Sec. 36a-487. (Formerly Sec. 36-440b). Exemptions f
Sec. 36a-498e. Prohibited acts.
Sec. 36a-535. (Formerly Sec. 36-254). Definitions.
Sec. 36a-555. (Formerly Sec. 36-225). Definitions.
Sec. 36a-596. (Formerly Sec. 36-531). Definitions.
Sec. 36a-602. (Formerly Sec. 36-538). Surety bond. Investments in lieu of surety bond.
Sec. 36a-611. Maintenance of records. Unique identifier of license. Advertising of license.
Sec. 36a-487. (Formerly Sec. 36-440b). Exemptions from licensure. (a) The following are exempt from licensing as a mortgage lender, mortgage correspondent lender or mortgage broker under sections 36a-485 to 36a-498e, inclusive, 36a-534a and 36a-534b: (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 any such bank or credit union; (3) any operating subsidiary where each owner of such operating subsidiary is wholly owned by the same such bank or credit union; (4) any person licensed under sections 36a-671 to 36a-671d, inclusive, or exempt from licensure under section 36a-671c, who is negotiating or offering to negotiate terms of a residential mortgage loan as authorized by said sections 36a-671 to 36a-671d, inclusive; and (5) any person engaged solely in providing loan processing or underwriting services to persons (A) licensed as a mortgage lender, mortgage correspondent lender or mortgage broker, or (B) exempt from such licensure under subdivision (1) of this subsection. Each wholly-owned subsidiary of a Connecticut bank or Connecticut credit union that engages in the business of making residential mortgage loans or acts as a mortgage broker in this state shall provide written notification to the commissioner prior to engaging in such activity.
(b) The following are exempt from licensing as a mortgage lender or mortgage correspondent lender under sections 36a-485 to 36a-498e, inclusive, 36a-534a and 36a-534b:
(1) Persons making five or fewer residential mortgage loans within any period of twelve consecutive months, provided nothing herein shall relieve such persons from complying with all applicable laws;
(2) Bona fide nonprofit organizations making residential mortgage loans that promote home ownership for the economically disadvantaged;
(3) Agencies of the federal government, or any state or municipal government, or any housing finance agency making residential mortgage loans under the specific authority of the laws of any state or the United States. For purposes of this subdivision, a “housing finance agency” means any authority:
(A) Chartered by a state to help meet the affordable housing needs of the residents of the state; (B) supervised directly or indirectly by the state government; (C) subject to audit and review by the state in which it operates; and (D) whose activities make it eligible to be a member of the National Council of State Housing Agencies;
(4) Persons owning real property who take back from the buyer of such property a secondary mortgage loan in lieu of any portion of the purchase price of the property;
(5) Any corporation or its affiliate that makes residential mortgage loans exclusively for the benefit of its employees or agents;
(6) Any corporation, licensed in accordance with section 38a-41, or its affiliate or subsidiary, that makes residential mortgage loans to promote home ownership in urban areas;
(7) Persons acting as fiduciaries with respect to any employee pension benefit plan qualified under the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, who make residential mortgage loans solely to plan participants from plan assets; and
(8) Persons making secondary mortgage loans to immediate family members.
(c) A bona fide nonprofit organization shall be exempt from licensing as a mortgage broker under sections 36a-485 to 36a-498e, inclusive, 36a-534a and 36a-534b to the extent that such bona fide nonprofit organization acts as a mortgage broker in connection with residential mortgage loans to be exclusively made by persons covered by the exemption set forth in either subdivision (5) or (6) of subsection (b) of this section.
(d) Any person claiming exemption from licensure under this section may register on the system as an exempt registrant for purposes of sponsoring a mortgage loan originator or a loan processor or underwriter pursuant to subdivision (1) of subsection (b) of section 36a-486. Such registration shall not affect the exempt status of such person. Each registration shall expire at the close of business on December thirty-first of the year in which such registration was approved, unless such registration is renewed or, if such registration is approved on or after November first, such registration shall expire at the close of business on December thirty-first of the year following the year in which such registration was approved. An application for renewal of a registration shall be filed on the system between November first and December thirty-first of the year in which the registration expires. Each applicant for an initial registration or renewal of a registration shall pay to the system any required fees or charges. All fees paid pursuant to this subsection shall be nonrefundable. Any approval of such registration, or any approval of any renewal of such registration, shall not constitute a determination by the commissioner that such entity is exempt, but rather shall evidence the commissioner's approval to use the system for purposes of sponsoring and bonding.
(e) (1) For purposes of this section, a “bona fide nonprofit organization” means an organization that has filed a written certified submission to the commissioner in a form prescribed by the commissioner and with such documentation as may be required by the commissioner and that demonstrates to the satisfaction of the commissioner that the organization: (A) Has the status of a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended; (B) promotes affordable housing or provides home ownership education or similar services; (C) conducts its activities in a manner that serves public or charitable purposes rather than commercial purposes; (D) receives funding and revenue and charges fees in a manner that does not incentivize it or its employees to act other than in the best interests of its clients; (E) compensates its employees in a manner that does not incentivize employees to act other than in the best interests of its clients; (F) provides or identifies for the borrower residential mortgage loans (i) with terms favorable to the borrower, which means such terms must be consistent with loan origination in a public or charitable context, not a commercial context, and (ii) comparable to mortgage loans and housing assistance provided under government housing assistance programs; and (G) meets such other standards as the commissioner may by regulation require. Any organization that demonstrates to the satisfaction of the commissioner its status as a bona fide nonprofit organization shall timely report any change in any information previously submitted to the commissioner and, not later than December thirty-first of each year, submit to the commissioner a renewed certification and documentation to update all information last filed in support of such bona fide nonprofit organization status or such status shall expire, except that any organization that obtained initial bona fide nonprofit status from the commissioner after November first of a given year shall submit a renewal certification and documentation by December thirty-first of the following year.
(2) The commissioner shall have the authority to periodically examine the books and activities of a certified bona fide nonprofit organization and to revoke the bona fide nonprofit organization status of an entity that does not continue to meet the criteria in subdivision (1) of this subsection.
(P.A. 85-399, S. 3; P.A. 88-65, S. 37; P.A. 89-211, S. 41; P.A. 92-12, S. 88; P.A. 94-122, S. 231, 340; P.A. 99-36, S. 24; P.A. 02-111, S. 4; P.A. 04-69, S. 3; P.A. 08-176, S. 41; P.A. 09-209, S. 6; P.A. 11-216, S. 11; P.A. 12-96, S. 9; P.A. 14-89, S. 21; P.A. 15-235, S. 30; P.A. 18-173, S. 9; P.A. 25-115, S. 20.)
History: P.A. 88-65 deleted a reference to industrial bank in Subsec. (a); P.A. 89-211 clarified reference to the Internal Revenue Code of 1986; P.A. 92-12 redesignated Subdivs.; P.A. 94-122 made technical changes, effective January 1, 1995; Sec. 36-440b transferred to Sec. 36a-487 in 1995; P.A. 99-36 made a technical change; P.A. 02-111 amended Subdivs. (2), (3) and (4) by substituting “making” for “granting”, amended Subdiv. (6) by changing “licensed lender” to “licensed mortgage lender” and amended Subdiv. (8) by substituting “makes” for “grants”; P.A. 04-69 substituted “36a-498a” for “36a-498”; P.A. 08-176 amended Subdiv. (1) to add reference to operating subsidiaries of federal banks and federally-chartered out-of-state banks, amended Subdiv. (2) to add “provided nothing herein shall relieve such persons from complying with all applicable laws”, amended Subdiv. (6) to replace former provision with provision re owners who take back a secondary mortgage loan in lieu of any portion of purchase price, added Subdiv. (10) re making of secondary mortgage loans to relatives, and made conforming changes, effective July 1, 2008; P.A. 09-209 designated existing introductory clause and Subdiv. (1) as Subsec. (a), amended same by adding citations to additional licensing provisions and adding exemptions re certain financial institutions, added Subsec. (b) re exemptions from licensing as a lender or correspondent lender, redesignated existing Subdivs. (2) to (10) as Subsecs. (b)(1) to (b)(9) and added “residential” re mortgage loans throughout, effective July 31, 2009; P.A. 11-216 amended Subsec. (a) to add provision re exemption is from licensing as a mortgage lender, mortgage correspondent lender or mortgage broker, designate provision re exemption for banks and credit unions as Subdiv. (1), add Subdiv. (2) re exemption for any person licensed under Secs. 36a-671 to 36a-671d or exempt from licensure and add Subdiv. (3) re exemption for any person engaged solely in providing loan processing or underwriting services to persons licensed as mortgage lender, correspondent lender or broker or exempt from such licensure, and added Subsec. (c) re persons exempt from licensure registering on the system; P.A. 12-96 amended Subsec. (b) to replace “corporations” with “organizations” in Subdiv. (2), to replace “quasi-governmental” with “housing finance” and add definition of “housing finance agency” in Subdiv. (3) and to make technical changes, added new Subsec. (c) re exemption of bona fide nonprofit organization, redesignated existing Subsec. (c) as Subsec. (d) and added Subsec. (e) defining “bona fide nonprofit organization”; P.A. 14-89 amended Subsec. (a) to designate existing provision re subsidiary as new Subdiv. (2) and amend same to replace “operating subsidiary” with “wholly-owned subsidiary”, delete references to federal bank and federally chartered out-of-state bank and make conforming changes, add new Subdiv. (3) re operating subsidiary and redesignate existing Subdivs. (2) and (3) as Subdivs. (4) and (5); P.A. 15-235 amended Subsec. (d) to add provision re scope of commissioner's approval of registration and to change “exempt” to “claiming exemption”, effective July 7, 2015; P.A. 18-173 amended Subsecs. (a) to (c) by replacing references to Sec. 36a-498f with references to Sec. 36a-498e, further amended Subsec. (b) by deleting former Subdiv. (4) re persons licensed under Secs. 36a-555 to 36a-573, and redesignating existing Subdivs. (5) to (9) as Subdivs. (4) to (8), amended Subsec. (e) by designating existing provisions re definition of “bona fide nonprofit organization” as Subdiv. (1) and amending same by adding provision re expiration of status, and adding Subdiv. (2) re commissioner's authority to examine books and activities of certified bona fide nonprofit organization and revoke status, and made technical and conforming changes; P.A. 25-115 added provisions in Subsec. (d) re expiration of registration, renewal of registration and fees or charges paid by applicants for registration.
