Sec. 36a-498e. Prohibited acts.
Sec. 36a-555. (Formerly Sec. 36-225). Definitions.
Sec. 36a-557. (Formerly Sec. 36-227). Exemptions.
Sec. 36a-560. (Formerly Sec. 36-230). Restrictions on licensee.
Sec. 36a-596. (Formerly Sec. 36-531). Definitions.
Sec. 36a-609. (Formerly Sec. 36-545). Exemptions.
Sec. 36a-486. (Formerly Sec. 36-440a). Licenses required. Exemptions. Prohibited advertisements. Violations. Temporary authority to act as mortgage loan originator. (a) No person shall engage in the business of making residential mortgage loans or act as a mortgage broker in this state unless such person has first obtained a license for its main office and for each branch office where such business is conducted in accordance with the provisions of sections 36a-485 to 36a-498e, inclusive, 36a-534a and 36a-534b. Any activity subject to licensure pursuant to sections 36a-485 to 36a-498e, inclusive, 36a-534a or 36a-534b shall be conducted from an office located in a state, as defined in section 36a-2. Any such person who is an individual shall also obtain a mortgage loan originator license prior to conducting such business unless such individual does not engage directly in the activities of a mortgage loan originator or conducts such business pursuant to the temporary authority provided in subsection (e) of this section. A person, other than a licensed mortgage loan originator acting on behalf of a mortgage lender or mortgage correspondent lender, shall be deemed to be engaged in the business of making residential mortgage loans if such person advertises, causes to be advertised, solicits or offers to make residential mortgage loans, either directly or indirectly. A person, other than a licensed mortgage loan originator acting on behalf of a mortgage broker, shall be deemed to be acting as a mortgage broker if such person advertises or causes to be advertised that such person will negotiate, solicit, place or find a residential mortgage loan, either directly or indirectly. A mortgage correspondent lender shall not be deemed to be acting as a mortgage lender if such mortgage correspondent lender makes a loan utilizing its own funds in a situation where another person does not honor such person's commitment to fund the loan. A licensed lead generator shall not be deemed to be acting as a mortgage lender, mortgage correspondent lender, mortgage broker or mortgage loan originator when engaged in the activities of a lead generator, as described in section 36a-485 if such person does not: (1) Obtain compensation or gain contingent upon the consummation of a residential mortgage loan or the receipt of a residential mortgage loan application, or (2) utilize financial criteria particular to the consumer or the residential mortgage loan transaction to selectively place a lead or to steer a consumer to a specific person for a residential mortgage loan.
(b) (1) No person licensed as a mortgage lender, mortgage correspondent lender or mortgage broker shall engage the services of a mortgage loan originator or of a loan processor or underwriter required to be licensed under this section unless such mortgage loan originator or loan processor or underwriter is licensed under section 36a-489 or acting pursuant to the temporary authority provided in subsection (e) of this section. No person licensed as a mortgage lender, mortgage correspondent lender, mortgage broker or mortgage loan originator shall engage the services of a lead generator unless such lead generator is licensed under section 36a-489 or exempt from licensure pursuant to subdivision (5) of this subsection. An individual, unless specifically exempted under subdivision (2) of this subsection or acting pursuant to the temporary authority provided in subsection (e) of this section, shall not engage in the business of a mortgage loan originator on behalf of a licensee or a person exempt under section 36a-487 with respect to any residential mortgage loan without first obtaining and maintaining annually a license as a mortgage loan originator under section 36a-489. An individual, unless specifically exempted under subdivision (2) of this subsection, shall be deemed to be engaged in the business of a mortgage loan originator if such individual: (A) Acts as a mortgage loan originator in connection with any residential mortgage loan on behalf of a licensee or person exempt under section 36a-487; or (B) makes any representation to the public through advertising or other means of communication that such individual can or will act as a mortgage loan originator on behalf of a licensee or person exempt under section 36a-487. Each licensed mortgage loan originator and each licensed loan processor or underwriter shall register with and maintain a valid unique identifier issued by the system. No individual may act as a mortgage loan originator for more than one person at the same time. No loan processor or underwriter licensee may be sponsored by more than one person at a time. The license of a mortgage loan originator or a loan processor or underwriter is not effective during any period when such mortgage loan originator or a loan processor or underwriter is not sponsored by a licensed mortgage lender, mortgage correspondent lender or mortgage broker, or by a person registered as an exempt registrant under subsection (d) of section 36a-487, or during any period in which the license of the mortgage lender, mortgage correspondent lender or mortgage broker with whom such originator or loan processor or underwriter is associated has been suspended. Either the mortgage loan originator, the loan processor or underwriter or the sponsor may file a notification of the termination of sponsorship with the system.
(2) The following are exempt from this section: (A) A registered mortgage loan originator or an employee of an institution or subsidiary described in section 36a-485, who is not required to be registered under Section 1507 of the S.A.F.E. Mortgage Licensing Act of 2008, 12 USC Section 5101 et seq., when acting for such institution or subsidiary; (B) an individual who offers or negotiates the terms of a residential mortgage loan with or on behalf of an immediate family member of such individual; (C) an individual who offers or negotiates the terms of a residential mortgage loan secured by a dwelling that served as the individual's residence, unless the context demonstrates that such individual engaged in such activities with a degree of habitualness or repetition; (D) a Connecticut 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 mortgage lender, mortgage correspondent lender, mortgage broker or other mortgage loan originator or by any agent of such mortgage lender, mortgage correspondent lender, mortgage broker or other mortgage loan originator; (E) an individual who takes a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan as an employee of a federal, state or local government agency or housing finance agency exempt from licensure pursuant to section 36a-487, and who does so only pursuant to such individual's official duties as an employee of such agency; (F) an individual who takes a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan as an employee of an organization that has obtained bona fide nonprofit status from the commissioner and is exempt from licensure pursuant to section 36a-487, and who does so only pursuant to such individual's official duties as an employee of such organization; and (G) an individual who offers or negotiates the terms of a residential mortgage loan secured by a dwelling that is not the individual's residence but is owned by such individual, unless the context demonstrates that such individual engaged in such activities with a degree of habitualness or repetition.
(3) No individual shall engage in the activities of a loan processor or underwriter unless such individual obtains and maintains a license as a loan processor or underwriter under section 36a-489. The following individuals are exempt from the foregoing license requirement:
(A) An employee of a licensed mortgage lender, mortgage correspondent lender or mortgage broker who engages in loan processor or underwriter activities (i) in connection with residential mortgage loans either originated or made by such licensee, and (ii) at the direction of and subject to the supervision of a licensed mortgage loan originator of such licensee;
(B) An employee of a person exempt from licensure under subdivision (1), (2) or (3) of subsection (a) of section 36a-487 who engages in loan processor or underwriter activities at the direction of and subject to the supervision of either a licensed mortgage loan originator or a registered mortgage loan originator of such exempt person; or
(C) Any individual engaged, in any capacity, in loan processor or underwriter activities in connection with a residential mortgage loan originated by an individual not required to be licensed or registered as a mortgage loan originator under this part.
(4) An individual engaging solely in loan processor or underwriter activities shall not represent to the public, through advertising or other means of communicating or providing information, including the use of business cards, stationery, brochures, signs, rate lists or other promotional items, that such individual can or will perform any of the activities of a mortgage loan originator.
(5) On and after January 1, 2018, no person shall, directly or indirectly, act as a lead generator without first obtaining a license under section 36a-489, unless such person is exempt from licensure. The following persons shall be exempt from licensure as a lead generator:
(A) Any bank, out-of-state bank, Connecticut credit union, federal credit union or out-of-state credit union, provided such bank or credit union is federally insured;
(B) Any wholly owned subsidiary of any such bank or credit union;
(C) Any operating subsidiary where each owner of such operating subsidiary is wholly owned by the same such bank or credit union;
(D) Any person licensed as a mortgage lender, mortgage correspondent lender or mortgage broker in this state, provided such exemption shall not be effective during any period in which the license of such person is suspended;
(E) A consumer reporting agency, as defined in Section 603 (f) of the Fair Credit Reporting Act, 15 USC 1681a, as amended from time to time;
(F) An employee of a person licensed as a lead generator or exempt from licensure as a lead generator, while engaged in lead generator activities on behalf of such person; and
(G) An individual employed by an affiliate of a bank or credit union exempt from licensure pursuant to subparagraph (A) of this subdivision, who is registered or licensed with a state or federal regulator to engage in securities brokerage, investment advisory or insurance sales activities and who, incidental to the performance of such regulated activities, performs lead generation activities by referring one or more leads to such bank or credit union. For purposes of this subparagraph, “affiliate” means an entity that is controlled by or is under common control with the bank or credit union, such that the bank or credit union (i) directly or indirectly acting through one or more other persons owns, controls or has the power to vote more than fifty per cent of any class of voting securities of the affiliate, (ii) controls in any manner the election of a majority of directors or trustees of the affiliate, or (iii) directly or indirectly exercises a controlling influence over the management or policies of the affiliate.
(c) If the United States Department of Housing and Urban Development, the Bureau of Consumer Financial Protection or a court of competent jurisdiction determines that the S.A.F.E. Mortgage Licensing Act of 2008, 12 USC Section 5101 et seq., requires an individual described in subparagraph (B) (iv) of subdivision (20) of section 36a-485 to be licensed as a mortgage loan originator under state laws implementing said S.A.F.E. Mortgage Licensing Act, such individual may continue to act in such individual's current capacity, provided such individual files an application for a mortgage loan originator license not later than the date sixty days from the date of such determination by the United States Department of Housing and Urban Development, the Bureau of Consumer Financial Protection or a court of competent jurisdiction.
(d) Each residential mortgage loan taken, offered, negotiated, solicited, arranged, placed, found, made, processed or underwritten without a license shall constitute a separate violation for purposes of section 36a-50.
(e) (1) An individual who is employed by a person licensed as a mortgage lender, mortgage correspondent lender or mortgage broker in this state shall have temporary authority to act as a mortgage loan originator in this state for the period of time described in subdivision (3) of this subsection, provided the individual (A) has not had (i) an application for a loan originator license denied in any governmental jurisdiction, or (ii) a loan originator license revoked or suspended in any governmental jurisdiction; (B) has not been subject to, or served with, a cease and desist order in any governmental jurisdiction or by the Bureau of Consumer Financial Protection pursuant to 12 USC 5113(c); (C) has not been convicted of a misdemeanor or felony that would preclude licensure in this state under subdivision (1) of subsection (b) of section 36a-489; (D) has submitted an application for licensure as a mortgage loan originator in this state pursuant to subsection (c) of section 36a-488; and (E) was registered in the system as a registered loan originator, as defined in 12 USC 5102, during the one-year period immediately preceding the date on which the individual submits in connection with such application for licensure in this state the individual's personal history and experience, including authorization to obtain an independent credit report, criminal background check and information relating to administrative, civil or criminal findings by any governmental jurisdiction.
(2) An out-of-state mortgage loan originator employed by a person licensed as a mortgage lender, mortgage correspondent lender or mortgage broker in this state shall have temporary authority to act as a mortgage loan originator in this state for the period described in subdivision (3) of this subsection, provided the individual (A) meets the requirements of subparagraphs (A) to (D), inclusive, of subdivision (1) of this subsection; and (B) was an out-of-state mortgage loan originator during the thirty-day period immediately preceding the date on which the individual submits in connection with the application for licensure as a mortgage loan originator in this state the individual's personal history and experience, including authorization to obtain an independent credit report, criminal background check and information relating to administrative, civil or criminal findings by any governmental jurisdiction.
(3) The period of temporary authority described in subdivisions (1) and (2) of this subsection shall commence on the date the registered loan originator or out-of-state mortgage loan originator submits the information required by subsection (c) of section 36a-488 and shall end on the earliest of (A) the date the individual withdraws the application to be a licensed mortgage loan originator in this state; (B) the date the commissioner denies the application; (C) the date the commissioner issues the mortgage loan originator license; or (D) one hundred twenty days after the date the individual submits the application, provided such application is identified as incomplete on the system.
