Money Transmission Services Act FAQ

  • Money Transmission Services Act FAQ

    Updated 11/18/19

FAQ
What is the Money Transmission Services Act?

2006 PA 250 created the Money Transmission Services Act (MTSA), to regulate the money transmission services business.

Who is subject to the MTSA?

Beginning January 1, 2007, all entities providing money transmission services must obtain the appropriate license from DIFS and comply with the provisions of the MTSA. The phrase “money transmission services” is defined to mean the selling or issuing of payment instruments or closed-loop prepaid access or prepaid access devices or vehicles or the receiving of money or monetary value for transmission. The term does not include the provision solely of delivery, online or telecommunications services or network access. A payment instrument is defined as any electronic or written check draft, money order, travelers check, or other wire, electronic or written instrument or order for the transmission or payment of money. The term does not include any credit card voucher, letter of credit, or tangible object redeemable by the issuer in goods or services.

Who is NOT subject to the MTSA?

The MTSA provides for various exemptions. These exemptions are listed under Section 4 of the MTSA. In order to utilize the "agent of payee" exemption defined under Section 4(g) of the MTSA, an entity or licensee must first submit a formal request to the Director of the Department of Insurance and Financial Services. Procedures on how to file for this exemption can be found on the DIFS website.

Does the MTSA apply to foreign currency exchange?

No, the MTSA does not apply if the activity conducted is strictly limited to the exchange of currency. If, on the other hand, the entity is not only going to provide currency exchange services, but also engage in the business of money transmission services (such as holding funds in an e-wallet), the entity would need to obtain the appropriate license.

How do we become licensed as a Money Transmitter in Michigan?

A money transmitter license application with appropriate surety bond and fees must be submitted through NMLS and approved by DIFS. For state specific licensing requirements, visit the DIFS website at www.michigan.gov/difs - Licensing - Consumer Finance and Mortgage – Money Transmission Services – How to become Licensed – Link to NMLS.

Is the application fee refundable?

No.

Is there a surety bond requirement to become licensed?

Yes. Submit an Electronic Surety Bond via NMLS in the amount of $500,000 for the first location, plus $10,000 for each additional location and authorized delegate up to a maximum amount of $1,500,000, furnished and submitted by a surety company authorized to conduct business in Michigan.

What is the net worth requirement to be licensed under the MTSA?

The applicant must have net worth that exceeds $100,000. If the applicant will provide money transmission services at more than one location or through authorized delegates, the net worth must equal at least the sum of $100,000.00 plus an additional $25,000.00 for each location or authorized delegate or $1,000,000.00, whichever is less. A licensee is required at all times to maintain a net worth that meets or exceeds the amounts described above.

How long does the Director have to approve or deny a completed application?

The Director has 120 days to approve or deny an application once it is determined to be complete.

When do we need to renew our Money Transmitter License?

Your license expires on December 31 of each year and must be renewed on or before December 1 of each year. You will receive a notice from our office with instructions on how to renew. Failure to renew in a timely manner may prevent you from conducting money transmission in Michigan. (Section 15 of the MTSA)

How will applicants and licensees know what the fee amounts will be?

Visit the DIFS website at www.michigan.gov/difs - Licensing - Consumer Finance and Mortgage, How to Become Licensed - Fee Schedule.

Do we need to give written notice for a proposed change of Direct or Indirect Ownership?

Yes. The transfer of a license is required when a change in control is proposed, or more than 25% of the ownership of a licensed entity will be conveyed. Section 24 of the MTSA requires prior approval by the Director for the transfer of a license. An Advanced Change Notice must be submitted through NMLS at least 30 days before the proposed change of control occurs.

What other changes are required to be submitted to DIFS?

A licensee is required to notify DIFS if there is a change in any information provided in a licensee’s initial or renewal application BEFORE the change occurs (Section 23).

What types of changes require a 30-day advance notice and the submission of an advance change notice in NMLS?

An advance change notice must be filed 30 days through NMLS prior to the change for each of the following:

  • Change of Business Address
  • Change of Business Name
  • Addition/Deletion of Trade Name
  • Change in State of Domicile
  • Change in Legal Entity Type
  • Change in Direct and Indirect Ownership

Submit the following document to DIFS:

  • Original license certificate
What are the fees associated with the changes listed above?

All fees collected through NMLS are not refundable.