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Sec. 36a-490. (Formerly Sec. 36-440e). License requirements. Request to surrender license. Requirements for filing information with system. (a)(1) Any licensee who intends to permanently cease engaging in the business of making residential mortgage loans or acting as a mortgage broker or lead generator at any time during a license period for any cause, including, but not limited to, bankruptcy or voluntary dissolution, shall file a request to surrender the license for each office at which the licensee intends to cease to do business, on the system, not later than fifteen days after the date of such cessation, provided this requirement shall not apply when a license has been suspended pursuant to section 36a-51. No surrender shall be effective until accepted by the commissioner.
(2) A mortgage loan originator licensee who intends to permanently cease engaging in the business of a mortgage loan originator at any time during a license period for any cause, including, but not limited to, bankruptcy, shall file a request to surrender the license on the system not later than fifteen days after the date of such cessation, provided this requirement shall not apply when a license has been suspended pursuant to section 36a-51. No surrender shall be effective until accepted by the commissioner.
(3) A loan processor or underwriter licensee who intends to permanently cease engaging in the activities of a loan processor or underwriter at any time during a license period for any cause, including, but not limited to, bankruptcy, shall file a request to surrender the license on the system not later than fifteen days after the date of such cessation, provided this requirement shall not apply when a license has been suspended pursuant to section 36a-51. No surrender shall be effective until accepted by the commissioner.
(b) (1) A mortgage lender, mortgage correspondent lender, mortgage broker or lead generator license shall not be transferable or assignable. Any change in any control person of the licensee, except a change of director, general partner or executive officer that is not the result of an acquisition or change of control of the licensee, shall be the subject of an advance change notice filed on the system not later than thirty days prior to the effective date of such change and no such change shall occur without the commissioner's approval. For purposes of this section, “change of control” means any change causing the majority ownership, voting rights or control of a licensee to be held by a different control person or group of control persons.
(2) No licensee may use any name other than its legal name or a fictitious name approved by the commissioner, provided such licensee may not use its legal name if the commissioner disapproves use of such name. No licensee shall use any name or address other than the name and address specified on the license issued by the commissioner. A mortgage lender, mortgage correspondent lender, mortgage broker or lead generator licensee may change the name of the licensee or address of the office specified on the most recent filing with the system if (A) at least thirty calendar days prior to such change, the licensee files such change with the system and, in the case of a change to the legal name of the licensee, provides, directly to the commissioner, a bond rider to the surety bond on file with the commissioner that reflects the new legal name of the licensee, and (B) the commissioner does not disapprove such change, in writing, or request further information within such thirty-day period.
(3) The commissioner may automatically suspend any license for a violation of this subsection, or upon a failure of the licensee to designate a qualified individual or branch manager who meets the requirements set forth in section 36a-488, within thirty days of a vacancy in the position. After a license has been automatically suspended pursuant to this subsection, the commissioner shall (A) give the licensee notice of the automatic suspension, pending proceedings for revocation of or refusal to renew the license pursuant to section 36a-494 and an opportunity for a hearing in accordance with section 36a-51, and (B) require the licensee to take or refrain from taking action as the commissioner deems necessary to effectuate the purpose of this section.
(c) Except as otherwise specified in subsection (b) of this section, each mortgage lender, mortgage correspondent lender, mortgage broker or lead generator applicant or licensee, and each individual designated as a control person, qualified individual or branch manager of such applicant or licensee, shall file on the system, or, if the information cannot be filed on the system, notify the commissioner, in writing, of any change in the information such applicant, licensee, control person, qualified individual or branch manager most recently submitted to the system in connection with the application or license not later than fifteen days after the date such applicant, licensee, control person, qualified individual or branch manager had reason to know of the change. A mortgage lender, mortgage correspondent lender, mortgage broker or lead generator licensee shall file with the system or, if the information cannot be filed on the system, notify the commissioner, in writing, of the occurrence of any of the following developments not later than fifteen days after the date such licensee had reason to know of such development:
(1) Filing for bankruptcy or the consummation of a corporate restructuring of the licensee;
(2) Filing of a criminal indictment against the licensee in any way related to the lending or brokerage activities of the licensee, or receiving notification of the filing of any criminal felony indictment or felony conviction of any control person, branch manager or qualified individual of the licensee;
(3) Receiving notification of the institution of license denial, cease and desist, suspension or revocation procedures, or other formal or informal action by any governmental agency against the licensee or any control person, branch manager or qualified individual of the licensee and the reasons therefor;
(4) Receiving notification of the initiation of any action against the licensee or any control person, branch manager or qualified individual of the licensee by the Attorney General or the attorney general of any other state and the reasons therefor;
(5) Receiving notification of a material adverse action with respect to any existing line of credit or warehouse credit agreement;
(6) Suspension or termination of the licensee's status as an approved seller or servicer by the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation or Government National Mortgage Association;
(7) Exercise of recourse rights by investors or subsequent assignees of residential mortgage loans if such loans for which the recourse rights are being exercised, in the aggregate, exceed the licensee's net worth exclusive of real property and fixed assets;
(8) Receiving notification of filing for bankruptcy of the licensee or of any control person, branch manager or qualified individual of the licensee; or
(9) A decrease in the net worth required by subsection (a) of section 36a-488.
(d) Each mortgage loan originator applicant or licensee and each loan processor or underwriter applicant or licensee shall file with the system or, if the information cannot be filed on the system, notify the commissioner, in writing, of any change in the information most recently submitted in connection with the application or license not later than fifteen days after the date such applicant or licensee had reason to know of the change. Each mortgage loan originator licensee and each loan processor or underwriter licensee shall file with the system, or, if the information cannot be filed on the system, notify the commissioner, in writing, of the occurrence of any of the following developments not later than fifteen days after the date that such licensee had reason to know of the development:
(1) Filing for bankruptcy of the licensee;
(2) Filing of a criminal indictment against the licensee;
(3) Receiving notification of the institution of license or registration denial, cease and desist, suspension or revocation procedures, or other formal or informal action by any governmental agency against the licensee and the reasons therefor; or
(4) Receiving notification of the initiation of any action against the licensee by the Attorney General or the attorney general of any other state and the reasons therefor.
(e) Each mortgage lender, mortgage correspondent lender, mortgage broker, lead generator, mortgage loan originator and loan processor or underwriter license shall remain in force and effect until it has been surrendered, revoked or suspended, or until it expires or is no longer effective, in accordance with the provisions of this title.
(P.A. 85-399, S. 6; P.A. 89-347, S. 13; P.A. 94-122, S. 234, 340; P.A. 97-22, S. 1; P.A. 02-111, S. 7; P.A. 04-69, S. 5; P.A. 07-91, S. 3; 07-156, S. 8; P.A. 08-176, S. 31, 44; P.A. 09-208, S. 4; 09-209, S. 10; P.A. 10-32, S. 112; P.A. 11-216, S. 18, 19; P.A. 17-38, S. 6; P.A. 18-173, S. 12; P.A. 21-138, S. 7; P.A. 25-115, S. 6.)