(4) Any person employing an individual who has temporary authority to act as a mortgage loan originator in this state pursuant to this subsection shall be subject to the laws of this state to the same extent as if the employed individual is licensed as a mortgage loan originator in this state. Any individual who has temporary authority to act as a mortgage loan originator in this state pursuant to this subsection and who engages in residential mortgage loan origination activities shall be subject to the laws of this state to the same extent as if the individual is licensed as a mortgage loan originator in this state.
(P.A. 85-399, S. 2; P.A. 89-347, S. 10; P.A. 93-32; P.A. 94-122, S. 230, 340; P.A. 96-71, S. 1, 8; 96-109, S. 10; 96-180, S. 117, 166; P.A. 02-111, S. 3; P.A. 04-69, S. 2; P.A. 07-156, S. 5; P.A. 08-176, S. 31, 40; P.A. 09-208, S. 2; 09-209, S. 5; P.A. 11-110, S. 4; 11-216, S. 10; P.A. 12-96, S. 8; P.A. 14-7, S. 11; 14-89, S. 34, 48; P.A. 15-14, S. 7; P.A. 17-38, S. 2; P.A. 18-173, S. 8; P.A. 21-138, S. 6; P.A. 23-126, S. 9.)
History: P.A. 89-347 added requirements re mortgage brokers; P.A. 93-32 made previous provision Subsec. (a) and added new Subsec. (b) imposing civil penalty for those who do not obtain the license required; P.A. 94-122 made technical changes, effective January 1, 1995; Sec. 36-440a transferred to Sec. 36a-486 in 1995; P.A. 96-71, 96-109 and 96-180 all amended Subsec. (a) to delete “loan” before “mortgage loan business in this state”, effective July 1, 1996; P.A. 02-111 amended Subsec. (a) by rewriting provisions applicable to lenders and brokers and adding provisions re first mortgage correspondent lenders, added new Subsec. (b) re registration of originators, and redesignated existing Subsec. (b) as Subsec. (c), adding “or registration” therein; P.A. 04-69 amended Subsecs. (a) and (b) to substitute “36a-498a” for “36a-498”; P.A. 07-156 amended Subsecs. (b) and (c) to replace registration requirement for originators with licensing requirement and to make conforming changes, effective September 30, 2008; P.A. 08-176 changed effective date of P.A. 07-156, S. 5, from September 30, 2008, to July 1, 2008, amended Subsec. (a) to add reference to main office and each branch office, to provide that a person, other than a mortgage loan originator, “shall be deemed to be engaged in the business of making mortgage loans if such person advertises, causes to be advertised, solicits, offers to make or makes mortgage loans, either directly or indirectly”, and to make conforming changes, amended Subsec. (b) to add mortgage correspondent lender, to change notification provision from “shall promptly notify the commissioner, in writing” to “may file” with Nationwide Mortgage Licensing System and to make conforming changes, and amended Subsec. (c) to add “arranged” and to make a conforming change, effective July 1, 2008; P.A. 09-208 amended Subsec. (b) by providing that license of mortgage loan originator is not effective during any period in which license of lender, correspondent lender or broker with whom originator is associated has been suspended, effective July 7, 2009; P.A. 09-209 amended Subsec. (a) to apply to persons engaged in business of making residential mortgage loans and by requiring certain individuals to obtain a mortgage loan originator license, adding provision re when a person is considered to be acting as a mortgage broker, making technical changes and inserting reference to other licensing provisions, amended Subsec. (b) by designating existing provisions as Subdiv. (1) and amending same by requiring individuals engaged in business of mortgage loan originator with respect to a dwelling to obtain and maintain a license, and by adding Subdiv. (2) re exemptions, Subdiv. (3) re loan processors or underwriters who are independent contractors and Subdiv. (4) re advertising, added new Subsec. (c) re determinations made by U.S. Department of Housing and Urban Development or court, redesignated existing Subsec. (c) as Subsec. (d) and amended same by adding “residential” re mortgage loan, effective July 31, 2009; P.A. 11-110 amended Subsec. (c) to add references to Bureau of Consumer Financial Protection, effective July 21, 2011; P.A. 11-216 amended Subsec. (b)(1) and (b)(3) to add references to loan processors or underwriters, to prohibit the engagement in business without a license of a mortgage loan originator “on behalf of a licensee or a person exempt under section 36a-487 with respect to any residential mortgage loan”, to permit alternative sponsorship “by a person registered as an exempt registrant under subsection (c) of section 36a-487”, to prohibit a loan processor or underwriter who is employed by any person other than a licensed mortgage lender, mortgage correspondent lender or mortgage broker or any person exempt from licensure under Sec. 36a-487(a)(1) from engaging in activities of a loan processor or underwriter without a license, to eliminate requirement of maintaining valid unique identifier issued by the system, and to make conforming and technical changes; P.A. 12-96 amended Subsec. (b) to add provisions re when individual shall be deemed engaged in the business of a mortgage loan originator and re loan processor or underwriter licensee not to be sponsored by more than one person at a time in Subdiv. (1), to add provision in Subpara. (C) re context demonstrating individual is engaged in activities with a degree of habitualness or repetition and add new Subparas. (E), (F) and (G) re residential mortgage loans in Subdiv. (2), and to replace former Subdiv. (3) with new Subdiv. (3) re loan processor or underwriter activities, amended Subsec. (d) to add “taken, offered” and “processed or underwritten”, and made technical changes; P.A. 14-7 amended Subsec. (b)(1) to replace reference to Sec. 36a-487(c) with reference to Sec. 36a-487(d), effective May 8, 2014; P.A. 14-89 amended Subsec. (b) to replace “licensed attorney” with “Connecticut licensed attorney” in Subdiv. (2)(D) and add reference to Sec. 36a-487(a)(2) or (3) in Subdiv. (3)(B); P.A. 15-14 made a technical change in Subsec. (b)(3)(C); P.A. 17-38 amended Subsec. (a) by deleting reference to April 1, 2010, adding provision re licensed lead generator not deemed to be acting as mortgage lender, mortgage correspondent lender, mortgage broker or mortgage loan originator, amended Subsec. (b) by replacing reference to Sec. 36a-485(23) with reference to Sec. 36a-485(25) in Subdiv. (2)(A), and adding Subdiv. (5) re lead generator licensure and exemptions, amended Subsec. (c) by replacing reference to Sec. 36a-485(18) with reference to Sec. 36a-485(20), and made a technical change; P.A. 18-173 amended Subsec. (a) by replacing reference to Sec. 36a-498f with reference to Sec. 36a-498e and adding provision re activity subject to licensure to be conducted from office located in the state; P.A. 21-138 amended Subsec. (a) by adding provision re conducting business pursuant to temporary authority provided in subsection (e), amended Subsec. (b)(1) by adding provisions re acting pursuant to temporary authority provided in subsection (e), amended Subsec. (b)(2) by deleting “subdivision (25) of”, amended Subsec. (b)(3) by adding Subpara. (G) re incidental performance of lead generation activities and by making a technical change, and added Subsec.(e) re temporary authority to act as mortgage loan originator; P.A. 23-126 amended Subsec. (b)(1) by adding provision prohibiting certain persons from engaging the services of a lead generator unless such lead generator is licensed or exempt from licensure.
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Sec. 36a-492. (Formerly Sec. 36-440g). Surety bond required. Cancellation of bond. Automatic suspension of license. Notices. (a)(1) Each licensed mortgage lender, mortgage correspondent lender and mortgage broker shall file with the commissioner a single surety bond, written by a surety authorized to write such bonds in this state, covering its main office and any branch office, in a penal sum determined in accordance with subsection (d) of this section, provided the penal sum of the bond for licensed mortgage lenders and mortgage correspondent lenders shall be not less than one hundred thousand dollars and the penal sum of the bond for mortgage brokers shall be not less than fifty thousand dollars. The bond shall cover all mortgage loan originators sponsored by such licensee.
(2) Each mortgage loan originator licensee shall be covered by a surety bond with a penal sum in an amount that reflects the dollar amount of loans originated by such mortgage loan originator in accordance with subsection (d) of this section, provided such coverage shall be provided through a single surety bond filed with the commissioner by the person who sponsors such mortgage loan originator.
(3) (A) In the case of an exempt registrant under subdivision (1), (2) or (3) of subsection (a) of section 36a-487: (i) The surety bond shall cover all mortgage loan originators sponsored by such exempt registrant and comply with the requirements set forth in this section, and (ii) the penal sum of such bond shall be in an amount determined in accordance with subsection (d) of this section, provided the penal sum of the bond shall be not less than one hundred thousand dollars; (B) in the case of an exempt registrant under subsection (b) of section 36a-487: (i) The surety bond shall cover all mortgage loan originators sponsored by such exempt registrant and comply with the requirements set forth in this section, and (ii) the penal sum of the bond shall be in an amount determined in accordance with subsection (d) of this section, provided the penal sum shall be not less than fifty thousand dollars; and (C) in the case of a person exempt from licensure as a mortgage lender, mortgage correspondent lender or mortgage broker under subdivision (4) of subsection (a) of section 36a-487, the surety bond shall cover all mortgage loan originators sponsored by such person and comply with the requirements set forth in section 36a-671d.
(4) The principal on a bond required by this section shall file quarterly reports on the system reflecting residential mortgage loan volume in accordance with subsection (c) of section 36a-534b to confirm that it maintains the required penal sum in an amount required by subsection (d) of this section. The principal shall file such information as the commissioner may require under subsection (d) of this section and shall file, as the commissioner may require, pursuant to subsection (d) of this section, any bond rider or endorsement to the surety bond on file with the commissioner to reflect any changes necessary to maintain the surety bond coverage required by this section.
(5) The commissioner may adopt regulations in accordance with chapter 54 with respect to the requirements for such surety bonds.
(b) Except for the bond required by subparagraph (C) of subdivision (3) of subsection (a) of this section, the bond required by subsection (a) of this section shall be (1) in a form approved by the Attorney General, and (2) conditioned upon the mortgage lender, mortgage correspondent lender or mortgage broker licensee and any mortgage loan originator licensee sponsored by such mortgage lender, mortgage correspondent lender or mortgage broker or, in the case of a mortgage loan originator licensee sponsored by an exempt registrant, upon such mortgage loan originator licensee faithfully performing any and all written agreements or commitments with or for the benefit of borrowers and prospective borrowers, truly and faithfully accounting for all funds received from a borrower or prospective borrower by the licensee in the licensee's capacity as a mortgage lender, mortgage correspondent lender, mortgage broker or mortgage loan originator, and conducting such mortgage business consistent with the provisions of sections 36a-485 to 36a-498e, inclusive, 36a-534a and 36a-534b. Any borrower or prospective borrower who may be damaged by failure to perform any written agreements or commitments, or by the wrongful conversion of funds paid by a borrower or prospective borrower to a licensee, may proceed on such bond against the principal or surety thereon, or both, to recover damages. Any borrower or prospective borrower who may be damaged by a mortgage lender, mortgage correspondent lender, mortgage broker or mortgage loan originator licensee's failure to satisfy a judgment against the licensee arising from the making or brokering of a nonprime home loan, as defined in section 36a-760, may proceed on such bond against the principal or surety thereon, or both, to recover the amount of the judgment. The commissioner may proceed on such bond against the principal or surety thereon, or both, to collect any civil penalty imposed upon a licensee pursuant to subsection (a) of section 36a-50 and any unpaid costs of examination of a licensee as determined pursuant to section 36a-65 and, on and after April 1, 2019, any restitution imposed pursuant to subsection (c) of section 36a-50. The proceeds of the bond, even if commingled with other assets of the principal, shall be deemed by operation of law to be held in trust for the benefit of such claimants against the principal in the event of bankruptcy of the principal and shall be immune from attachment by creditors and judgment creditors. The bond shall run concurrently with the period of the license for the main office and the aggregate liability under the bond shall not exceed the penal sum of the bond. The principal shall notify the commissioner of the commencement of an action on the bond. When an action is commenced on a principal's bond, the commissioner may require the filing of a new bond and immediately on recovery on any action on the bond, the principal shall file a new bond.