Michigan collects fees for the following changes through NMLS at time of initial advance change notice:

  • Change of Business Address - $50
  • Change of Business Name - $50
  • Addition of Trade Name - $50
  • Conversion of legal entity type - $50

Michigan collects fees for the following changes through an uploaded NMLS Agency Invoice:

  • Deletion of Trade Name - $50
  • Change in State of Domicile - New Application Required
  • Change in Legal Entity Type (no conversion of legal entity) - New Application Required
  • Issuance of Duplicate Certificate - $50
  • Change in Ownership
    • $50 - if no investigation required
    • $600 - if investigation required
What types of changes are not charged a fee?

Michigan does not charge fees for the following changes:

  • Mailing Address, Phone/Fax Number, Website Address, E-mail Address
  • Company Control Persons
  • Qualifying Individual
  • Disclosure Questions
Are we required to report Authorized Delegates to DIFS?

Yes. You must complete your agent/delegate upload through the UAAR functionality in NMLS. After your initial upload, your company will be required to report through NMLS any changes to this information on a quarterly basis.

Are we required to file Quarterly Reports?

Yes. The MSB Call Report is required to be completed and submitted quarterly in NMLS. The reports are due 45 days after the end of each quarter.

We no longer want/need our Money Transmitter license, what do we do?

Whether you go out of business or elect not to renew your license, you must file a surrender request through NMLS.

In addition, you must submit the original license certificate to DIFS.

Who do we contact for licensing issues?

If you have any questions concerning licensing issues, please contact the Consumer Finance Licensing Unit at 877-999-6442.

Who do we contact for compliance issues?

If you have questions concerning compliance issues, quarterly report filing, UAAR authorized delegate reporting, permissible investments/outstanding payment liabilities, or examinations, you should contact the Consumer Finance Examination Unit at 877-999-6442.

How can we locate licensed Money Transmitter Entities/Locations?

You can view licensed entities and entity locations by visiting the DIFS website at www.michigan.gov/difs – Locate, Consumer Finance, Industry Type – Money Transmitters.

Can the Director conduct an investigation or examination of a licensee or any of its authorized delegates?

Yes.

Is the information obtained during the investigation or examination confidential?

Section 26 of the MTSA requires all employees and agents of DIFS to keep secret all facts and information obtained in the course of their duties, unless the person is required under law to report on, take official action concerning, or testify in any proceedings regarding a licensee. This does not prohibit the furnishing of information or documents to, any federal, foreign or out-of-state regulator agency with jurisdiction over a licensee and this section is not applicable to any disclosure made in the public interest by the Director, at his or her discretion.

How long must a licensee or any person subject to the MTSA maintain its financial records and other records for DIFS examination or investigation?

For at least three years.

What investments are permissible?

The authorized permissible investments are listed in Section 32 of the MTSA.  Order No. 2018-003-CF lists additional items the Director has designated that may be used as permissible investments.  Please note:

  • Only cash in a federally insured depository financial institution may be utilized as a permissible investment.Cash on hand and cash in a foreign bank cannot be utilized to cover outstanding payment instruments.

  • Authorized delegate receivables are limited as follows: They must be payable in the ordinary course of business, pursuant to contracts that are not past due or doubtful of collection; the aggregate amount of authorized delegate receivables must not exceed 20% of total permissible investments; and the receivable from any 1 authorized delegate cannot exceed more than 10% of the total permissible investments.

May we utilize ACH receivables and credit card receivables as permissible investments?

Order No. 2018-003-CF became effective on February 12, 2018. The Order states that MTSA licensees may utilize ACH receivables from money transmission activities and credit card receivables from money transmission activities as permissible investments subject to certain conditions.

Must an authorized delegate engaged in the money services business be licensed under the MTSA?

No license is required for a person to act as an authorized delegate (AD) on behalf of an entity licensed under the MTSA or a class 1 licensee under the Consumer Financial Services Act. An AD shall not provide money transmission services outside the scope of activity permissible under the authorized delegate agreement, except activity in which the AD is otherwise authorized or licensed to engage.

What documentation must a licensee provide to an authorized delegate?

An authorized delegate (AD) is defined as a person that a licensee designates to provide money transmission services in this state on behalf of the licensee. The agreement between the licensee and AD must be in writing and require the AD to operate in compliance with the MTSA and other applicable law. The licensee must furnish the AD with written policies and procedures sufficient to ensure compliance with the MTSA and other applicable law. The specific information included in Sections 21, 25, 33, 34 and 42 of the MTSA must be included within the signed AD agreement or provided within the policies and procedures given to the AD.

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    The answers provided are not meant to be a substitute for legal advice.