History: P.A. 89-347 amended Subsec. (a) by adding the reference to a licensee acting as a mortgage broker in more than one location; P.A. 94-122 made technical changes, effective January 1, 1995; Sec. 36-440e transferred to Sec. 36a-490 in 1995; P.A. 97-22 made a technical change in Subsec. (a); P.A. 02-111 amended Subsec. (a) by changing requirement re license from “prominently posted in each place of business of the licensee” to “maintained at the location for which the license was issued and shall be available for public inspection”, by changing requirement re change of location from prior approval to prior written notice and by making technical changes, amended Subsec. (b) by deleting former notice requirements and adding provision requiring licensee to promptly notify commissioner of any change in the information provided in the application and amended Subsec. (c) by replacing reference to Sec. 36a-495 with reference to Sec. 36a-498; P.A. 04-69 amended Subsec. (c) to substitute “36a-498a” for “36a-498”; P.A. 07-91 amended Subsec. (a) to delete provision requiring only prior written notice to commissioner for any change of location of a licensee, and amended Subsec. (b) to allow licensee to change name or location specified on its license if, at least 21 calendar days prior to change, licensee provides written notice to commissioner on a form satisfactory to commissioner and a bond rider or endorsement to surety bond on file and commissioner does not disapprove change, in writing, or request further information within such 21-day period; P.A. 07-156 amended Subsec. (a) to insert “mortgage lender and first mortgage broker” re license, effective September 30, 2008; P.A. 08-176 changed effective date of P.A. 07-156, S. 8, from September 30, 2008, to July 1, 2008, amended Subsec. (a) to add mortgage correspondent lender, to delete provisions re business at more than one location, to substitute legal name or fictitious name approved by commissioner for name stated on license, to add provisions re licensee who ceases to engage in business and to make conforming changes, amended Subsec. (b) to substitute “thirty” for “twenty-one” calendar days and “thirty-day” for “twenty-one-day” period and provide for filing with Nationwide Mortgage Licensing System, added new Subsecs. (c) and (d) re notification requirements, redesignated existing Subsec. (c) as Subsec. (e) and made conforming changes therein, effective July 1, 2008; P.A. 09-208 amended Subsec. (e) by substituting “this title” for “sections 36a-485 to 36a-498a, inclusive”, effective July 7, 2009; P.A. 09-209 changed “mortgage loan” to “residential mortgage loan” and “Nationwide Mortgage Licensing System” to “system” throughout, amended Subsec. (a) to provide that no surrender of license is effective until accepted by commissioner, amended Subsec. (b) to reposition and revise provision re prompt filing of change in information, amended Subsec. (c) by deleting former Subdiv. (9) re notifying commissioner of change in control and adding new Subdiv. (9) re decrease in net worth, and amended Subsec. (e) by inserting reference to other licensing provisions, effective July 31, 2009; P.A. 10-32 made technical changes in Subsec. (e), effective May 10, 2010; P.A. 11-216 amended Subsec. (a) to designate existing provisions as Subdiv. (1) and delete “license revocation” therein and add Subdivs. (2) and (3) re filing request to surrender a license, amended Subsec. (b) to add references to main or branch office and addendum, amended Subsec. (d) to add reference to loan processor or underwriter, require notification of any change in information most recently submitted and delete “mortgage loan originator” in Subdivs. (1) to (4) and amended Subsec. (e) to add reference to loan processor or underwriter, effective July 13, 2011; P.A. 17-38 added references to lead generator, amended Subsec. (a)(3) and (d) to delete reference to October 1, 2011, amended Subsec. (c)(3) and (d)(3) to delete “regulatory”, and made technical changes; P.A. 18-173 amended Subsec. (a)(1) by deleting provision re transfer or assignment of license and use of name other than legal or approved fictitious name, amended Subsec. (b) by adding Subdiv. (1) re transfer or assignment of license and change in control person, designating existing provisions re change to name or address on most recent filing with the system as Subdiv. (2) and amending same to add provision re use of name other than legal name or approved fictitious name, redesignating existing Subdivs. (1) and (2) as Subparas. (A) and (B), deleting provision re licensee to promptly file change in information most recently submitted in connection with license with the system or notify commissioner of change, and adding Subdiv. (3) re automatic suspension of license, amended Subsec. (c) by adding provision re filing or notice to commissioner of change to information, adding provision re notice to commissioner of occurrence of developments not later than 15 days after licensee has reason to know of development, deleting reference to licensee's officers, directors, members, partners or shareholders owning ten per cent or more of the outstanding stock in Subdivs. (2) and (8), adding references to control person, branch manager or qualified individual of licensee in Subdivs. (2), (3), (4) and (8), amended Subsec. (d) by adding references to applicant and application, adding provisions re filing or notice to commissioner of change to information or of certain developments not later than 15 days after date applicant or licensee had reason to know of change or development, and made technical and conforming changes; P.A. 21-138 amended Subsec. (b)(1) by defining “change of control” and making a conforming change; P.A. 25-115 amended Subsec. (b)(2) to replace “main or branch office” with “change to the legal name of the licensee”, delete “or endorsement, or addendum, as applicable,”, and to replace “new name or address of the main or branch office” with “new legal name of the licensee”.
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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. Such written notice of cancellation shall 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. 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; P.A. 25-115, S. 1.)
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); P.A. 25-115 amended Subsec. (c) to replace “If the bond is issued electronically on the system,” with “Such”, replace “cancellation may be provided” with “cancellation shall be provided” and delete provision re any notice of cancellation not provided through the system be sent by certified mail.
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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 qualified 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; P.A. 25-115, S. 26.)
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); P.A. 25-115 amended Subsec. (b)(1) to replace “qualifying” with “qualified”.
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Sec. 36a-498i. Mortgage lender licensees offering shared appreciation agreements. Required disclosures. (a) As used in this section, “mortgage lender” and “shared appreciation agreement” have the same meanings as provided in section 36a-485.
(b) Any mortgage lender that is required to be licensed pursuant to sections 36a-485 to 36a-498e, inclusive, 36a-534a and 36a-534b and offers to make a shared appreciation agreement shall, not later than three business days after the prospective borrower under such proposed agreement submits an application to such mortgage lender for such proposed agreement, disclose to such prospective borrower, in writing:
(1) The following statement, which shall be clear, conspicuous and in at least twelve-point font: “You are not required to complete this agreement merely because you have received these disclosures or have signed a loan application. If you obtain this loan, the lender will have a mortgage and shared interest in your home. You could lose your home, and any money you have put into it, if you do not meet your obligations under the loan. You may wish to consult an attorney.”;
(2) Financial information relevant to the proposed shared appreciation agreement, including, but not limited to, whether such proposed agreement is terminated through repayment, which repayment may include the mortgage lender's receipt of some or all of the proceeds from a sale of the dwelling or residential real estate that is the subject of such proposed agreement if such proposed agreement is terminated by such sale;
(3) Agreement and transaction details for the proposed shared appreciation agreement, including, but not limited to, the mortgage lender's contact information, the transaction amount, the sum of cash to be paid to the prospective borrower, the starting value for appreciation sharing, the term of the proposed agreement and the estimated current fair market value of the dwelling or residential real estate that is the subject of such proposed agreement;
(4) The method of determining the current fair market value of the dwelling or residential real estate that is the subject of the proposed shared appreciation agreement;
(5) The method of determining the final value of the dwelling or residential real estate that is the subject of the proposed shared appreciation agreement upon termination of such proposed agreement;
(6) The interest charged, if applicable;
(7) The limit of the mortgage lender's share of appreciation or equity in the dwelling or residential real estate that is the subject of the proposed shared appreciation agreement;
(8) An advisory that the prospective borrower consult such borrower's tax advisor on the potential tax implications of the proposed shared appreciation agreement;
(9) Repayment examples for the proposed shared appreciation agreement based upon, at minimum:
(A) Settlement of such proposed agreement after five years, ten years, fifteen years and thirty years, in each case up to the maximum term of such proposed agreement; and
(B) (i) No change in the market value of the dwelling or residential real estate that is the subject of such proposed agreement, and (ii) changes in the market value of the dwelling or residential real estate that is the subject of such proposed agreement (I) at the rate of ten per cent total depreciation over the term of such proposed agreement, (II) at the rate of three and one-half per cent total appreciation over such term, (III) at the rate of five and one-half per cent total appreciation over such term, and (IV) reflecting the actual average rate of appreciation or depreciation for all dwellings or residential real estate in this state during the period that is equal to the term of such proposed agreement and that occurred immediately prior to such term; and
(10) The following information and corresponding calculations for the proposed shared appreciation agreement, if applicable:
(A) The calculated appreciation amount;
(B) The appreciation-based charge;
(C) The accrued or charged interest;
(D) The principal amount to be repaid;
(E) The mortgage lender's total calculated share of appreciation or equity;
(F) Any limit to the mortgage lender's share of appreciation or equity; and
(G) For each of the repayment scenarios specified in subdivision (9) of this section:
(i) The actual amount of money to be paid by the prospective borrower to the mortgage lender, inclusive of any unconditional administrative fees or reimbursement of protective advances that are required to be paid at the time of the settlement of such proposed agreement; and
(ii) The total cost to the prospective borrower expressed as an annual percentage rate, to allow the prospective borrower to compare, under each such repayment scenario, the cost at the time of the settlement of such proposed agreement with the cost of a traditional mortgage loan.
(P.A. 25-115, S. 25.)
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Sec. 36a-535. (Formerly Sec. 36-254). Definitions. As used in sections 36a-535 to 36a-547, inclusive, unless the context otherwise requires:
(1) The terms “goods”, “retail installment sale”, “retail installment contract”, “installment loan contract”, “retail seller” and “retail buyer” have the same meanings as provided in section 36a-770;
(2) “Sales finance company” means any person engaging in this state in the business, in whole or in part, of (A) acquiring retail installment contracts or installment loan contracts from the holders thereof, by purchase, discount or pledge, or by loan or advance to the holder of either on the security thereof, or otherwise, or (B) receiving payments, including, but not limited to, principal, interest or fees, from a retail buyer in connection with a retail installment contract or installment loan contract. “Sales finance company” does not include a bank, out-of-state bank, Connecticut credit union, federal credit union, or out-of-state credit union, if so engaged;
(3) “Advertise” or “advertising” has the same meaning as provided in section 36a-485;
(4) “Control person” has the same meaning as provided in section 36a-485;
(5) “Branch office” means a location other than the main office at which a licensee or any person on behalf of a licensee acts as a sales finance company;
(6) “Main office” has the same meaning as provided in section 36a-485; and
(7) “Unique identifier” has the same meaning as provided in section 36a-485.