(c) The surety company shall have the right to cancel the bond at any time by a written notice to the principal stating the date cancellation shall take effect, provided the surety company notifies the commissioner in writing not less than thirty days prior to the effective date of cancellation. If the bond is issued electronically on the system, written notice of cancellation may be provided by the surety company to the principal and the commissioner through the system at least thirty days prior to the date of cancellation. Any notice of cancellation not provided through the system shall be sent by certified mail to the principal and the commissioner at least thirty days prior to the date of cancellation. A surety bond shall not be cancelled unless the surety company notifies the commissioner in writing not less than thirty days prior to the effective date of cancellation. After receipt of such notification from the surety company, the commissioner shall give written notice to the principal of the date such bond cancellation shall take effect and such notice shall be deemed notice to each mortgage loan originator licensee sponsored by such principal. The commissioner shall automatically suspend the licenses of a mortgage lender, mortgage correspondent lender or mortgage broker on such date and inactivate the licenses of the mortgage loan originators sponsored by such lender, correspondent lender or broker. In the case of a cancellation of an exempt registrant's bond, the commissioner shall inactivate the licenses of the mortgage loan originators sponsored by such exempt registrant. No automatic suspension or inactivation shall occur if, prior to the date that the bond cancellation shall take effect, (1) the principal submits a letter of reinstatement of the bond from the surety company or a new bond, (2) the mortgage lender, mortgage correspondent lender or mortgage broker licensee has ceased business and has surrendered all licenses in accordance with subsection (a) of section 36a-490, or (3) in the case of a mortgage loan originator licensee, the sponsorship with the mortgage lender, mortgage correspondent lender or mortgage broker who was automatically suspended pursuant to this section or, with the exempt registrant who failed to provide the bond required by this section, has been terminated and a new sponsor has been requested and approved. After a mortgage lender, mortgage correspondent lender or mortgage broker license has been automatically suspended pursuant to this section, the commissioner shall (A) give the licensee notice of the automatic suspension, pending proceedings for revocation or refusal to renew pursuant to section 36a-494 and an opportunity for a hearing on such action in accordance with section 36a-51, and (B) require such licensee to take or refrain from taking such action as the commissioner deems necessary to effectuate the purposes of this section. The commissioner may provide information to an exempt registrant concerning actions taken by the commissioner pursuant to this subsection against any mortgage loan originator licensee that was sponsored and bonded by such exempt registrant.
(d) The penal sum of the bond required by subdivisions (1) to (3), inclusive, of subsection (a) of this section shall be determined as follows:
(1) An applicant for an initial mortgage lender license or mortgage correspondent lender license shall file a bond in a penal sum of one hundred thousand dollars in connection with its application for the main office.
(2) An applicant for an initial mortgage broker license shall file a bond in a penal sum of fifty thousand dollars in connection with its application for the main office.
(3) An exempt registrant under subsection (d) of section 36a-487 who is exempt from licensure under subdivision (1), (2) or (3) of subsection (a) of section 36a-487 shall file a bond in a penal sum of one hundred thousand dollars the first time such exempt registrant sponsors a mortgage loan originator.
(4) An exempt registrant under subsection (d) of section 36a-487 who is exempt from licensure under subsection (b) of section 36a-487 shall file a bond in a penal sum of fifty thousand dollars the first time such exempt registrant sponsors a mortgage loan originator.
(5) Persons exempt from licensure under subdivision (4) of subsection (a) of section 36a-487 shall file a bond in a penal sum as set forth in section 36a-671d.
(6) (A) For mortgage lender and mortgage correspondent lender licensees and persons sponsoring and bonding at least one mortgage loan originator as an exempt registrant under subsection (d) of section 36a-487 and who are exempt from licensing under subdivision (1), (2) or (3) of subsection (a) of section 36a-487, if: (i) The aggregate dollar amount of all residential mortgage loans originated by such licensee at all licensed locations or by the exempt registrant during the preceding four quarters ending June thirtieth is less than thirty million dollars, the penal sum of the bond shall be one hundred thousand dollars; (ii) the aggregate dollar amount of all residential mortgage loans originated by such licensee at all licensed locations or by the exempt registrant during the preceding four quarters ending June thirtieth is thirty million dollars or more but less than one hundred million dollars, the penal sum of the bond shall be two hundred thousand dollars; (iii) the aggregate dollar amount of all residential mortgage loans originated by such licensee at all licensed locations or by the exempt registrant during the preceding four quarters ending June thirtieth is one hundred million dollars or more but less than two hundred fifty million dollars, the penal sum of the bond shall be three hundred thousand dollars; and (iv) the aggregate dollar amount of all residential mortgage loans originated by such licensee at all licensed locations or by the exempt registrant during the preceding four quarters ending June thirtieth is two hundred fifty million dollars or more, the penal sum of the bond shall be five hundred thousand dollars.
(B) For mortgage broker licensees and persons who are sponsoring and bonding at least one mortgage loan originator as an exempt registrant under subsection (d) of section 36a-487 and who are exempt from licensing under subsection (b) or (c) of section 36a-487, if: (i) The aggregate dollar amount of all residential mortgage loans originated by such licensee at all licensed locations or by the exempt registrant during the preceding four quarters ending June thirtieth is less than thirty million dollars, the penal sum of the bond shall be fifty thousand dollars; (ii) the aggregate dollar amount of all residential mortgage loans originated by such licensee at all licensed locations or by the exempt registrant during the preceding four quarters ending June thirtieth is thirty million dollars or more but less than fifty million dollars, the penal sum of the bond shall be one hundred thousand dollars; and (iii) the aggregate dollar amount of all residential mortgage loans originated by such licensee at all licensed locations or by the exempt registrant during the preceding four quarters ending June thirtieth is fifty million dollars or more, the penal sum of the bond shall be one hundred fifty thousand dollars.
(7) For purposes of this subsection, the aggregate dollar amount of all residential mortgage loans originated by such licensee or exempt registrant includes the aggregate dollar amount of all closed residential mortgage loans that the licensee or exempt registrant originated, brokered or made, as applicable.
(8) Financial information necessary to verify the aggregate dollar amount of residential mortgage loans originated shall be filed with the commissioner, as the commissioner may require, and shall be reported on the system at such time and in such form as the system may require.
(9) The commissioner may require a change in the penal sum of the bond if the commissioner determines at any time that the aggregate dollar amount of all residential mortgage loans originated warrants a change in the penal sum of the bond.
(P.A. 85-399, S. 8; P.A. 89-347, S. 15; P.A. 90-277; P.A. 94-122, S. 235, 340; P.A. 99-36, S. 28; P.A. 02-111, S. 9; P.A. 04-69, S. 7; P.A. 07-156, S. 10; P.A. 08-176, S. 31, 46, 47; P.A. 09-208, S. 5; 09-209, S. 12; P.A. 11-216, S. 21; P.A. 14-7, S. 12; 14-89, S. 47; P.A. 15-235, S. 29; P.A. 17-38, S. 8; P.A. 18-173, S. 13; P.A. 22-94, S. 6; P.A. 23-126, S. 12.)
History: P.A. 89-347 extended the application of the section to mortgage brokers; P.A. 90-277 reduced the required bond sum from $50,000 to $40,000; P.A. 94-122 made technical changes, effective January 1, 1995; Sec. 36-440g transferred to Sec. 36a-492 in 1995; P.A. 99-36 made technical changes; P.A. 02-111 added provision re performance “for the benefit” of borrowers and prospective borrowers, changed any “person” to any “borrower or perspective borrower”, added provisions re commissioner to proceed on bond to collect civil penalty imposed pursuant to Sec. 36a-50(a) and re bond proceeds deemed to be held in trust and immune from attachment, and made conforming and technical changes; P.A. 04-69 designated existing provisions as Subsec. (a), substituting “36a-498a” for “36a-498” therein, and added Subsec. (b) giving surety company the right to cancel the bond at any time by written notice to licensee, specifying manner of notice, requiring surety company to notify commissioner in writing prior to cancellation, requiring commissioner to automatically suspend license on date cancellation takes effect, unless bond has been replaced or renewed, and requiring commissioner to give licensee notice of automatic suspension pending proceedings for revocation or refusal to renew and an opportunity for a hearing in accordance with Sec. 36a-51; P.A. 07-156 amended Subsec. (a) to insert “mortgage lender or first mortgage broker” re license, effective September 30, 2008; P.A. 08-176 changed effective date of P.A. 07-156, S. 10, from September 30, 2008, to July 1, 2008, amended Subsec. (a) to add “mortgage correspondent lender”, to increase amount of bond to $80,000 on and after August 1, 2009, to add provision, commencing August 1, 2009, for borrower or prospective borrower of nonprime home loan to proceed on bond to recover amount of judgment, to allow commissioner to proceed on bond to collect any unpaid costs of examination of licensee and to make conforming changes, and amended Subsec. (b) to delete provision re automatic suspension of license when bond is cancelled, effective July 1, 2008; P.A. 09-208 amended Subsec. (b) by adding provisions re automatic suspension of license and opportunity for hearing upon cancellation of bond; P.A. 09-209 amended Subsec. (a) by designating existing provisions as Subdiv. (1), deleting provisions re conditions of surety bond and proceeding on bonds, adding provision re penal sum of bond reflecting dollar amount of loans originated by lender or broker as determined by commissioner and adding Subdiv. (2) re surety bonds for originators, added new Subsec. (b) re conditions of surety bond and proceeding on bonds and redesignated existing Subsec. (b) as Subsec. (c), effective July 31, 2009; P.A. 11-216 replaced former Subsec. (a)(1) and (2) with new Subsec. (a)(1) to (5) re surety bond requirements, amended Subsec. (b) to require bond to be in form approved by Attorney General, add provision re mortgage loan originator licensee sponsored by an exempt registrant, make technical changes, and replace “licensee” with “principal”, amended Subsec. (c) to replace “licensee” with “principal”, permit notice from commissioner to principal of bond cancellation to be deemed notice to each mortgage loan originator licensee sponsored by such principal, add requirements re suspension or inactivation of license and prevention of suspension or inactivation for mortgage loan originator licensees whose sponsorship has been terminated and who have requested and received approval for new sponsor, permit commissioner to provide information re exempt registrants concerning actions taken against any mortgage loan originator licensees sponsored by such registrants and make technical changes, and added Subsec. (d) re determination of penal sum of bond required, effective July 1, 2011; P.A. 14-7 amended Subsec. (d) by replacing references to Sec. 36a-487(c) with references to Sec. 36a-487(d) in Subdivs. (3) to (6) and adding reference to Sec. 36a-487(c) in Subdiv. (6)(B), effective May 8, 2014; P.A. 14-89 added references to Sec. 36a-487(a)(2) or (3) in Subsecs. (a)(3), (d)(3) and (d)(6) and replaced references to Sec. 36a-487(a)(2) with references to Sec. 36a-487(a)(4) in Subsecs. (a)(3) and (d)(5); P.A. 15-235 replaced references to not later than September 1, 2011, and every September first thereafter with references to after review of preceding four-quarter period ending June thirtieth re deadline for principal on bond to file information with commissioner in Subsec. (a)(4), replaced references to twelve-month period ending July thirty-first of current year with references to four quarters ending June thirtieth re time period for determination of penal sum on bond in Subsec. (d)(6), and made technical changes, effective July 7, 2015; P.A. 17-38 deleted references to October 1, 2011, amended Subsec. (b) to delete reference to August 1, 2009, and made technical changes; P.A. 18-173 amended Subsec. (a) by replacing references to exempt registrant with references to person exempt from licensure as mortgage lender, mortgage correspondent lender or mortgage broker in Subdiv. (3), replacing provision re annual confirmation in connection with renewal request with provision re filing quarterly reports on system, and deleting provision re reviewing preceding four-quarter period, deleting Subpara. (B) re principal on bond to annually confirm it maintains required penal sum and filing information as commissioner may require, and deleting Subpara. (A) designator in Subdiv. (4), amended Subsec. (b) by adding reference to bond required by Subsec. (a)(3)(C), replacing reference to Sec. 36a-498f with reference to Sec. 36a-498e, and adding provision re restitution imposed on and after April 1, 2019, amended Subsec. (c) by adding provisions re surety company to notify commissioner prior to effective date of cancellation, designating existing provisions re notice to licensee and requiring licensee to take or refrain from taking action as Subparas. (A) and (B), respectively, replacing “action as in the opinion of the commissioner will effectuate” with “action as the commissioner deems necessary to effectuate” in Subpara. (B), amended Subsec. (d)(5) by deleting reference to exempt registrant, and made technical and conforming changes; P.A. 22-94 amended Subsec. (a)(1) by deleting “file an addendum to such bond to cover”, effective May 24, 2022; P.A. 23-126 made a technical change in Subsec. (d)(5).
