The rollover options for enrollees in the retirement plan;

(f) Whether the financial services firm offering the retirement plan will recommend investments to enrollees, and if so, how the firm will communicate to enrollees the option to select investments other than the recommended investments;

(g) A list of documents an employer must complete to establish the retirement plan and its business relationship with the financial services firm offering the plan;

(h) A list of the documents enrollees must complete to establish their retirement account and their relationship with the financial services firm offering the plan; and

(i) Disclosure of any other fees associated with the retirement plan.

History

Statutory Authority: RCW 43.330.732, 43.330.735, 43.330.750, and 43.320.180. WSR 17-21-082, § 208-710-040, filed 10/16/17, effective 11/16/17
WSR 16-13-016, § 208-710-040, filed 6/3/16, effective 7/4/16.

Wash. Admin. Code § 208-710-050 Application review criteria.

The department of financial institutions will review applications for verification to ensure that retirement plans meet the following criteria established by RCW 43.330.732(7) and 43.330.735:

(1) The financial services firm offering the retirement plan must be licensed or hold a certificate of authority and be in good standing with the department of financial institutions, or be regulated by a federal agency with authority over banking, securities, or broker-dealer firms, and meet all federal laws and regulations to offer retirement plans;

(2) The retirement plan must offer a minimum of two product options:

(a) A target date or other similar fund, with asset allocations and maturities designed to coincide with the expected date of retirement; and

(b) A balanced fund.

(3) The retirement plan must include the option for enrollees to roll pretax contributions into a different individual retirement account or another eligible retirement plan after the enrollees cease participation in the retirement plan offered on the Washington small business retirement marketplace;

(4) The financial services firm offering the retirement plan may not charge the participating employer an administrative fee and may not charge enrollees more than one hundred basis points in total annual fees, except that financial services firms may charge retirement plan enrollees a de minimis fee for new and/or low balance accounts in amounts negotiated and agreed upon by the department of commerce and the financial services firm;

(5) The financial services firm offering the retirement plan must provide information about the product's historical investment performance; and

(6) Participation in a retirement plan offered on the Washington small business retirement marketplace must be voluntary for both eligible employers and qualified employees.

History

Statutory Authority: RCW 43.330.732, 43.330.735, 43.330.750, and 43.320.180. WSR 17-21-082, § 208-710-050, filed 10/16/17, effective 11/16/17
WSR 16-13-016, § 208-710-050, filed 6/3/16, effective 7/4/16.

Wash. Admin. Code § 208-710-060 Annual renewal application procedure.

(1) To apply to renew the verification of a retirement plan for inclusion on the Washington small business retirement marketplace for a subsequent one-year period, the financial services firm offering the plan must submit the following to the department of financial institutions at least thirty days prior to the expiration of the current verification letter:

(a) A completed application for verification form marked "renewal";

(b) The most recently updated versions of the retirement plan, marketing materials, prospectuses, and other plan documents required by WAC 208-710-040 (2) through (6); and

(c) A report indicating the number of eligible employers in Washington who established retirement plans under the financial service provider's approved plan in the last year. The report must include the total number of new retirement accounts opened in Washington by qualified employees as a result of the adoption of the approved plan by eligible employers in Washington.

(2) If the financial services firm previously negotiated a de minimis fee with respect to new and/or low balance accounts pursuant to RCW 43.330.735(11), the department of commerce and the financial services firm must negotiate and agree upon any changes to such fee prior to the submission of a renewal application.

(3) If the retirement plan meets the requirements set forth in RCW 43.330.732(7), 43.330.735, and WAC 208-710-050 for inclusion on the Washington small business retirement marketplace, the department of financial institutions will issue a renewal of the verification letter for the retirement plan. An application for verification will not be considered renewed until the department of financial institutions issues a new verification letter.

(4) If the retirement plan no longer meets the requirements for inclusion on the Washington small business retirement marketplace, or the application is otherwise deficient, the department of financial institutions will issue a deficiency letter rather than renew the verification letter.

History

Statutory Authority: RCW 43.330.732, 43.330.735, 43.330.750, and 43.320.180. WSR 17-21-082, § 208-710-060, filed 10/16/17, effective 11/16/17
WSR 16-13-016, § 208-710-060, filed 6/3/16, effective 7/4/16.

Wash. Admin. Code § 208-710-070 Amendment review procedure.

(1) During the time period in which a retirement plan's verification letter is effective, the financial services firm offering the plan must amend its application for verification if material amendments to the retirement plan or its underlying investment options are proposed.

(2) To amend an application for verification, the financial services firm must submit the following to the department of financial institutions at least thirty days prior to the proposed amendment of the plan:

(a) A completed application for verification marked "amendment"; and

(b) The most recent versions of the retirement plan, marketing materials, prospectuses, and other plan documents required by WAC 208-710-040 (2) through (6).

(3) If the financial services firm previously negotiated a de minimis fee with respect to new and/or low balance accounts pursuant to RCW 43.330.735(11), the department of commerce and the financial services firm must negotiate and agree upon any changes to such fee prior to the submission of an amended application.

(4) If the amended retirement plan meets the requirements set forth in RCW 43.330.732(7), 43.330.735, and WAC 208-710-050 for inclusion on the Washington small business retirement marketplace, the department of financial institutions will issue a verification letter for the amended retirement plan.

History

Statutory Authority: RCW 43.330.732, 43.330.735, 43.330.750, and 43.320.180. WSR 17-21-082, § 208-710-070, filed 10/16/17, effective 11/16/17
WSR 16-13-016, § 208-710-070, filed 6/3/16, effective 7/4/16.