(1949 Rev., S. 5963; 1949, 1955, S. 2767d; 1957, P.A. 356, S. 1; March, 1958, P.A. 27, S. 50; 1959, P.A. 589, S. 1; 1961, P.A. 116, S. 18; 1969, P.A. 454, S. 27; P.A. 77-604, S. 51, 84; 77-614, S. 161, 610; P.A. 78-121, S. 108, 113; P.A. 80-482, S. 256, 345, 348; P.A. 81-128, S. 5; 81-158, S. 12, 17; P.A. 82-18, S. 2, 4; P.A. 87-9, S. 2, 3; P.A. 88-65, S. 34; P.A. 91-69; P.A. 92-12, S. 74; P.A. 94-122, S. 249, 340; P.A. 17-233, S. 10; 17-236, S. 12; P.A. 18-173, S. 23; P.A. 22-94, S. 1; P.A. 25-115, S. 12.)
History: 1959 act amended Subdiv. (b) by specifying goods means all chattels included in one contract and raising the aggregate price to $6000; 1961 act made various changes to conform to uniform commercial code; 1969 act specified that amount for “other itemized charges …” is part of time sale price where previously reference was to amount for insurance, other benefits and filing fees in Subsec. (c); P.A. 77-604 revised references to Sec. 42a-9-105; P.A. 77-614 replaced bank commissioner with banking commissioner within the department of business regulation and made banking department a division within said department, effective January 1, 1979; P.A. 78-121 deleted reference to private bankers in Subdiv. (h); P.A. 80-482 restored banking division as independent department and abolished the department of business regulation, allowing corresponding revision of commissioner's name; P.A. 81-128 eliminated the specific definitions for “goods”, “retail installment sale”, “retail installment contract”, “installment loan contract”, “retail seller” and “retail buyer” and provided those terms would have the definitions found in Sec. 42-83; P.A. 81-158 amended Subsec. (c) by replacing “section 36-396”, which had been repealed, with chapter 657, effective March 31, 1982; P.A. 82-18 changed effective date of P.A. 81-158 from March 31, 1982, to “the effective date of Title VI of Public Law 96-221, as contained in Section 625(a) of Public Law 96-221, as amended”, i.e. October 1, 1982; (Revisor's note: Pursuant to P.A. 87-9 “banking commissioner” was changed by the Revisors to “commissioner of banking”); P.A. 88-65 redefined “sales finance company” by deleting reference to industrial banks; P.A. 91-69 made technical changes and amended Subsec. (c) to provide that the term “sales finance company” does not include a bank, savings bank, savings and loan association, industrial bank or credit union; P.A. 92-12 redesignated Subdivs.; P.A. 94-122 deleted the definitions of “person” and “commissioner”, renumbered the remaining Subdivs. and made technical changes, effective January 1, 1995; Sec. 36-254 transferred to Sec. 36a-535 in 1995; P.A. 17-233 added Subdiv. (3) defining “advertise” or advertising” and added Subdiv. (4) defining “control person”; P.A. 17-236 amended Subdiv. (2) to redefine “sales finance company”; P.A. 18-173 replaced reference to Sec. 36a-546 with reference to Sec. 36a-547, amended Subdiv. (2) by redefining “sales finance company”, added Subdiv. (5) defining “branch office”, added Subdiv. (6) defining “main office”, added Subdiv. (7) defining “unique identifier”, and made technical changes; P.A. 22-94 redefined “sales finance company” in Subdiv. (2); P.A. 25-115 amended Subdiv. (2) to redefine “sales finance company”.
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Sec. 36a-555. (Formerly Sec. 36-225). Definitions. As used in this section, and sections 36a-556 to 36a-574, 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 finance charge shall be included;
(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) “Earned but unpaid wage or salary income” means the wage, salary, compensation or other income earned on an hourly, project-based, piecework or other basis by a Connecticut borrower for the provision of labor or services to, or on behalf of, an employer, which (A) is owed by the employer but has not yet been paid to the Connecticut borrower, and (B) has been verified by an earned but unpaid wage or salary income advance provider;
(7) “Earned but unpaid wage or salary income advance” means a small loan that is an advance to a Connecticut borrower of earned but unpaid wage or salary income in an original principal amount that is less than seven hundred fifty dollars and not greater than the amount of earned but unpaid wage or salary income for any particular pay period;
(8) “Earned but unpaid wage or salary income advance provider” means any person that engages in any of the activities set forth in subsection (a) of section 36a-556 with regard to an earned but unpaid wage or salary income advance;
(9) “Employer” means (A) an employer, as defined in section 31-58, who employs a Connecticut borrower and is obligated to pay the Connecticut borrower earned but unpaid wage or salary income, or (B) any other person who, in exchange for the provision of services to, or on behalf of, such person by a Connecticut borrower acting as an independent contractor, is contractually obligated to pay earned but unpaid wage or salary income to the Connecticut borrower;
(10) “Finance charge” means: (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 Connecticut 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 Connecticut borrower in connection or concurrent with a small loan;
(11) “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;
(12) “Independent contractor” has the same meaning as provided in section 36a-485;
(13) “Lead” means any information identifying a potential consumer of a small loan;
(14) “Main office” means the main address designated on the system;
(15) “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;
(16) “Person” means a natural person, corporation, company, limited liability company, partnership or association;
(17) “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, earned but unpaid wage or salary income, 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, (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, or (v) a wage, as defined in section 31-58, paid by an employer directly to an employee prior to a regular pay day in accordance with the provisions of title 31;
(18) “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
(19) “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; P.A. 25-155, 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; P.A. 25-155 amended introductory language to add reference to Sec. 36a-574, redefined “APR” in Subdiv. (2), added definitions of “earned but unpaid wage or salary income”, “earned but unpaid wage or salary income advance”, “earned but unpaid wage or salary income advance provider”, “employer” and “finance charge” in new Subdivs. (6) to (10), redesignated Subdiv. (6) as Subdiv. (11), added new Subdiv. (12) to define “independent contractor”, redesignated Subdivs. (7) to (13) as Subdivs. (13) to (19) and redefined “small loan” in Subdiv. (17).
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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, including, but not limited to, payments for principal, interest or fees, from a Connecticut borrower in connection with a small loan;
(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; P.A. 25-115, S. 17.)
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; P.A. 25-115 amended Subsec. (a)(4) to replace “Receive payments of principal and interest in connection with a small loan made to a Connecticut borrower” with “Receive payments, including, but not limited to, payments for principal, interest or fees, from a Connecticut borrower in connection with a small loan”.
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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 or section 36a-574.
(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 or section 36a-574.
(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 or section 36a-574 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) (A) For a small loan that is under five thousand dollars, except for an earned but unpaid wage or salary income advance, 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; or
(B) For an earned but unpaid wage or salary income advance, a total finance charge that exceeds (i) four dollars per advance, or (ii) thirty dollars per month;
(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 or allowed under subparagraph (B) of subdivision (1) of this subsection and section 36a-574.
(e) Except as provided in section 36a-574, 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; P.A. 25-155, S. 2.)
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”; P.A. 25-155 added references to Sec. 36a-574 in Subsecs. (a), (b) and (c)(1), amended Subsec. (d) to designate existing provisions in Subdiv. (1) as Subdiv. (1)(A) and therein add “, except for an earned but unpaid wage or salary income advance” and “or”, add Subdiv. (1)(B) re total finance charge for an earned but unpaid wage or salary income advance and add “or allowed under subparagraph (B) of subdivision (1) of this subsection and section 36a-574” in Subdiv. (11) and amended Subsec. (e) to replace “Small” with “Except as provided in section 36a-574, small”.