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Sec. 36a-498e. Prohibited acts. (a) No person who is required to be licensed and who is subject to this section, sections 36a-485 to 36a-498d, inclusive, 36a-534a and 36a-534b, may, directly or indirectly:
(1) Employ any scheme, device or artifice to defraud or mislead borrowers or lenders or to defraud any person;
(2) Engage in any unfair or deceptive practice toward any person;
(3) Obtain property by fraud or misrepresentation;
(4) Solicit or enter into a contract with a borrower that provides in substance that such person or individual may earn a fee or commission through “best efforts” to obtain a loan even though no loan is actually obtained for the borrower;
(5) Solicit, advertise or enter into a contract for specific interest rates, points or other financing terms unless the terms are actually available at the time of soliciting, advertising or contracting;
(6) Conduct any business as a mortgage lender, mortgage correspondent lender, mortgage broker, lead generator, mortgage loan originator or loan processor or underwriter without holding a valid license as required under this section, sections 36a-485 to 36a-498d, inclusive, 36a-498h, 36a-534a and 36a-534b or assist or aid and abet any person in the conduct of business as a mortgage lender, mortgage correspondent lender, mortgage broker, lead generator, mortgage loan originator or loan processor or underwriter without a valid license as required under said sections;
(7) Fail to make disclosures as required by this section, sections 36a-485 to 36a-498d, inclusive, 36a-498h, 36a-534a and 36a-534b and any other applicable state or federal law including regulations adopted thereunder;
(8) Fail to comply with this section, sections 36a-485 to 36a-498d, inclusive, 36a-498h, 36a-534a and 36a-534b or rules or regulations adopted under said sections or fail to comply with any other state or federal law, including the rules and regulations adopted thereunder, applicable to any business authorized or conducted under said sections;
(9) Make, in any manner, any false or deceptive statement or representation including, with regard to the rates, points or other financing terms or conditions for a residential mortgage loan, or engage in bait and switch advertising;
(10) Negligently make any false statement or knowingly and wilfully make any omission of material fact in connection with any information or reports filed with a governmental agency or the system, as defined in section 36a-2, or in connection with any investigation conducted by the commissioner or another governmental agency;
(11) Make any payment, threat or promise, directly or indirectly, to any person for the purposes of influencing the independent judgment of the person in connection with a residential mortgage loan as defined in section 36a-485 or make any payment, threat or promise, 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;
(12) Collect, charge, attempt to collect or charge or use or propose any agreement purporting to collect or charge any fee prohibited by this section, sections 36a-485 to 36a-498d, inclusive, 36a-498h, 36a-534a and 36a-534b;
(13) Cause or require a borrower to obtain property insurance coverage in an amount that exceeds the replacement cost of the improvements as established by the property insurer; or
(14) Fail to truthfully account for moneys belonging to a party to a residential mortgage loan transaction.
(b) (1) No person, other than an individual, who is required to be licensed and is subject to sections 36a-485 to 36a-498h, inclusive, 36a-534a and 36a-534b, and no qualifying individual or branch manager shall fail to establish, enforce and maintain policies and procedures reasonably designed to achieve compliance with subsection (a) of this section.
(2) No individual who (A) is required to be licensed as a mortgage loan originator, (B) is subject to sections 36a-485 to 36a-498e, inclusive, 36a-534a and 36a-534b, and (C) supervises loan processors or loan underwriters shall fail to enforce any policies and procedures established in accordance with subdivision (1) of this subsection.
(3) No violation of this subsection shall be found unless the failure to establish, enforce and maintain policies and procedures resulted in conduct in violation of sections 36a-485 to 36a-498e, inclusive, 36a-498h, 36a-534a and 36a-534b, inclusive, or rules or regulations adopted under said sections or any other state or federal law, including the rules and regulations thereunder, applicable to any business authorized or conducted under said sections.
(P.A. 09-209, S. 20; Sept. Sp. Sess. P.A. 09-7, S. 96; P.A. 11-216, S. 25; P.A. 14-89, S. 35; P.A. 17-38, S. 12; 17-233, S. 9; 17-236, S. 24; P.A. 18-173, S. 20; P.A. 23-126, S. 10.)
History: P.A. 09-209 effective July 31, 2009; Sept. Sp. Sess. P.A. 09-7 added “who is required to be licensed and who is” in introductory language, effective October 5, 2009; P.A. 11-216 amended Subdiv. (6) to add references to loan processor or underwriter; P.A. 14-89 amended Subdiv. (10) to replace reference to Sec. 36a-485 with reference to Sec. 36a-2 and replace “Banking Commissioner” with “commissioner”; P.A. 17-38 deleted “or individual” re requirement to be licensed, added reference to lead generator in Subdiv. (6), and added references to Sec. 36a-498h; P.A. 17-233 designated provisions re requirement to be licensed as Subsec. (a) and amended same to delete “or individual”, add “, directly or indirectly”, delete “directly or indirectly” in Subdiv. (1), and make a technical change, added Subsec. (b) re establishment, enforcement and maintenance of policies and procedures; P.A. 17-236 changed effective date of P.A. 17-233, S. 9, from October 1, 2017, to July 1, 2018, effective July 11, 2017; P.A. 18-173 amended Subsec. (a) by replacing “36a-498f” with “36a-489e”, adding “lead generator” in Subdiv. (6), and adding reference to Sec. 36a-498h in Subdivs. (6), (7), (8) and (12), amended Subsec. (b)(1) by replacing “36a-498f” with “36a-498h”, amended Subsecs. (b)(2) and (b)(3) by replacing “36a-498f” with “36a-498e”, and made technical and conforming changes; P.A. 23-126 amended Subsec. (a) by making technical and conforming changes throughout and adding lead generators to provision prohibiting certain persons from assisting or aiding and abetting any person in conducting certain businesses without license in Subdiv. (6).
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Sec. 36a-555. (Formerly Sec. 36-225). Definitions. As used in this section and sections 36a-556 to 36a-573, inclusive:
(1) “Advertise” or “advertising” means any announcement, statement, assertion or representation that is placed before the public in a newspaper, magazine or other publication, in the form of a notice, circular, pamphlet, letter or poster, over any radio or television station, by means of the Internet, by other electronic means of distributing information, by personal contact, or in any other way or medium;
(2) “APR” means the annual percentage rate for the loan calculated according to the provisions of the federal Military Lending Act, 10 USC 987, as amended from time to time, and the regulations promulgated thereunder. For the purpose of calculating the APR, each of the following shall be deemed to be a finance charge: (A) A charge set forth in 32 CFR 232.4(c)(1), as amended from time to time, (B) a charge for any ancillary product, membership or service sold in connection or concurrent with a small loan, (C) any amount offered or agreed to by a borrower in furtherance of obtaining credit or as compensation for the use of money, and (D) any fee, voluntarily or otherwise, charged, agreed to or paid by a borrower in connection or concurrent with a small loan;
(3) “Branch office” means a location other than the main office where the licensee, or any person on behalf of the licensee, will engage in activities that require a small loan license;
(4) “Connecticut borrower” means any borrower who resides in or maintains a domicile in this state and who (A) negotiates or agrees to the terms of the small loan in person, by mail, by telephone or via the Internet while physically present in this state, (B) enters into or executes a small loan agreement with the lender in person, by mail, by telephone or via the Internet while physically present in this state, or (C) makes a payment on the loan in this state. For purposes of this subdivision, “payment on the loan” includes a debit on an account the borrower holds in a branch of a financial institution or the use of a negotiable instrument drawn on an account at a financial institution. For purposes of this subdivision, “financial institution” means any bank or credit union chartered or licensed under the laws of this state, any other state or the United States;
(5) “Control person” means an individual that directly or indirectly exercises control over another person, and includes any person that (A) is a director, general partner or executive officer, (B) in the case of a corporation, directly or indirectly has the right to vote ten per cent or more of a class of any voting security or has the power to sell or direct the sale of ten per cent or more of any class of voting securities, (C) in the case of a limited liability company, is a managing member, or (D) in the case of a partnership, has the right to receive upon dissolution, or has contributed, ten per cent or more of the capital. For purposes of this subdivision, “control” means the power, directly or indirectly, to direct the management or policies of a company, whether through ownership of securities, by contract or otherwise;
(6) “Generating leads” means (A) engaging in the business of selling leads for small loans, (B) generating or augmenting leads for small loans for other persons for or with the expectation of compensation or gain, or (C) referring consumers to other persons for a small loan for or with the expectation of compensation or gain for such referral, except “generating leads” shall not include generating or augmenting leads for small loans for an exempt person, as described in subsection (b) of section 36a-557, using the exempt person's data or customer information;
(7) “Lead” means any information identifying a potential consumer of a small loan;
(8) “Main office” means the main address designated on the system;
(9) “Open-end small loan” has the same meaning as “open-end credit”, as defined in 12 CFR 1026.2, as amended from time to time;
(10) “Person” means a natural person, corporation, company, limited liability company, partnership or association;
(11) “Small loan” (A) means any loan of money or extension of credit, or the purchase of, or an advance of money on, a borrower's future potential source of money, including, but not limited to, future pay, salary, pension income or a tax refund, if (i) the amount or value is fifty thousand dollars or less, and (ii) the APR is greater than twelve per cent, and (B) does not include (i) a retail installment contract made in accordance with section 36a-772, (ii) a loan or extension of credit for agricultural, commercial, industrial or governmental use, (iii) a residential mortgage loan, as defined in section 36a-485, or (iv) an open-end credit account that is accessed by a credit card issued by an exempt entity, as described in subdivision (1) of subsection (b) of section 36a-557;
(12) “Trigger lead” means a consumer report obtained pursuant to Section 604(C)(1)(B) of the Fair Credit Reporting Act, 15 USC 1681b, where the issuance of the report is triggered by an inquiry made with a consumer reporting agency in response to an application for credit. “Trigger lead” does not include a consumer report obtained by a small loan lender that holds or services existing indebtedness of the applicant who is the subject of the report; and
(13) “Unique identifier” means a number or other identifier assigned by protocols established by the system.
(1949 Rev., S. 5937; 1949, S. 2753d; 1957, P.A. 439, S. 1; 1963, P.A. 175, S. 1; 1969, P.A. 242, S. 1; P.A. 77-129, S. 1; 77-183, S. 1, 2; P.A. 78-121, S. 71, 113; 78-303, S. 50, 136; P.A. 87-9, S. 2, 3; P.A. 88-65, S. 33; P.A. 89-338, S. 1; P.A. 92-12, S. 65; P.A. 94-122, S. 258, 340; P.A. 97-13, S. 1; P.A. 98-264; P.A. 02-111, S. 34; P.A. 04-69, S. 19; P.A. 08-176, S. 58; P.A. 09-208, S. 40; 09-209, S. 18; P.A. 15-235, S. 13; P.A. 16-65, S. 19; P.A. 17-233, S. 12; P.A. 23-126, S. 1.)
History: 1963 act increased limit from $600 to $1,000 and added reference to charge or consideration in provision re 12% interest; 1969 act increased limit to $1,800 and deleted reference to loans of “goods or things in action”; P.A. 77-129 increased limit to $5,000; P.A. 77-183 authorized loans by building or savings and loan associations and wholly owned subsidiary service corporations; P.A. 78-121 included federal credit unions, deleted private bankers and referred to savings and loan associations rather than “building or” savings and loan associations in authority to make loans; P.A. 78-303 replaced banking commission with banking commissioner in keeping with requirements of P.A. 77-614 which repealed the commission; (Revisor's note: Pursuant to P.A. 87-9 “banking commissioner” was changed editorially by the Revisors to “commissioner of banking”); P.A. 88-65 deleted a reference to industrial banks; P.A. 89-338 increased the limit from $5,000 to $10,000 for loans made under Sec. 36-233b, clarified that the section applies to out-of-state institutions and added the exception for entities making loans for agricultural, commercial, industrial or governmental use or extending credit through certain open-end credit plans; P.A. 92-12 made technical changes; P.A. 94-122 made technical changes, effective January 1, 1995; Sec. 36-225 transferred to Sec. 36a-555 in 1995; P.A. 97-13 increased limit from $5,000 to $15,000 for loans made under Sec. 36a-563, deleted reference to limit of $10,000 for loans made under Sec. 36a-565, and made reference to limit of $15,000 applicable to loans made under Sec. 36a-565 to conform to existing provisions of Sec. 36a-565; P.A. 98-264 added exceptions for licensed nondepository first mortgage lenders and secondary mortgage lenders and made technical changes; P.A. 02-111 amended Subdiv. (8) by deleting “nondepository first” and amended Subdiv. (9) by deleting “secondary”; P.A. 04-69 made technical changes, and amended Subdiv. (8) by substituting “36a-498a” for “36a-498” and inserting “when making first mortgage loans, as defined in section 36a-485”, and amended Subdiv. (9) by inserting “when making secondary mortgage loans, as defined in section 36a-510”; P.A. 08-176 added reference to “mortgage correspondent lender” in Subdiv. (8), deleted former Subdiv. (9), renumbered existing Subdiv. (10) as new Subdiv. (9) and made a technical change, effective July 1, 2008; P.A. 09-208 inserted Subdiv. (1) designator, added Subdivs. (2) and (3) re loan prohibitions and made conforming changes; P.A. 09-209 replaced reference to Secs. 36a-485 to 36a-498a with reference to Sec. 36a-489 and changed “first mortgage loans” to “residential mortgage loans”, effective July 31, 2009; P.A. 15-235 replaced reference to Sec. 36a-676(a)(8) with reference to 15 USC 1602, effective August 1, 2015; P.A. 16-65 replaced former provisions with introductory language and Subdivs. (1) to (13) re definitions, effective July 1, 2016; P.A. 17-233 amended Subdiv. (8) by redefining “main office”; P.A. 23-126 redefined “APR” in Subdiv. (2), redefined “Connecticut borrower” in Subdiv. (4), redefined “small loan” in Subdiv. (11), and made technical and conforming changes throughout.
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Sec. 36a-556. (Formerly Sec. 36-226). Small loan lending and related activities prohibited without license or exemption. License required for certain persons acting for exempt person. (a) Without having first obtained a small loan license from the commissioner pursuant to section 36a-565, no person shall, by any method, including, but not limited to, mail, telephone, Internet or other electronic means, unless exempt pursuant to section 36a-557:
(1) Make a small loan to a Connecticut borrower;
(2) Offer, solicit, broker, directly or indirectly arrange, place or find a small loan for a prospective Connecticut borrower;
(3) Engage in any other activity intended to assist a prospective Connecticut borrower in obtaining a small loan, including, but not limited to, generating leads;
(4) Receive payments of principal and interest in connection with a small loan made to a Connecticut borrower;
(5) Purchase, acquire or receive assignment of a small loan made to a Connecticut borrower; and
(6) Advertise or cause to be advertised in this state a small loan or any of the services described in subdivisions (1) to (5), inclusive, of this subsection.
(b) No person shall accept any lead, referral or application for a small loan to a prospective Connecticut borrower from a person who is not (1) licensed pursuant to section 36a-565, or (2) exempt from licensure pursuant to section 36a-557.
(c) No person shall sell, transfer, pledge, assign or otherwise dispose of any small loan made to a Connecticut borrower to any person who is not (1) licensed pursuant to section 36a-565, or (2) exempt from licensure pursuant to section 36a-557.
(d) Any person who purports to act as an agent, service provider or in another capacity for a person who is exempt from licensure pursuant to subsection (a) or (b) of section 36a-557, shall require licensure pursuant to subsection (a) of this section if: (1) Such person holds, acquires or maintains, directly or indirectly, the predominant economic interest in a small loan; (2) such person markets, brokers, arranges or facilitates the loan and holds the right, requirement or right of first refusal to purchase the small loans, receivables or interests in the small loans; or (3) the totality of the circumstances indicate that such person is the lender and the transaction is structured to evade the requirements of sections 36a-555 to 36a-573, inclusive. Circumstances weighing in favor of deeming a person a lender who shall be licensed under sections 36a-555 to 36a-573, inclusive, include, but are not limited to, the person: (A) Indemnifying, insuring or protecting an exempt person for any costs or risks related to a small loan; (B) predominantly designing, controlling or operating a small loan program; or (C) purporting to act as an agent, service provider or in another capacity for an exempt person in this state while acting directly as a lender in another state.
(1949 Rev., S. 5940; 1949, S. 2756d; P.A. 78-303, S. 51, 136; P.A. 87-9, S. 2, 3; P.A. 91-357, S. 52, 78; P.A. 92-12, S. 66; P.A. 94-122, S. 259, 340; P.A. 02-111, S. 35; P.A. 09-208, S. 8; P.A. 11-216, S. 31; P.A. 16-65, S. 20; P.A. 23-126, S. 2.)
History: P.A. 78-303 specified commissioner referred to in section as banking commissioner and substituted banking commissioner for banking commission elsewhere in section in keeping with P.A. 77-614 which repealed the banking commission; (Revisor's note: Pursuant to P.A. 87-9 “banking commissioner” was changed editorially by the Revisors to “commissioner of banking”); P.A. 91-357 made technical changes; P.A. 92-12 made technical changes; P.A. 94-122 made technical changes, effective January 1, 1995; Sec. 36-226 transferred to Sec. 36a-556 in 1995; P.A. 02-111 deleted provisions re public notice, added “limited liability company” in Subdiv. (1), added provisions re commissioner's authority to deny application for license, changed “place of business” to “location”, and deleted provisions re maintenance of capital investment and exception; P.A. 09-208 authorized commissioner to deny application based on certain criminal convictions, specified when withdrawal of application becomes effective, and provided that commissioner may deny license up to 1 year after date the withdrawal became effective, effective July 7, 2009; P.A. 11-216 deleted provision re ten-year period re misdemeanor and felony convictions; P.A. 16-65 replaced former provisions with Subsecs. (a) to (c) re small loan lending and related activities prohibited without license or exemption, effective July 1, 2016; P.A. 23-126 added Subsec. (d) re licensure requirement for certain persons who purport to act as agent, as service provider or in another capacity for person exempt from licensure.
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Sec. 36a-557. (Formerly Sec. 36-227). Exemptions. (a) The following persons are exempt from the requirement for licensure set forth in section 36a-556:
(1) A licensed pawnbroker;
(2) A person licensed as a consumer collection agency in accordance with section 36a-801 when engaged in the activities of a consumer collection agency in the normal course of business;
(3) A person who services small loans for an exempt person described in subsection (b) of this section, when such exempt person owns the small loans, provided the servicing arrangements include, in addition to receiving payments of principal and interest in connection with the small loans, the provision of accounting, recordkeeping and data processing services and such person does not engage in the activities set forth in subsection (d) of section 36a-556;
(4) A person who is a passive buyer of a small loan. For purposes of this subdivision, “passive buyer” means a person who: (A) Has acquired a small loan for investment purposes from a person who is either licensed or exempt from licensure under subdivisions (1) to (3), inclusive, of subsection (b) of this section; (B) will receive the principal and interest and any other moneys due under the small loan through a person who is either licensed or exempt from licensure under subdivisions (1) to (3), inclusive, of subsection (b) of this section; and (C) has had and will have no communications of any kind with the Connecticut borrower regarding the small loan it has acquired;
(5) A consumer reporting agency, as defined in Section 603(f) of the Fair Credit Reporting Act, 15 USC 1681a, as amended from time to time, when generating leads; and
(6) A retail seller who offers, extends or facilitates credit through an open-end or closed-end credit plan for the purchase of goods or services from such retail seller.
(b) The following persons are exempt from the provisions of sections 36a-555 to 36a-573, inclusive:
(1) Any bank, out-of-state bank, Connecticut credit union, federal credit union or out-of-state credit union, provided such bank or credit union is federally insured;
(2) Any wholly-owned subsidiary of such bank or credit union; and
(3) Any operating subsidiary where each owner of such operating subsidiary is wholly owned by the same bank or credit union.
(c) Loans made by an exempt person described in subsection (b) of this section shall be exempt from the provisions of sections 36a-555 to 36a-573, inclusive, including, without limitation, the provisions applicable to licensed persons, even if: (1) The exempt person utilizes the services of a person exempt from licensing or required to be licensed pursuant to section 36a-556 in connection with the small loans that are made or offered to be made by the exempt person described in subsection (b) of this section; and (2) a person exempt from licensing or required to be licensed pursuant to section 36a-556 engages in activities intended to assist a prospective Connecticut borrower or a Connecticut borrower in obtaining a small loan that is made or offered to be made by an exempt person described in subsection (b) of this section. Nothing in this subsection shall be construed as exempting persons required to be licensed pursuant to section 36a-556 from the requirements to obtain and maintain a license or from the provisions of sections 36a-562 to 36a-573, inclusive. Notwithstanding the foregoing, no person licensed or required to be licensed under section 36a-556 shall engage in any of the activities described in subsection (a) of section 36a-556 for any small loan that has an APR in excess of thirty-six per cent if that small loan contains any condition or provision inconsistent with the requirements of subsections (d) to (g), inclusive, of section 36a-558. This subsection shall not apply to loans described in subsection (d) of section 36a-556.
(1949 Rev., S. 5938; 1949, S. 2754d; P.A. 94-122 S. 260, 340; P.A. 02-111, S. 36; P.A. 09-208, S. 9; P.A. 11-216, S. 32; P.A. 16-65, S. 21; P.A. 18-173, S. 31, 32; P.A. 23-126, S. 3.)
History: P.A. 94-122 made technical changes, effective January 1, 1995; Sec. 36-227 transferred to Sec. 36a-557 in 1995; P.A. 02-111 deleted provisions re content of application; P.A. 09-208 designated existing provisions as Subsec. (a), added Subdivs. (1) and (2) therein re criminal conviction information to be included in application and added Subsec. (b) specifying when withdrawal of application becomes effective and providing that commissioner may deny license up to 1 year after date the withdrawal became effective, effective July 7, 2009; P.A. 11-216 amended Subsec. (a) to delete provision re ten-year period re history of criminal convictions, add provisions authorizing commissioner to conduct state and national criminal history records check of applicant and each member, officer and director of applicant and add provisions re abandonment of application; P.A. 16-65 replaced former provisions with new Subsecs. (a) to (c) re exemptions, effective July 1, 2016; P.A. 18-173 amended Subsec. (a)(4) by replacing references to Subsecs. (a)(1) to (a)(3) with references to Subsecs. (b)(1) to (b)(3) and amended Subsec. (c) by adding “or offered to be made” and “or offered” re small loan; P.A. 23-126 amended Subsec. (a)(3) by adding provision re person does not engage in certain activities and amended Subsec. (c) by deleting “a disclosed”, making a technical change and adding provision re Subsec. (c) inapplicable to certain loans.
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Sec. 36a-558. (Formerly Sec. 36-228). Prohibitions re small loans and related activities. Permitted small loan provisions. Open-end small loans. Lead generation activities. (a) Except as provided in subsection (c) of section 36a-557, no person licensed or required to be licensed under section 36a-556 shall engage in any of the activities described in subsection (a) of section 36a-556 for any small loan that contains any condition or provision inconsistent with the requirements in subsections (d) to (g), inclusive, of this section.