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Sec. 36a-574. Requirements and prohibitions applicable to earned but unpaid wage or salary income advance providers. (a) An earned but unpaid wage or salary income advance provider required to be licensed under sections 36a-555 to 36a-573, inclusive, shall:
(1) Offer each Connecticut borrower who the provider approves to receive an earned but unpaid wage or salary income advance at least one option per transaction to receive such advance at no cost and clearly disclose the procedure for electing to receive such advance at no cost;
(2) If the provider charges or receives a finance charge:
(A) Offer each Connecticut borrower, who the provider approves to receive an earned but unpaid wage or salary income advance, (i) an earned but unpaid wage or salary income advance in an amount equal to not less than seventy-five per cent of the amount of the Connecticut borrower's earned but unpaid wage or salary income for the pay period, or (ii) not more than one earned but unpaid wage or salary income advance for the pay period; and
(B) Clearly and conspicuously disclose to the Connecticut borrower, for each time that the provider solicits, charges or receives a finance charge purporting to be voluntarily charged, agreed to or paid, that: (i) The finance charge is voluntary; (ii) such borrower may elect a finance charge of zero dollars; and (iii) the amount and frequency of the earned but unpaid wage or salary income advances that a borrower is eligible to request or receive are not contingent on whether the borrower pays or agrees to the voluntary finance charge or whether the borrower has previously paid a finance charge;
(3) Prior to offering or providing a Connecticut borrower an earned but unpaid wage or salary income advance:
(A) Fully and clearly disclose to the borrower: (i) Any finance charge associated with the earned but unpaid wage or salary income advance; (ii) the provider's cancellation procedure; (iii) that the borrower may submit complaints concerning the provider to the Department of Banking via the department's Internet web site; and (iv) a link to such Internet web site;
(B) Verify that the borrower's earned but unpaid wage or salary income meets or exceeds the amount of the earned but unpaid wage or salary income advance by using (i) payroll data of the borrower's employer, (ii) electronic payroll data that the borrower affirmatively authorizes the provider to access, or (iii) any similar data or other reasonable method approved by the Banking Commissioner; and
(C) Require the borrower to attest that the borrower understands that the borrower may not receive more than one earned but unpaid wage or salary income advance from more than one earned but unpaid wage or salary income advance provider on the basis of the same earned but unpaid wage or salary income, or to provide a similar attestation approved by the Banking Commissioner;
(4) Schedule the repayment of any earned but unpaid wage or salary income advance amount, or finance charge, in the form of a single repayment on a date that corresponds to the date of the Connecticut borrower's next scheduled paycheck or direct deposit payment from such borrower's employer and is not more than thirty-four days after the provider provides the earned but unpaid wage or salary income advance to the borrower, except that if such repayment is not made on such date due to a request by the borrower to reschedule the payment, lack of the borrower's available paycheck or direct deposit payment funds or payroll or similar error, the provider shall reschedule such repayment in the form of not more than three installments on any subsequent date or dates agreed to by the borrower at the time when the borrower agrees to the earned but unpaid wage or salary income advance;
(5) Reimburse each Connecticut borrower the full amount of any overdraft or nonsufficient funds fee imposed on the borrower by the borrower's depository institution that is caused by the provider attempting to seek repayment of any earned but unpaid wage or salary income advance amount or finance charge on a date before the repayment date disclosed to the borrower or in an amount other than the repayment amount disclosed to the borrower;
(6) Make readily available to each Connecticut borrower, in electronic form, the following information:
(A) For each earned but unpaid wage or salary income advance provided to the borrower during the preceding twelve months, (i) the date of the earned but unpaid wage or salary income advance; (ii) the amount of any finance charge; and (iii) the amount of the earned but unpaid wage or salary income advance; and
(B) The total amount of (i) all earned but unpaid wage or salary income advances that the borrower has received for the current pay period, if any; (ii) all finance charges for such advances, if any; and (iii) all earned but unpaid wage or salary income for the current pay period that has not been advanced to the borrower, if any;
(7) Allow each Connecticut borrower to cancel any earned but unpaid wage or salary income advance application, service, subscription or program at any time without incurring a fee;
(8) Implement measures to prevent an earned but unpaid wage or salary income advance from being provided to a Connecticut borrower who has previously received an earned but unpaid wage or salary income advance from another earned but unpaid wage or salary income advance provider on the basis of the same earned but unpaid wage or salary income, including, but not limited to, the following measures:
(A) The establishment and implementation of policies and procedures requiring a review and analysis of data in the possession and control of the provider at least once every six months to identify any instance or pattern involving a Connecticut borrower receiving more than one earned but unpaid wage or salary income advance from more than one earned but unpaid wage or salary income advance provider for a single pay period, which totaled more than the borrower's earned but unpaid wage or salary income amount for such pay period; and
(B) Any similar measures the commissioner may require; and
(9) Develop and implement policies and procedures to respond to questions and complaints from Connecticut borrowers in an expedient manner.
(b) An earned but unpaid wage or salary income advance provider required to be licensed under sections 36a-555 to 36a-573, inclusive, shall not:
(1) Charge or receive a total finance charge in excess of the amount permitted by subdivision (1) of subsection (d) of section 36a-558;
(2) Solicit a voluntary finance charge prior to informing the Connecticut borrower of how much earned but unpaid wage or salary income such borrower is approved to request;
(3) Set any voluntary finance charge in an amount greater than zero dollars as the default option offered to a Connecticut borrower;
(4) Share with an employer any portion of a finance charge paid by a Connecticut borrower;
(5) Request repayment for an earned but unpaid wage or salary income advance or finance charge from a Connecticut borrower prior to the date of the borrower's next scheduled paycheck or direct deposit payment from such borrower's employer;
(6) Accept repayment for an earned but unpaid wage or salary income advance or finance charge from a Connecticut borrower by means of a credit card or charge card;
(7) Charge a late fee, a deferral fee, interest or any other penalty or charge for the late repayment of, or failure to repay, an earned but unpaid wage or salary income advance or for the late payment of, or failure to pay, a finance charge;
(8) Compel or attempt to compel repayment by a Connecticut borrower for any earned but unpaid wage or salary income advance or finance charge through any of the following means:
(A) The use of unsolicited outbound telephone calls;
(B) A lawsuit against the borrower in any court in any jurisdiction;
(C) The use of a third party to pursue collection from the borrower on the provider's behalf; or
(D) The sale of an outstanding amount to a consumer collection agency, as defined in section 36a-800, for collection from the borrower;
(9) Require a credit report, credit score or other credit-related information to determine the eligibility of a Connecticut borrower for an earned but unpaid wage or salary income advance; or
(10) Report to a consumer reporting agency, as described in Section 603(p) of the Fair Credit Reporting Act, 15 USC 1681a, as amended from time to time, or consumer collection agency any information about a Connecticut borrower regarding nonpayment for any earned but unpaid wage or salary income advance or finance charge.
(P.A. 25-155, S. 3.)
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Sec. 36a-596. (Formerly Sec. 36-531). Definitions. As used in sections 36a-595 to 36a-614, inclusive, unless the context otherwise requires:
(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) “Digital wallet” means any electronic or digital functionality that (A) stores stored value or virtual currency for a consumer, including, but not limited to, in encrypted or tokenized form, and (B) transmits, routes or otherwise processes such stored value or virtual currency to facilitate a consumer payment transaction.
(6) “Electronic payment instrument” (A) means a card or other tangible object (i) for the transmission of money or monetary value or payment of money, (ii) which contains a microprocessor chip, magnetic stripe or other means for the storage of information, (iii) that is prefunded, and (iv) for which the value is decremented upon each use, and (B) does not include a card or other tangible object that is redeemable by the issuer in the issuer's goods or services.
(7) “Existing customer” means a consumer who (A) is engaging in a virtual currency transaction with a licensee, (B) has performed not fewer than three virtual currency transactions with the licensee, and (C) has been registered as a customer of such licensee for more than seventy-two hours.
(8) “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.
(9) “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.
(10) “Licensee” means any person licensed or required to be licensed pursuant to sections 36a-595 to 36a-612, inclusive.
(11) “Main office” has the same meaning as provided in section 36a-485.
(12) “Monetary value” means a medium of exchange, whether or not redeemable in money.
(13) “Money transmission” means engaging, directly or through an authorized delegate, 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, virtual currency kiosk or digital wallet, including, but not limited to, a digital wallet utilized in connection with a consumer payment mobile application.
(14) “New customer” means a consumer who (A) is engaging in a virtual currency transaction with a licensee, (B) has performed fewer than three virtual currency transactions with the licensee, and (C) has been registered as a customer of such licensee for less than seventy-two hours.
(15) “Outstanding” means (A) in the case of a payment instrument or stored value, that (i) such instrument or value is sold or issued in the United States, (ii) a report of such instrument or value has been received by a licensee from its authorized delegates, and (iii) such instrument or value 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.
(16) “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.
(17) “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.
(18) “Permissible investment” means (A) (i) cash in United States currency, including, but not limited to, demand deposits, savings deposits and funds in demand deposit and savings deposit accounts held for the benefit of a licensee's customers in an insured depository institution, and (ii) cash equivalents, including, but not limited to, (I) automated clearing house items in transit to a licensee or payee, (II) international wires in transit to a payee, (III) cash in transit via armored car, (IV) cash in smart safes, (V) cash in locations owned by licensees, (VI) transmission receivables that are funded by debit cards or credit cards and owed by any bank, and (VII) money market mutual funds rated “AAA” or the equivalent by S & P Global, Incorporated, in the “S & P Global Ratings” or by any other rating service recognized by the commissioner, (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.
(19) “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.
(20) “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.
(21) “Receipt” means a paper record, electronic record or other written confirmation of a money transmission transaction.
(22) “Stored value” means monetary value that represents a claim against the issuer of such monetary value and is evidenced by an electronic or digital record. For the purposes of this subdivision, “electronic or digital record” means information that is stored in an electronic medium and is retrievable in perceivable form.
(23) “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.
(24) “Unique identifier” has the same meaning as provided in section 36a-485.
(25) “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.
(26) “Virtual currency address” means an alphanumeric identifier representing a destination for a virtual currency transfer that is associated with a virtual currency wallet.
(27) “Virtual currency control services vendor” means a person who controls virtual currency under an agreement with another person who, on behalf of a third person, assumes control of virtual currency.
(28) “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.