(b) No person exempt from licensure under section 36a-557 shall engage in any of the activities described in subdivision (4), (5) or (6) of subsection (a) of section 36a-556 for any small loan made by a person who was licensed or who was required to be licensed under section 36a-556 that contains any condition or provision inconsistent with the requirements in subsections (d) to (g), inclusive, of this section.
(c) (1) Except as the result of a bona fide error or as set forth in subdivision (2) of this subsection, any small loan described in subsection (a) or (b) of this section that contains any condition or provision inconsistent with the requirements in subsections (d) to (g), inclusive, of this section shall not be enforced in this state. Such small loan shall be void and no person shall have the right to collect or receive any principal, interest, charge or other consideration thereon. Any person attempting to collect or receive principal, interest, charge or other consideration on such small loan shall be subject to the provisions of section 36a-570.
(2) Subdivision (1) of this subsection shall not apply when: (A) The inconsistent condition or provision is the result of a bona fide error; or (B) the small loan was lawfully made in compliance with a validly enacted licensed loan law of another state to a borrower who was not, at the time of the making of such loan, a Connecticut borrower but who has since become a Connecticut borrower.
(3) For the purposes of this subsection, the term “bona fide error” includes, but is not limited to, clerical, calculation and computer malfunction, programming and printing errors, but does not include an error of legal judgment with respect to a person's obligations under sections 36a-555 to 36a-573, inclusive, or under regulations implemented pursuant to section 36a-573.
(d) Small loans that are the subject of the activities set forth in subsections (a) and (b) of this section shall not contain:
(1) For a small loan that is under five thousand dollars, an APR that exceeds the lesser of thirty-six per cent or the maximum annual percentage rate for interest that is permitted with respect to the consumer credit extended under the Military Lending Act, 10 USC 987, as amended from time to time, or for a small loan that is between five thousand and fifty thousand dollars, an APR that exceeds twenty-five per cent;
(2) For other than an open-end small loan, a provision that increases the interest rate due to payment default;
(3) A payment schedule with regular periodic payments that when aggregated do not fully amortize the outstanding principal balance;
(4) A payment schedule with regular periodic payments that cause the principal balance to increase;
(5) A payment schedule that consolidates more than two periodic payments and pays them in advance from the proceeds, unless such payments are required to be escrowed by a governmental agency;
(6) A prepayment penalty;
(7) An adjustable rate provision;
(8) A waiver of participation in a class action or a provision requiring a borrower, whether acting individually or on behalf of others similarly situated, to assert any claim or defense in a nonjudicial forum that: (A) Utilizes principles that are inconsistent with the law as set forth in the general statutes or common law; or (B) limits any claim or defense the borrower may have;
(9) A call provision that permits the lender, in its sole discretion, to accelerate the indebtedness, except when repayment of the loan is accelerated by a bona fide default pursuant to a due-on-sale clause;
(10) A security interest, except as provided in subsection (e) of this section; or
(11) Fees or charges of any kind, except as expressly permitted by subsection (e) of this section.
(e) Small loans as described in subsections (a) and (b) of this section may contain provisions:
(1) For late fees, if: (A) Such fees are assessed after an installment remains unpaid for ten or more consecutive days, including Sundays and holidays; (B) such fees do not exceed five per cent of the outstanding installment payment, excluding any previously assessed late fees, or a total of twenty-five dollars per month, whichever is less; and (C) no interest is charged on such fees;
(2) Allowing charges for a dishonored check or any other form of returned payment, provided the total fee for such returned payment shall not exceed twenty dollars;
(3) Allowing for collection of deferral charges, but only upon the specific written authorization of the borrower and in a total amount not to exceed the interest due during the applicable billing cycle;
(4) Allowing for the accrual of interest after the maturity date or the deferred maturity date, provided such interest shall not exceed twelve per cent per annum computed on a daily basis on the respective unpaid balances;
(5) Providing for reasonable attorney's fees subject to the conditions and restrictions set forth in section 42-150aa;
(6) Including credit life insurance or credit accident and health insurance subject to the conditions and restrictions set forth in section 36a-559; and
(7) Taking a security interest in a motor vehicle in connection with a closed-end small loan made solely for the purchase or refinancing of such motor vehicle, provided the APR of such loan shall not exceed the rates indicated for the respective classifications of motor vehicles as follows: (A) New motor vehicles, fifteen per cent; (B) used motor vehicles of a model designated by the manufacturer by a year not more than two years prior to the year in which the sale is made, seventeen per cent; and (C) used motor vehicles of a model designated by the manufacturer by a year more than two years prior to the year in which the sale is made, nineteen per cent.
(f) Open-end small loans as described in subsections (a) and (b) of this section shall, in addition to the requirements set forth in subsections (d) and (e) of this section:
(1) Not provide for an advance of money exceeding at any one time an unpaid principal of fifty thousand dollars;
(2) Provide for payments and credits to be made to the same borrower's account from which advances, interests, charges and costs on such loan are debited;
(3) Provide for interest to be computed on any unpaid principal balance of the account in each billing cycle by one of the following methods: (A) By converting the APR to a daily rate and multiplying such daily rate by the daily unpaid principal balance of the account, in which case the daily rate is determined by dividing the APR by three hundred sixty-five; or (B) by converting the APR to a monthly rate and multiplying the monthly rate by the average daily unpaid principal balance of the account in the billing cycle, in which case (i) the monthly rate is determined by dividing the APR by twelve, and (ii) the average daily unpaid principal balance is the sum of the amount unpaid each day during the cycle divided by the number of days in the cycle. In either of such computations, the billing cycle shall be monthly and the unpaid principal balance on any day shall be determined by adding to any balance unpaid as of the beginning of such day all advances and other permissible amounts charged to the borrower and deducting all payments and other credits made or received that day;
(4) Not compound interest or charges by adding any unpaid interest or charges authorized by sections 36a-555 to 36a-573, inclusive, to the unpaid principal balance of the borrower's account; or
(5) Not include any other fees or charges of any kind, except as expressly permitted by subsection (g) of this section.
(g) Open-end small loans as described in subsections (a) and (b) of this section, in addition to the requirements set forth in subsections (d) to (f), inclusive, of this section, may:
(1) Provide for an annual fee for the privileges made available to the borrower under the open-end loan agreement, provided such annual fee shall not exceed fifty dollars; and
(2) Include credit life insurance or credit accident and health insurance, subject to the conditions and restrictions set forth in section 36a-559.
(h) No person licensed or required to be licensed under sections 36a-555 to 36a-573, inclusive, who is engaged in generating leads shall in connection with lead generation activities:
(1) Initiate any outbound telephone call using an automatic telephone dialing system or an artificial or prerecorded voice without the prior express written consent of the recipient;
(2) Fail to transmit or cause to transmit the lead generator's name and telephone number to any caller identification service in use by a consumer;
(3) Initiate an outbound telephone call to a consumer's residence between nine o'clock p.m. and eight o'clock a.m. local time at the consumer's location;
(4) Fail to clearly and conspicuously identify the lead generator and the purpose of the contact in its written and oral communications with a consumer;
(5) Fail to provide the ability to opt out of any unsolicited advertisement communicated to a consumer via an electronic mail address;
(6) Initiate an unsolicited advertisement via electronic mail to a consumer more than ten business days after the receipt of a request from such consumer to opt out of such unsolicited advertisements;
(7) Use a subject heading or electronic mail address in a commercial electronic mail message that would likely mislead a recipient, acting reasonably under the circumstances, about a material fact regarding the sender, contents or subject matter of the message;
(8) Sell, lease, exchange or otherwise transfer or release the electronic mail address or telephone number of a consumer who has requested to be opted out of future solicitations;
(9) Collect, buy, lease, exchange or otherwise transfer or receive an individual's Social Security number or bank account number;
(10) Use information from a trigger lead to solicit consumers who have opted out of firm offers of credit under the federal Fair Credit Reporting Act;
(11) Initiate a telephone call to a consumer who has placed his or her contact information on a federal or state Do Not Call list, unless the consumer has provided express written consent;
(12) Represent to the public, through advertising or other means of communicating or providing information, including, but not limited to, the use of business cards or stationery, brochures, signs or other promotional items, that such lead generator can or will perform any other activity requiring licensure under this title, unless such lead generator is duly licensed to perform such other activity or exempt from such licensure requirements;
(13) Refer applicants to, or receive a fee from, any person who is required to be licensed under this title, but was not so licensed as of the time of the performance of such lead generator's services; or
(14) Assist or aid and abet any person in the conduct of business requiring licensure under this title when such person does not hold the license required.
(1949 Rev., S. 5938; 1949, S. 2754d; March, 1958, P.A. 27, S. 47; P.A. 88-150, S. 3; P.A. 92-89, S. 5, 20; P.A. 94-104, S. 2; 94-122, S. 338, 340; P.A. 96-71, S. 6, 8; P.A. 02-111, S. 37; P.A. 04-69, S. 20; P.A. 05-46, S. 7; P.A. 16-65, S. 22; P.A. 17-233, S. 13, 14; P.A. 18-173, S. 96; P.A. 23-126, S. 4.)
History: P.A. 88-150 specified that the license fee is nonrefundable and added the provision re expiration of licenses on June thirtieth; P.A. 92-89 increased the license fees from $200 to $400; P.A. 94-104 changed the license renewal deadline from June twentieth to June first, added a $100 late fee and added a $100 processing fee for a person whose license expired within 60 days of his application; P.A. 94-122 made technical changes, effective January 1, 1995; Sec. 36-228 transferred to Sec. 36a-558 in 1995; P.A. 96-71 amended Subsec. (a) to delete “nonrefundable” modifying “license fee” and added Subsec. (b) to make all fees required by this section nonrefundable, effective July 1, 1996; P.A. 02-111 amended Subsec. (a) by providing that license fee for “small loan lender” license is $800, provided if application is filed not earlier than one year before the expiration date of license, fee is $400, by adding provision re license that is renewed effective July 1, 2003, shall expire on September 30, 2005, by adding provisions re expiration of license at the close of business on September thirtieth of the odd-numbered year following its issuance, renewal fee of $800 and exceptions for licenses that expire on June 30, 2003, and by making conforming and technical changes; P.A. 04-69 inserted new Subsec. (b), requiring commissioner to automatically suspend license or renewal license if commissioner determines that a check filed to pay fee has been dishonored and requiring commissioner to give notice of the automatic suspension pending proceedings for revocation or refusal to renew and an opportunity for a hearing in accordance with Sec. 36a-51, and redesignated existing Subsec. (b) as Subsec. (c); P.A. 05-46 amended Subsec. (a) to provide that renewal application filed with commissioner after September first, accompanied by late fee, shall be deemed to be timely and sufficient for purposes of Sec. 4-182(b); P.A. 16-65 replaced former provisions with new Subsecs. (a) to (h) re small loan prohibitions and permitted provisions, open-end small loans and lead generation activities, effective July 1, 2016; P.A. 17-233 amended Subsec. (d) by deleting provision re calculation under Military Lending Act in Subdiv. (1), and adding “payment” in Subdiv. (2), and amended Subsec. (e)(1)(B) by deleting “the lesser of”; P.A. 18-173 amended Subsec. (d)(1) by adding “lesser of thirty-six per cent or the”; P.A. 23-126 amended Subsec. (d)(1) by making technical changes and changing “fifteen” to “fifty”, amended Subsec. (e)(6) by making a technical change and amended Subsec. (f)(1) by changing “fifteen” to “fifty”.
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Sec. 36a-560. (Formerly Sec. 36-230). Restrictions on licensee. No licensee shall:
(1) Cause a borrower, including, but not limited to, a comaker or guarantor, to owe at any time more than fifty thousand dollars in principal on one or more small loans;
(2) Induce or permit a borrower to split or divide any small loan or loans, or induce or permit a borrower to become obligated, directly or indirectly, under more than one contract of loan at the same time, primarily for the purpose of obtaining rates or charges that would otherwise be prohibited by any applicable provision of sections 36a-555 to 36a-573, inclusive;
(3) Take any (A) confession of judgment, (B) power of attorney, (C) note or promise to pay that does not state the actual amount of the loan, the time period for which the loan is made and the charges for such loan, or (D) instrument related to the loan in which blanks are left to be filled after the loan is made;
(4) Offer the borrower any other product or service for which there is or will ever be any cost to the borrower in connection with a small loan unless (A) permitted by sections 36a-555 to 36a-573, inclusive, (B) authorized under another license, or by applicable exemption from any requirement for such licensure, to offer such product or services, or (C) if no separate license or exemption therefrom is required to offer such product or services, authorized in advance, in writing, by the commissioner upon being satisfied that such other product or service is of such a character that the granting of such authority would not permit or easily facilitate evasion of the provisions of sections 36a-555 to 36a-573, inclusive, or of any regulations promulgated thereunder; or
(5) Renew or refinance a small loan unless the renewal or refinancing of the loan will result in a distinct advantage to the borrower, provided restoration to a contractually up-to-date condition shall not, in itself, constitute a distinct advantage to the borrower.
(1949 Rev., S. 5943; P.A. 78-303, S. 52, 136; P.A. 87-9, S. 2, 3; P.A. 94-122, S. 262, 340; P.A. 08-119, S. 7; P.A. 16-65, S. 24; P.A. 18-173, S. 33; P.A. 23-126, S. 5.)
History: P.A. 78-303 replaced banking commission with banking commissioner in keeping with provisions of P.A. 77-614; (Revisor's note: Pursuant to P.A. 87-9 “banking commissioner” was changed editorially by the Revisors to “commissioner of banking”); P.A. 94-122 made technical changes, effective January 1, 1995; Sec. 36-230 transferred to Sec. 36a-560 in 1995; P.A. 08-119 added requirement for surrender of license when licensee ceases to engage in the business of a small loan lender; P.A. 16-65 replaced former provisions with introductory language and Subdivs. (1) to (5) re restrictions on licensee, effective July 1, 2016; P.A. 18-173 made a technical change; P.A. 23-126 amended Subdiv. (1) by changing “fifteen” to “fifty”.
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Sec. 36a-596. (Formerly Sec. 36-531). Definitions. As used in sections 36a-595 to 36a-613, inclusive:
(1) “Advertise” or “advertising” has the same meaning as provided in section 36a-485.
(2) “Authorized delegate” means a person designated by a person licensed pursuant to sections 36a-595 to 36a-612, inclusive, to provide money transmission services on behalf of such licensed person.
(3) “Control” means (A) the power to vote, directly or indirectly, at least twenty-five per cent of the outstanding voting shares or voting interests of a licensee or person in control of a licensee; (B) the power to elect or appoint a majority of key individuals or executive officers, managers, directors, trustees or other persons exercising managerial authority of a person in control of a licensee; or (C) the power to exercise, directly or indirectly, a controlling influence over the management or policies of a licensee or person in control of a licensee. For purposes of this subdivision: (i) A person is presumed to exercise a controlling influence when the person holds the power to vote, directly or indirectly, at least ten per cent of the outstanding voting shares or voting interests of a licensee or person in control of a licensee, (ii) a person presumed to exercise a controlling influence can rebut such presumption if the person is a passive investor, and (iii) to determine the percentage of control, a person's interest shall be aggregated with the interest of any other immediate family member, including the person's spouse, parent, child, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law and any other person who shares the person's home.
(4) “Control person” means any individual in control of a licensee or applicant, any individual who seeks to acquire control of a licensee or a key individual.
(5) “Electronic payment instrument” means a card or other tangible object for the transmission of money or monetary value or payment of money which contains a microprocessor chip, magnetic stripe, or other means for the storage of information, that is prefunded and for which the value is decremented upon each use, but does not include a card or other tangible object that is redeemable by the issuer in the issuer's goods or services.
(6) “Holder” means a person, other than a purchaser, who is either in possession of a payment instrument and is the named payee thereon or in possession of a payment instrument issued or endorsed to such person or bearer or in blank. “Holder” does not include any person who is in possession of a lost, stolen or forged payment instrument.
(7) “Key individual” means any individual ultimately responsible for establishing or directing policies and procedures of the licensee, including, but not limited to, an executive officer, manager, director or trustee.
(8) “Licensee” means any person licensed or required to be licensed pursuant to sections 36a-595 to 36a-612, inclusive.
(9) “Main office” has the same meaning as provided in section 36a-485.
(10) “Monetary value” means a medium of exchange, whether or not redeemable in money.
(11) “Money transmission” means engaging in the business of issuing or selling payment instruments or stored value, receiving money or monetary value for current or future transmission or the business of transmitting money or monetary value within the United States or to locations outside the United States by any and all means including, but not limited to, payment instrument, wire, facsimile, electronic transfer or virtual currency kiosk.
(12) “Outstanding” means (A) in the case of a payment instrument or stored value, that: (i) It is sold or issued in the United States; (ii) a report of it has been received by a licensee from its authorized delegates; and (iii) it has not yet been paid by the issuer, and (B) for all other money transmissions, the value reported to the licensee for which the licensee or any authorized delegate has received money or its equivalent value from the customer for transmission, but has not yet completed the money transmission by delivering the money or monetary value to the person designated by the customer.
(13) “Passive investor” means a person that: (A) Does not have the power to elect a majority of key individuals or executive officers, managers, directors, trustees or other persons exercising managerial authority of a person in control of a licensee; (B) is not employed by and does not have any managerial duties of the licensee or person in control of a licensee; (C) does not have the power to exercise, directly or indirectly, a controlling influence over the management or policies of a licensee or person in control of a licensee; and (D) attests to subparagraphs (A), (B) and (C) of this subdivision in the form and manner prescribed by the commissioner.
(14) “Payment instrument” means a check, draft, money order, travelers check or electronic payment instrument that evidences either an obligation for the transmission of money or monetary value or payment of money, or the purchase or the deposit of funds for the purchase of such check, draft, money order, travelers check or electronic payment instrument.
(15) “Permissible investment” means: (A) Cash in United States currency; (B) time deposits, as defined in section 36a-2, or other debt instruments of a bank; (C) bills of exchange or bankers acceptances which are eligible for purchase by member banks of the Federal Reserve System; (D) commercial paper of prime quality; (E) interest-bearing bills, notes, bonds, debentures or other obligations issued or guaranteed by: (i) The United States or any of its agencies or instrumentalities, or (ii) any state, or any agency, instrumentality, political subdivision, school district or legally constituted authority of any state if such investment is of prime quality; (F) interest-bearing bills or notes, or bonds, debentures or preferred stocks, traded on any national securities exchange or on a national over-the-counter market, if such debt or equity investments are of prime quality; (G) receivables due from authorized delegates consisting of the proceeds of the sale of payment instruments which are not past due or doubtful of collection; (H) gold; and (I) any other investments approved by the commissioner. Notwithstanding the provisions of this subdivision, if the commissioner at any time finds that an investment of a licensee is unsatisfactory for investment purposes, the investment shall not qualify as a permissible investment.
(16) “Prime quality” of an investment means that it is within the top four rating categories in any rating service recognized by the commissioner unless the commissioner determines for any licensee that only those investments in the top three rating categories qualify as prime quality.
(17) “Purchaser” means a person who buys or has bought a payment instrument or who has given money or monetary value for current or future transmission.
(18) “Stored value” means monetary value that is evidenced by an electronic record. For the purposes of this subdivision, “electronic record” means information that is stored in an electronic medium and is retrievable in perceivable form.
(19) “Travelers check” means a payment instrument for the payment of money that contains a provision for a specimen signature of the purchaser to be completed at the time of a purchase of the instrument and a provision for a countersignature of the purchaser to be completed at the time of negotiation.
(20) “Unique identifier” has the same meaning as provided in section 36a-485.
(21) “Virtual currency” means any type of digital unit that is used as a medium of exchange or a form of digitally stored value or that is incorporated into payment system technology. Virtual currency shall be construed to include digital units of exchange that (A) have a centralized repository or administrator; (B) are decentralized and have no centralized repository or administrator; or (C) may be created or obtained by computing or manufacturing effort. Virtual currency shall not be construed to include digital units that are used (i) solely within online gaming platforms with no market or application outside such gaming platforms, or (ii) exclusively as part of a consumer affinity or rewards program, and can be applied solely as payment for purchases with the issuer or other designated merchants, but cannot be converted into or redeemed for fiat currency.
(22) “Virtual currency address” means an alphanumeric identifier representing a destination for a virtual currency transfer that is associated with a virtual currency wallet.
(23) “Virtual currency kiosk” means an electronic terminal acting as a mechanical agent of the owner or operator to enable the owner or operator to facilitate the exchange of virtual currency for fiat currency or other virtual currency, including, but not limited to, by (A) connecting directly to a separate virtual currency exchanger that performs the actual virtual currency transmission, or (B) drawing upon the virtual currency in the possession of the owner or operator of the electronic terminal.
(24) “Virtual currency wallet” means a software application or other mechanism providing a means for holding, storing and transferring virtual currency.
(P.A. 81-264, S. 2; P.A. 87-9, S. 2, 3; P.A. 92-12, S. 96; P.A. 94-122, S. 276, 340; P.A. 98-192, S. 3; 98-258, S. 4; P.A. 01-56, S. 3; P.A. 02-73, S. 84; P.A. 04-14, S. 3; 04-136, S. 43; P.A. 07-91, S. 8; P.A. 09-208, S. 13; P.A. 13-253, S. 2; P.A. 15-53, S. 5; P.A. 17-233, S. 18; P.A. 18-173, S. 49; P.A. 22-94, S. 2; 22-96, S. 2; P.A. 23-82, S. 2.)