(29) “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; P.A. 24-146, S. 1; P.A. 25-66, S. 1.)
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; P.A. 24-146 replaced “36a-613” with “36a-614” and inserted “unless the context otherwise requires” in the introductory language, designated existing provisions in Subdiv. (5) defining “electronic payment instrument” as Subdiv. (5)(A) and (B), defined “existing customer” in new Subdiv. (6), redesignated existing Subdivs. (6) to (11) as Subdivs. (7) to (12), defined “new customer” in new Subdiv. (13), redesignated existing Subdivs. (12) to (17) as Subdivs. (14) to (19), redefined “permissible investment” in new Subdiv. (17), defined “receipt” in new Subdiv. (20), redesignated existing Subdivs. (18) to (24) as Subdivs. (21) to (27) and made technical and conforming changes throughout; P.A. 25-66 added definition of “digital wallet” in new Subdiv. (5), redesignated existing Subdivs. (5) to (25) as Subdivs. (6) to (26), redefined “existing customer” in redesignated Subdiv. (7), “money transmission” in redesignated Subdiv. (13), “new customer” in redesignated Subdiv. (14) and “stored value” in redesignated Subdiv. (22), added definition of “virtual currency control services vendor” in new Subdiv. (27) and redesignated existing Subdivs. (26) and (27) as Subdivs. (28) and (29).
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Sec. 36a-598. (Formerly Sec. 36-533). Application. Criminal history records check. Abandonment of application. Required system filing or notice to commissioner. License not assignable or transferable. Use of name. Automatic suspension. (a) Each application for an initial or renewal license required under sections 36a-595 to 36a-612, inclusive, shall be made and processed on the system pursuant to section 36a-24b, in the form prescribed by the commissioner. Each such form shall contain content as set forth by instruction or procedure of the commissioner and may be changed or updated as necessary by the commissioner in order to carry out the purposes of sections 36a-595 to 36a-612, inclusive. The applicant shall, at a minimum, furnish to the system information concerning the identity of the applicant, any control person of the applicant, the qualified individual and any branch manager responsible for the actions of the licensee, including, but not limited to, information related to such person's personal history and experience and any administrative, civil or criminal findings by any governmental jurisdiction. As part of an application, the commissioner may, (1) in accordance with section 29-17a, conduct a state or national criminal history records check of the applicant, any control person of the applicant, the qualified individual and any branch manager, and, (2) in accordance with section 36a-24b, (A) require the submission of fingerprints of any such person to the Federal Bureau of Investigation or other state, national or international criminal databases, and (B) investigate the financial condition of any such person and require authorization from any such person for the system and the commissioner to obtain an independent credit report from a consumer reporting agency, as described in Section 603(p) of the Fair Credit Reporting Act, 15 USC 1681a, as amended from time to time. An application for an initial license shall also include:
(i) A copy of the applicant's audited financial statements for the most recent fiscal year, and (I) if the applicant is a wholly-owned subsidiary of another corporation, the most recent audited consolidated annual financial statements of the parent corporation, (II) if the applicant is publicly traded, a copy of the most recent 10-K report that such applicant filed with the Securities and Exchange Commission, or, if the applicant is a wholly-owned subsidiary of a publicly traded company, a copy of the parent company's most recent 10-K report that was filed with the Securities and Exchange Commission, and (III) if the applicant or parent company of a wholly-owned subsidiary applicant is publicly traded on a foreign exchange, a copy of documentation similar to the 10-K report that was filed with the applicable securities regulator for the applicant or the parent company of the wholly-owned subsidiary applicant, as applicable. Notwithstanding the provisions of this clause, if the applicant has operated for not more than one calendar year, the applicant shall only be required to include an initial statement of condition;
(ii) A list of the applicant's permissible investments, the book and market values of such investments, and the dollar amount of the applicant's aggregate outstanding money transmissions (I) as of the date of the financial statement filed in accordance with clause (i) of this subparagraph; and (II) as of a date no earlier than thirty business days prior to the filing of the application;
(iii) (I) The surety bond required by subsection (a) of section 36a-602, if applicable; and
(II) A list of the investments maintained in accordance with subsection (d) of section 36a-602, if applicable, and the book and market values of any such investments as of the date of the financial statement filed in accordance with clause (i) of this subparagraph; and as of a date no earlier than thirty business days prior to the filing of the application;
(iv) A statement describing the type of money transmission business that will be conducted by the applicant in this state and whether such money transmission will include the transmission of monetary value in the form of virtual currency;
(v) The name and address of any financial institution used by the applicant for its money transmission business in this state;
(vi) For each authorized delegate, a sample of the contract evidencing the proposed arrangement between the applicant and the authorized delegate; and
(vii) Any other information the commissioner may require.
(b) The commissioner may deem an application for a license to engage in the business of money transmission in this state abandoned if the applicant fails to respond to any request for information required under sections 36a-595 to 36a-612, inclusive, or any regulations adopted pursuant to said sections. The commissioner shall notify the applicant on the system that if the applicant fails to submit such information not later than sixty days after such request, the application shall be deemed abandoned. An application filing fee paid prior to the date an application is deemed abandoned pursuant to this subsection shall not be refunded. Abandonment of an application pursuant to this subsection shall not preclude the applicant from submitting a new application for a license under sections 36a-595 to 36a-612, inclusive.
(c) Except as otherwise specified in subsections (d) and (e) of this section, each applicant, licensee, control person and qualified individual shall file with the system any change in the information most recently submitted to the system by such licensee, control person or qualified individual in connection with the application or license, or, if the information cannot be filed on the system, notify the commissioner, in writing, of such change in the information not later than fifteen days after the date the applicant, licensee, control person or qualified individual has reason to know of such change.
(d) (1) A money transmission license shall not be transferable or assignable, but a licensee may be acquired in accordance with the requirements of this subsection. Any change in any control person of the licensee, except a change of a key individual that is not the result of an acquisition or a change of control of the licensee, shall be the subject of an advance change notice filed on the system at least thirty days prior to the effective date of such change and no such change shall occur without the commissioner's approval. For purposes of this section, “change of control” means any change causing the majority ownership, voting rights or control of a licensee to be held by a different control person or group of control persons.
(2) No licensee may use any name other than its legal name or a fictitious name approved by the commissioner, provided such licensee may not use its legal name if the commissioner disapproves use of such name. No licensee shall use any name or address other than the name and address specified on the license issued by the commissioner. A licensee may change the name of the licensee or the address of the office specified on the most recent filing with the system if, (A) at least thirty calendar days prior to such change, the licensee files such change with the system and, in the case of a change to the legal name of the licensee, provides a bond rider to the surety bond on file with the commissioner that reflects the new legal name of the licensee, and (B) the commissioner does not disapprove such change, in writing, or request further information within such thirty-day period.
(3) The commissioner may automatically suspend any license for a violation of this subsection. After a license has been automatically suspended pursuant to this subsection, the commissioner shall (A) give the licensee notice of the automatic suspension, pending proceedings for revocation of or refusal to renew the license pursuant to section 36a-608 and an opportunity for a hearing in accordance with section 36a-51, and (B) require the licensee to take or refrain from taking action as the commissioner deems necessary to effectuate the purpose of this section.
(e) A licensee shall file with the system or, if the information cannot be filed on the system, provide a written notice to the commissioner not later than one business day after the licensee has reason to know of the occurrence of any of the following events:
(1) The filing of a petition by or against the licensee under the United States Bankruptcy Code for bankruptcy or reorganization or the filing of a petition under the United States Bankruptcy Code for bankruptcy or reorganization by any control person, qualified individual or authorized delegate of the licensee;
(2) The filing of a petition by or against the licensee for receivership, the commencement of any other judicial or administrative proceeding for its dissolution or reorganization, or the making of a general assignment for the benefit of its creditors;
(3) The commencement of a proceeding to revoke or suspend its license to engage in money transmission in another state or a foreign country, or other formal or informal regulatory action by any governmental agency against the licensee or any control person, qualified individual or authorized delegate of the licensee and the reasons therefor;
(4) The commencement of any action by the Attorney General or the attorney general of any other state against the licensee or any control person, qualified individual or authorized delegate of the licensee and the reasons therefor;
(5) The cancellation or other impairment of the licensee's bond or other security, including notice of claims filed against the licensee's bond or other security;
(6) A conviction or indictment of the licensee or of any control person or qualified individual of the licensee for a misdemeanor involving the money transmission business or a felony; or
(7) A conviction or indictment of an authorized delegate for a misdemeanor involving the money transmission business or a felony.
(P.A. 81-264, S. 4; P.A. 92-12, S. 97; P.A. 94-122, S. 277, 340; P.A. 98-192, S. 4; P.A. 01-56, S. 5; P.A. 03-19, S. 84; P.A. 04-14, S. 4; P.A. 05-46, S. 11; P.A. 08-119, S. 11; P.A. 09-208, S. 15; P.A. 11-216, S. 35; P.A. 13-253, S. 4; P.A. 15-53, S. 6; P.A. 17-233, S. 19; P.A. 18-173, S. 51; P.A. 21-138, S. 11; P.A. 22-94, S. 3; P.A. 25-115, S. 7.)
History: P.A. 92-12 redesignated Subsecs. and Subdivs.; P.A. 94-122 made technical changes, effective January 1, 1995; Sec. 36-533 transferred to Sec. 36a-598 in 1995; P.A. 98-192 amended Subdiv. (9) by adding reference to electronic payment instrument and making conforming changes; P.A. 01-56 amended Subdiv. (5) by changing 20% stock ownership threshold to 10% ownership of securities and required name and addresses of persons holding securities, added new Subdiv. (8) re history of material litigation and criminal convictions, renumbered existing Subdivs. (8) to (10) as Subdivs. (9) to (11), added language re money transmission in Subdivs. (3) and (10) and made technical and conforming changes throughout; P.A. 03-19 made a technical change in Subdiv. (10), effective May 12, 2003; P.A. 04-14 designated existing provisions as Subsec. (a), and amended same by inserting in Subdivs. (5) and (8) new Subpara. (D) re managers, if applicant is a limited liability company, inserting reference to “managers” in Subdiv. (5), and making technical changes in Subdivs. (7)(A) and (9)(B), and inserted new Subsec. (b) requiring applicant or licensee to notify commissioner of any change in information provided; P.A. 05-46 added Subsec. (c) to prohibit licensee from changing the name specified on license unless licensee files application, pays name change fee specified in Sec. 36a-599(a) and receives approval of commissioner; P.A. 08-119 amended Subsec. (a) to make a technical change and to replace “managers” with “members” in Subdivs. (5)(D) and (8)(D); P.A. 09-208 amended Subsec. (a) by deleting provision in Subdiv. (5) requiring applicants to submit sufficient information to commissioner as commissioner deems necessary to make the findings required under Sec. 36a-600, adding new Subdiv. (9) requiring applicants to submit information concerning criminal convictions, redesignating existing Subdiv. (9) as Subdiv. (10), deleting Subpara. (C) therein re commissioner to defer compliance, redesignating existing Subdivs. (10) and (11) as Subdivs. (11) and (12), and making conforming and technical changes, and added Subsec. (d) requiring licensee to provide written notice to commissioner upon the occurrence of events listed in Subdivs. (1) to (7); P.A. 11-216 amended Subsec. (a)(9) to delete provision re ten-year period re history of criminal convictions, added new Subsec. (b) authorizing commissioner to conduct state and national criminal history records check of applicant and each partner, director, trustee, principal officer, member and shareholder owning at least 10% of each class of securities of applicant and re abandonment of application, and redesignated existing Subsecs. (b) to (d) as Subsecs. (c) to (e); P.A. 13-253 amended Subsec. (a) by adding reference to Secs. 36a-611 and 36a-612, by changing “branches, subsidiaries, affiliates and agents” to “locations and authorized delegates” and adding provision requiring that money transmission occur in this state in Subdiv. (3), by adding provision re a copy of audited financial statements for the most recent fiscal year and, if a wholly-owned subsidiary, the most recent audited consolidated annual financial statements of the parent corporation or most recent audited consolidated annual financial statement of the applicant, deleting requirement that financial statements be prepared by an independent certified public accountant, and adding provision re a 10-K report for publicly traded applicants or a report similar to a 10-K if publicly traded on a foreign exchange in Subdiv. (6), by changing “payment instruments” to “money transmissions” in Subdiv. (7), by adding definition of “material litigation” in Subdiv. (8), by replacing former provision with provision requiring a statement describing the type of money transmission business to be conducted in the state in Subdiv. (11), by adding new Subdivs. (12) and (13) re name and address of financial institution used and sample of contract, and by redesignating existing Subdiv. (12) as Subdiv. (14), amended Subsec. (b) by adding provision requiring that money transmission occur in this state and adding references to Secs. 36a-611 and 36a-612, amended Subsec. (c) by deleting “promptly” and adding provision re notification to occur not later than 15 days after the applicant or licensee has reason to know of the change, amended Subsec. (e) by adding “or indictment” in Subdivs. (6) and (7), deleting reference to Connecticut payment instruments in Subdiv. (6) and changing “agent” to “authorized delegate” and adding “misdemeanor involving the money transmission business” in Subdiv. (7), and made technical changes; P.A. 15-53 amended Subsec. (a)(11) by adding provision re applicant to indicate on application whether money transmission business will include transmitting monetary value in form of virtual currency; P.A. 17-233 amended Subsec. (a) by deleting Subdiv. (8) re history of material litigation and by redesignating existing Subdivs. (9) to (14) as Subdivs. (8) to (13); P.A. 18-173 substantially amended Subsec. (a) including by deleting former Subdivs. (1) to (5), adding provisions re processing of application for license on system, adding new Subdivs. (1) and (2) re commissioner's authority to conduct criminal history records check, require submission of fingerprints and investigate financial condition of person, redesignating Subdivs. (6) and (7) as new Subdivs. (5)(i) and (ii), deleting Subdiv. (8), and redesignating Subdivs. (9) to (13) as Subdivs. (5)(iii) to (viii), amended Subsec. (b) by deleting provision re commissioner's authority to conduct criminal history records check, and replacing provision re commissioner to notify applicant in writing with provision re commissioner to notify applicant on system, substantially amended Subsec. (c) including by adding references to control person and qualified individual, replacing provision re notification to commissioner in writing with provision re filing with system, and adding provision re filing change in information on system or notifying commissioner of change in writing, amended Subsec. (d) by deleting provisions re licensee's change to name specified on license, adding Subdivs. (1) to (3) re money transmission license not transferable or assignable and change in control person to be subject of advance change notice filed on system, licensee's use of name and address specified on license and change of licensee's name or address, and commissioner's automatic suspension of license, respectively, amended Subsec. (e) by adding reference to filing with system, adding provision re filing petition under U.S. Bankruptcy Code in Subdiv. (1), adding references to control person, qualified individual or authorized delegate of licensee in Subdivs. (3) and (4), replacing references to partner, director, trustee, principal officer, member or shareholder with references to control person or qualified individual in Subdiv. (6), and made technical and conforming changes; P.A. 21-138 amended Subsec. (a)(2)(B)(i) by deleting provision re applicant's most recent audited consolidated and unconsolidated financial statements and adding provision re applicants that have not operated for more than 1 calendar year, amended Subsec. (d)(1) by defining “change of control”, and made technical and conforming changes; P.A. 22-94 amended Subsec. (d)(1) by adding provision stating licensee may be acquired in accordance with Subsec. (d) and changed “director, general partner or executive officer” to “key individual”; P.A. 25-115 amended Subsec. (d)(2) to designate existing provisions as Subparas. (A) and (B) and amended Subsec. (d)(2)(A) to add “, in the case of a change to the legal name of the licensee,”, delete “, endorsement or addendum, as applicable,”, and replace “reflects the new name or address” with “reflects the new legal name of the licensee”.
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Sec. 36a-602. (Formerly Sec. 36-538). Surety bond. Investments in lieu of surety bond. (a) As a condition for the issuance and retention of the license, applicants for a license and licensees shall file with the commissioner a surety bond, the form of which shall be approved by the Attorney General, issued by a bonding company or insurance company authorized to do business in this state. The bond shall be conditioned upon the licensee and the licensee's authorized delegates faithfully performing all obligations with respect to the licensee's money transmission business in this state and conducting such business in this state consistent with the provisions of sections 36a-595 to 36a-612, inclusive. The bond shall be in favor of the commissioner and run concurrently with the period of the license. For applicants and licensees who will not be engaged in the business of transmitting monetary value in the form of virtual currency, such bond shall be in the principal sum of not less than: (1) Three hundred thousand dollars for any applicant and any licensee with an average weekly amount of money transmissions in this state of less than three hundred thousand dollars for the most recent twelve-month period ending June thirtieth, (2) five hundred thousand dollars for any licensee with an average weekly amount of money transmissions in this state equal to or greater than three hundred thousand dollars but less than or equal to five hundred thousand dollars for the most recent twelve-month period ending June thirtieth, or (3) one million dollars for any licensee with an average weekly amount of money transmissions in this state exceeding five hundred thousand dollars for the most recent twelve-month period ending June thirtieth. For purposes of this section, “money transmissions” includes (A) money or monetary value received or transmitted in this state, and (B) stored value and payment instruments issued or sold in this state. For applicants and licensees who will or may engage in the business of transmitting monetary value in the form of virtual currency, such bond shall be in a principal sum as determined by the commissioner and shall be calculated reasonably to address the current and prospective volatility of the market in such currency or currencies.
(b) The proceeds of the bond, even if commingled with other assets of the licensee, shall be deemed by operation of law to be held in trust for the benefit of any claimants against the licensee to serve the faithful performance of the obligations of the licensee and the licensee's authorized delegates with respect to the licensee's money transmission business in this state in the event of the bankruptcy of the licensee, and shall be immune from attachment by creditors or judgment creditors. Any person who may be damaged as a result of the failure by the licensee or the licensee's authorized delegates to perform obligations with respect to the licensee's money transmission business in this state may proceed against the licensee's bond to recover damages. The commissioner may proceed on such bond against the principal or surety thereon, or both, to collect any civil penalty imposed upon the licensee pursuant to subsection (a) of section 36a-50, any restitution imposed pursuant to subsection (c) of section 36a-50, and any unpaid costs of examination of the licensee as determined pursuant to subdivision (6) of subsection (c) of section 36a-65. The bond shall cover claims for damages arising from the licensee's money transmission business in this state made not later than two years from the date of the act, error or omission that allegedly caused or resulted in such damages. When an action is commenced on a licensee's bond, the commissioner may require the filing of a new bond and, immediately upon recovery on any action on the bond, the licensee shall file a new bond. If the commissioner finds that the financial condition of a licensee so requires, as evidenced by the reduction of tangible net worth, financial losses or potential losses as a result of a violation of sections 36a-595 to 36a-612, inclusive, the commissioner may require one or more additional bonds meeting the standards set forth in this section. The licensee shall file any such additional bonds not later than ten days after receipt of the commissioner's written notice of such requirement.