History: (Revisor's note: Pursuant to P.A. 87-9 “banking commissioner” was changed editorially by the Revisors to “commissioner of banking”); P.A. 92-12 redesignated Subdivs. and Subparas.; P.A. 94-122 deleted former Subdivs. (1) and (2) defining “commissioner” and “financial institution”, renumbered former Subdivs. (3) through (9) as Subdivs. (1) through (7), deleted Subdiv. (10) defining “person” and renumbered former Subdivs. (11) through (13) as Subdivs. (8) through (10), effective January 1, 1995; Sec. 36-531 transferred to Sec. 36a-596 in 1995; (Revisor's note: In 1997 the reference in Subdiv. (7) to “... time deposits, as defined in subdivision (55) of section 36a-2 ...” was corrected editorially by the Revisors to “... time deposits, as defined in subdivision (62) of section 36a-2 ...” to reflect the current internal numbering of that section); P.A. 98-192 added new Subdiv. (1) defining “electronic payment instrument”, made conforming changes and redesignated existing Subdivs. (1) to (10) as Subdivs. (2) to (11); P.A. 98-258 made a technical change in Subdiv. (7); P.A. 01-56 made technical changes in Subdiv. (2) defining “holder”, deleted former Subdiv. (3) defining “instrument” and renumbered existing Subdiv. (4) as Subdiv. (3), added new Subdiv. (4) defining “material litigation”, made technical changes in Subdiv. (5) defining “money order”, added new Subdiv. (6) defining “money transmission” and renumbered existing Subdivs. (6) and (7) as Subdivs. (7) and (8), redefined “outstanding” in redesignated Subdiv. (8), added new Subdiv. (9) defining “payment instrument”, renumbered existing Subdivs. (8) to (11) as Subdivs. (10) to (13) and made technical changes in redesignated Subdivs. (10) to (13); P.A. 02-73 amended Subdiv. (10)(B) by changing reference from Subdiv. (63) to Subdiv. (65) of Sec. 36a-2; P.A. 04-14 added definitions of “monetary value” in new Subdiv. (5) and “stored value” and “electronic record” in new Subdiv. (14), renumbering the existing Subdivs. accordingly, inserted references to “monetary value” and “current or future” transmission in definition of “money transmission”, inserted references to “stored value” in definitions of “money transmission” and “outstanding” and, in Subpara. (A) of the latter definition, inserted “or issued”, and made a technical change in definition of “permissible investment”, effective April 16, 2004; P.A. 04-136 amended Subdiv. (10)(B) to make a technical change, effective May 12, 2004; P.A. 07-91 inserted references to transmission “of money or monetary value” in definitions of “electronic payment instrument” and “payment instrument” in Subdivs. (1) and (10); P.A. 09-208 redefined “licensee” in Subdiv. (3), “outstanding” in Subdiv. (9) and “purchaser” in Subdiv. (13) and defined “unsafe or unsound practice” in Subdiv. (16), effective July 7, 2009; P.A. 13-253 added reference to Secs. 36a-611 and 36a-612, added new Subdiv. (1) defining “authorized delegate”, redesignated existing Subdivs. (1) to (3) as Subdivs. (2) to (4), deleted former Subdiv. (4) defining “material litigation”, deleted former Subdiv. (6) defining “money order”, redesignated existing Subdiv. (7) as Subdiv. (6) and amended same to redefine “money transmission”, deleted former Subdiv. (8) defining “net worth”, redesignated existing Subdiv. (9) as Subdiv. (7) and amended same to redefine “outstanding”, redesignated existing Subdiv. (10) as Subdiv. (8) and amended same to redefine “payment instrument”, redesignated existing Subdiv. (11) as Subdiv. (9) and amended same to redefine “permissible investment”, redesignated existing Subdivs. (12) to (15) as Subdivs. (10) to (13), deleted former Subdiv. (16) defining “unsafe or unsound practice”, and made technical and conforming changes; P.A. 15-53 added Subdiv. (14) defining “virtual currency”; P.A. 17-233 added new Subdiv. (1) defining “advertise” or “advertising”, redesignated existing Subdiv. (1) as Subdiv. (2), added new Subdiv. (3) defining “control person” and redesignated existing Subdivs. (2) to (14) as Subdivs. (4) to (16); P.A. 18-173 added new Subdiv. (7) re definition of “main office”, redesignated existing Subdivs. (7) to (15) as new Subdivs. (8) to (16), added Subdiv. (17) re definition of “unique identifier”, and redesignated existing Subdiv. (16) as Subdiv. (18); P.A. 22-94 added new Subdiv. (3) to define “control”, redesignated existing Subdivs. (3) to (5) as Subdivs. (4) to (6), redefined “control person” in new Subdiv. (4), added new Subdiv. (7) to define “key individual”, redesignated existing Subdivs. (6) to (10) as Subdivs. (8) to (12), added new Subdiv. (13) to define “passive investor”, redesignated existing Subdivs. (11) to (18) as Subdivs. (14) to (21) and made a technical change in new Subdiv. (16); P.A. 22-96 redefined “control person” in Subdiv. (4) and “key individual” in Subdiv. (7); P.A. 23-82 added reference to Sec. 36a-613 in introductory language, redefined “money transmission” in Subdiv. (11) and added Subdivs. (22) to (24) defining “virtual currency address”, “virtual currency kiosk” and “virtual currency wallet”, respectively.
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Sec. 36a-609. (Formerly Sec. 36-545). Exemptions. The provisions of sections 36a-597 to 36a-607, inclusive, and sections 36a-611 and 36a-612 shall not apply to:
(1) Any federally insured federal bank, out-of-state bank, Connecticut bank, Connecticut credit union, federal credit union or out-of-state credit union, provided such institution does not engage in the business of money transmission in this state through any person who is not (A) a federally insured federal bank, out-of-state bank, Connecticut bank, Connecticut credit union, federal credit union or out-of-state credit union, (B) a person licensed pursuant to sections 36a-595 to 36a-612, inclusive, or an authorized delegate acting on behalf of such licensed person, or (C) a person exempt pursuant to subdivisions (2) to (4), inclusive, of this section;
(2) Any Connecticut bank that is an uninsured bank organized pursuant to subsection (t) of section 36a-70;
(3) The United States Postal Service and any contractor that engages in the business of money transmission in this state on behalf of the United States Postal Service; and
(4) A person whose activity is limited to the electronic funds transfer of governmental benefits for or on behalf of a federal, state or other governmental agency, quasi-governmental agency or government sponsored enterprise.
(P.A. 81-264, S. 16; P.A. 91-357, S. 58, 78 P.A. 92-12, S. 99; P.A. 94-122, S. 284, 340; P.A. 01-56, S. 16; P.A. 03-61, S. 6; P.A. 04-14, S. 12; P.A. 09-208, S. 21; P.A. 13-253, S. 16; P.A. 23-126, S. 26.)
History: P.A. 91-357 deleted reference to the Federal Savings and Loan Insurance Corporation from Subsec. (a); P.A. 92-12 redesignated Subdivs.; P.A. 94-122 changed “financial institution” to “bank”, effective January 1, 1995; Sec. 36-545 transferred to Sec. 36a-609 in 1995; P.A. 01-56 amended Subdiv. (1) by replacing reference to banks with insurable deposits with list of specific types of financial institutions and amended Subdiv. (3) by replacing former provisions re telegraph or cable company with language re electronic funds transfer of governmental benefits; P.A. 03-61 substituted “36a-597 to 36a-606a” for “36a-595 to 36a-610”, amended Subdiv. (1) by deleting “Except in its capacity as an agent of a licensee”, substituting “federally insured federal bank” for “federally insured bank” and deleting “Connecticut credit union”, inserted new Subdiv. (2) re exemption for any Connecticut bank or Connecticut credit union and redesignated existing Subdivs. (2) and (3) as new Subdivs. (3) and (4); P.A. 04-14 amended Subdiv. (1) to add reference to “monetary value”, effective April 16, 2004; P.A. 09-208 deleted reference to subagent in Subdiv. (1); P.A. 13-253 replaced reference to Sec. 36a-606a with reference to Sec. 36a-607 and added references to Secs. 36a-611 and 36a-612, amended Subdiv. (1) to add references to Connecticut bank and Connecticut credit union, change “issue or sell Connecticut payment instruments or transmit money or monetary value” to “engage in the business of money transmission in this state”, change “agent” to “any person”, add Subparas. (B) and (C) re licensed or exempt person and designate provision re federally insured institutions as Subpara. (A), deleted former Subdiv. (2) re Connecticut bank or credit union, redesignated existing Subdiv. (3) as Subdiv. (2) and amended same to add “any contractor that engages in the business of money transmission in this state on behalf of the United States Postal Service”, and redesignated existing Subdiv. (4) as Subdiv. (3); P.A. 23-126 made a technical and conforming change in Subdiv. (1), added new Subdiv. (2) re exemption for certain uninsured banks, and redesignated existing Subdivs. (2) and (3) as Subdivs. (3) and (4).
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Sec. 36a-613. Virtual currency kiosks. Disclosures. Receipts. Maximum fees. Maximum daily transaction limit. Cancellation and refund. (a) The owner or operator of a virtual currency kiosk shall, in establishing a relationship with a customer and prior to entering into an initial virtual currency transaction for, on behalf of or with the customer, disclose in clear, conspicuous and legible writing in the English language all material risks associated with virtual currency generally, including, but not limited to, the following:
(1) A disclosure, which shall be acknowledged by the customer, provided separately from the disclosures provided pursuant to subdivisions (2) to (9), inclusive, of this subsection and written prominently and in bold type, stating the following: “WARNING: LOSSES DUE TO FRAUDULENT OR ACCIDENTAL TRANSACTIONS MAY NOT BE RECOVERABLE AND TRANSACTIONS IN VIRTUAL CURRENCY ARE IRREVERSIBLE.”;
(2) Virtual currency is not backed or insured by the government and accounts and value balances are not subject to Federal Deposit Insurance Corporation, National Credit Union Administration or Securities Investor Protection Corporation protections;
(3) Some virtual currency transactions shall be deemed to be made when recorded on a public ledger, which may not be the date or time when the customer initiates the virtual currency transaction;
(4) The value of virtual currency may be derived from the continued willingness of market participants to exchange fiat currency for virtual currency, which may result in the permanent and total loss of the value of a particular virtual currency, if the market for that virtual currency disappears;
(5) There is no assurance that a person who accepts a virtual currency as payment today will continue to do so in the future;
(6) The volatility and unpredictability of the price of virtual currency relative to fiat currency may result in a significant loss over a short period of time;
(7) The nature of virtual currency may lead to an increased risk of fraud or cyber attack;
(8) The nature of virtual currency means that any technological difficulties experienced by the owner or operator may prevent access to or use of a customer's virtual currency; and
(9) Any bond maintained by the owner or operator for the benefit of the customers of such owner or operator may not be sufficient to cover all losses incurred by such customers.
(b) The owner or operator of a virtual currency kiosk shall, when opening an account for a new customer and prior to entering into an initial virtual currency transaction for, on behalf of or with such customer, disclose in clear, conspicuous and legible writing in the English language, using not less than twenty-four point sans-serif-type font, all relevant terms and conditions associated with the products, services and activities of the owner or operator and virtual currency generally, including, but not limited to, the following:
(1) The customer's liability for unauthorized virtual currency transactions;
(2) The customer's right to stop payment of a preauthorized virtual currency transfer and the procedure used to initiate a stop-payment order;
(3) Under what circumstances the owner or operator will, absent a court or government order, disclose information concerning the customer's account to third parties;
(4) The customer's right to receive periodic account statements and valuations from the owner or operator;
(5) The customer's right to receive a receipt, trade ticket or other evidence of a virtual currency transaction; and
(6) The customer's right to prior notice of a change in the rules or policies of the owner or operator.
(c) The owner or operator of a virtual currency kiosk shall, prior to each transaction in virtual currency for, on behalf of or with a customer, disclose to such customer in clear, conspicuous and legible writing in the English language, using not less than twenty-four point sans-serif-type font, the terms and conditions of the virtual currency transaction, including, but not limited to, the following:
(1) The amount of the transaction;
(2) Any fees, expenses and charges borne by the customer, including, but not limited to, applicable exchange rates;
(3) The type and nature of the virtual currency transaction;
(4) A warning that, once executed, the virtual currency transaction may not be undone, if applicable;
(5) A daily virtual currency transaction limit in accordance with subsection (g) of this section; and
(6) The difference in the sale price of the virtual currency versus the current market price.
(d) The owner or operator of a virtual currency kiosk shall ensure that each customer acknowledges receipt of all disclosures required under this section.
(e) The owner or operator of a virtual currency kiosk shall, upon the completion of any virtual currency transaction, provide to the customer a receipt containing the following information:
(1) The name of, and contact information for, the owner or operator, including a telephone number established by the owner or operator to answer questions and register complaints;
(2) The type, value, date and precise time of such virtual currency transaction, and each virtual currency address;
(3) The fee charged;
(4) The exchange rate, if applicable;
(5) A statement of the liability of the owner or operator for nondelivery or delayed delivery;
(6) A statement of the refund policy of the owner or operator; and
(7) Any additional information the Banking Commissioner may require.
(f) The Banking Commissioner may establish a schedule of maximum fees that an owner or operator of a virtual currency kiosk may charge for specific services.
(g) There is established a maximum daily transaction limit of two thousand five hundred dollars for each customer of a virtual currency kiosk.
(h) The owner or operator of a virtual currency kiosk shall, at such owner's or operator's cost and within seventy-two hours after a virtual currency transaction, allow the customer to cancel and receive a full refund for the virtual currency transaction if such virtual currency transaction: (1) Is the customer's first virtual currency transaction with such owner or operator; and (2) is to a virtual currency wallet or exchange located outside of the United States.
(P.A. 23-82, S. 3.)
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Sec. 36a-614. Regulations. (a) For purposes of this section, “commissioner” has the same meaning as provided in section 36a-2.
(b) The commissioner may, in accordance with the provisions of chapter 54, adopt, amend and rescind regulations, forms and orders governing the business use of digital assets, including, but not limited to, virtual currencies and stablecoins, by entities that, and individuals who, are subject to regulation by the commissioner, which regulations, forms and orders shall ensure consumer protection.
(c) In adopting, amending or rescinding any regulation, form or order pursuant to subsection (b) of this section, the commissioner may consult with federal financial services regulators, financial services regulators of other states, other stakeholders and industry professionals to ensure that digital assets receive, to the extent practicable, consistent treatment.
(P.A. 23-82, S. 1.)
History: P.A. 23-82 effective June 27, 2023.
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