(c) The surety company may cancel the bond at any time by a written notice to the licensee and the commissioner, stating the date cancellation shall take effect. Such written notice shall be provided by the surety company to the licensee and the commissioner through the system 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 licensee of the date such bond cancellation shall take effect. The commissioner shall automatically suspend the license on such date, unless the licensee, prior to such date, submits (1) a letter of reinstatement of the bond from the surety company, (2) a new bond, (3) evidence that all of the principal sum of such surety bond has been invested as provided in subsection (d) of this section, (4) a new bond that replaces the surety bond in part and evidence that the remaining part of the principal sum of such surety bond has been invested as provided in subsection (d) of this section, or (5) evidence that the licensee has ceased business and has surrendered the license. After a license has been automatically suspended, the commissioner shall (A) give the licensee notice of the automatic suspension pending proceedings for revocation or refusal to renew such license and an opportunity for a hearing on such actions in accordance with section 36a-51, and (B) require the licensee to take or refrain from taking such action as the commissioner deems necessary to effectuate the purposes of this section.
(d) In lieu of all or part of the principal sum of such surety bonds, applicants for a license and licensees may invest such sum as provided in this subsection. The book or market value, whichever is lower, of such investments shall be equal to the amount of the bond required by subsection (a) of this section less the amount of the bond filed with the commissioner by the applicant or licensee. Such applicants and licensees shall keep such investments with such banks, Connecticut credit unions or federal credit unions as such applicants or licensees may designate and the commissioner may approve, and subject to such conditions as the commissioner deems necessary for the protection of consumers and in the public interest. As used in this subsection, “investments” means: (1) Dollar deposits; and (2) interest-bearing bills, notes, bonds, debentures or other obligations issued or guaranteed by (A) the United States or any of its agencies or instrumentalities, or (B) any state, or any agency, instrumentality, political subdivision, school district or legally constituted authority of any state if such investment is of prime quality. The investments shall secure the same obligation as would a surety bond filed under this section. The investments shall be held at such banks or credit unions to cover claims during the period the license remains in full force and effect and the succeeding two years after such license has been surrendered, revoked or suspended or has expired in accordance with the provisions of sections 36a-595 to 36a-612, inclusive. The licensee shall be permitted to collect interest on such investments and at any time to exchange, examine and compare such investments. The investments made pursuant to this section, even if commingled with other assets of the licensee, shall be deemed by operation of law to be held in trust for the benefit of any claimants against the licensee to serve the faithful performance of the obligations of the licensee and the licensee's authorized delegates with respect to the licensee's money transmission business in this state in the event of the bankruptcy of the licensee, and shall be immune from attachment by creditors or judgment creditors.
(P.A. 81-264, S. 9; P.A. 91-306, S. 1; P.A. 94-122, S. 280, 340; P.A. 98-192, S. 6; P.A. 01-56, S. 9; P.A. 02-111, S. 39; P.A. 03-61, S. 4; P.A. 04-14, S. 7; P.A. 06-35, S. 9; P.A. 07-91, S. 9; P.A. 09-208, S. 17; P.A. 13-253, S. 8; P.A. 15-53, S. 8; P.A. 18-173, S. 55; P.A. 25-115, S. 2.)
History: P.A. 91-306 amended Subsec. (a) by deleting existing provisions re amount of bond and added Subdivs. (1), (2) and (3) re principal sum of bond; P.A. 94-122 made technical changes, effective January 1, 1995; Sec. 36-538 transferred to Sec. 36a-602 in 1995; P.A. 98-192 amended Subsec. (a) by adding provision re two-year time period for bond to remain in place and adding specific requirements for licensees that engage in the business of receiving money for transmitting the same; P.A. 01-56 amended Subsec. (a) by changing “Connecticut instruments” to “Connecticut payment instruments”, by rewording language re money transmission and by replacing provisions re trust fund with provisions re proceeds of bond deemed to be held in trust for benefit of claimants, and amended Subsec. (c) by replacing provisions re investment maintained in trust with provisions re investments deemed to be held in trust for benefit of claimants; P.A. 02-111 amended Subsec. (a) by adding provision re authority of commissioner to proceed on bond to collect civil penalty imposed pursuant to Sec. 36a-50(a); P.A. 03-61 changed “corporate surety bond” to “surety bond” throughout, amended Subsec. (a) by revising provisions re approval of form, coverage of bond and beginning of two-year period and by adding provision re surrendered, revoked, suspended or expired license and amended Subsec. (c) by inserting “Connecticut”; P.A. 04-14 amended Subsec. (a)(1), (2) and (3) to replace references to “equivalent thereof” with references to “monetary value received or transmitted, whichever amount is greater”, and to insert references to “monetary value” in provisions re proceeds of the bond to be held in trust for benefit of claimants against licensee, added new Subsec. (b) re cancellation of surety bond and automatic suspension of license and redesignated existing Subsecs. (b) and (c) as new Subsecs. (c) and (d), respectively, revising internal reference accordingly, effective April 16, 2004; P.A. 06-35 amended Subsec. (c) to require applicants and licensees to keep investments with such banks, Connecticut credit unions or federal credit unions as applicants or licensees designate, to require that investments be held subject to such conditions as commissioner deems necessary for protection of consumers and in the public interest and to define “investments” to include “dollar deposits” and “interest-bearing” bills, notes, bonds, debentures or other obligations, deleting former Subdiv. designators (1) and (2), reference to “in accordance with such regulations as the commissioner may adopt”, and Subsec. designator (d), to add provision requiring investments to be held at banks or credit unions to cover claims during period license remains in effect and the succeeding two years after license has been surrendered, revoked or suspended or has expired, and to make conforming changes, effective May 8, 2006; P.A. 07-91 amended Subsec. (a) to insert references to “Connecticut” payment instruments and transmission of “monetary value”, and amended Subsec. (c) to insert references to transmission or payment of “monetary value” and to make a technical change; P.A. 09-208 amended Subsec. (b) by requiring commissioner to give written notice to licensee of the effective date of a bond cancellation, by providing that license shall be automatically suspended unless licensee submits letter of reinstatement from the surety company or a new bond, and by making conforming and technical changes; P.A. 13-253 amended Subsec. (a) by adding provision requiring that bond be conditioned upon faithful performance of all obligations with respect to money transmission business in this state, deleting provisions re bond covering claims arising during licensure period and bond amounts being dependent upon daily balances and adding provisions re bond running concurrently with period of the license and being in a sum dependent upon the amount of applicant's average weekly transmissions, designated provisions re proceeds of the bond as new Subsec. (b) and amended same to add reference to licensee's authorized delegates, replace provision re sale and issuance of Connecticut payment instruments or transmission of money with provision re licensee's money transmission business in this state, add provision re person damaged as a result of a failure to perform obligations may proceed against the bond to recover damages, delete provision re lowering principal sum of bond, add provision re commissioner to proceed on bond to collect any restitution imposed pursuant to Sec. 36a-50 and any unpaid costs of examination, add provision re bond to cover claims for damages and add provision re commissioner to require filing of new bond when action is commenced on licensee's bond or if licensee's financial condition so requires, redesignated existing Subsec. (b) as Subsec. (c) and amended same by making technical changes, and redesignated existing Subsec. (c) as Subsec. (d) and amended same to add reference to Secs. 36a-611 and 36a-612, add reference to the licensee's authorized delegates and replace provision re sale and issuance of Connecticut payment instruments or transmission of money with provision re licensee's money transmission business in this state; P.A. 15-53 amended Subsec. (a) by adding provisions re surety bond requirements for engaging in transmissions involving virtual currency; P.A. 18-173 amended Subsec. (c) by adding references to the commissioner, and adding provision re notice of cancellation for bond issued electronically, designating provision re notice of automatic suspension as Subpara. (A) and designating provision re commissioner to require licensee take or refrain from taking action as Subpara. (B), and making technical and conforming changes; P.A. 25-115 amended Subsec. (c) to replace “If the bond is issued electronically on the system, such” with “Such”, replace “notice may be provided” with “notice shall be provided” and delete provision re requirement that any notice of cancellation not provided through the system be sent by certified mail.
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Sec. 36a-603. (Formerly Sec. 36-539). Investments equal to amount of money transmissions. Virtual currency equal to amount owed or obligated. Investments and virtual currency held in trust. (a) Each licensee shall at all times maintain permissible investments having a value, computed in accordance with generally accepted accounting principles, at least equal to the aggregate amount of its outstanding money transmissions in this state, provided the value of receivables due from authorized delegates consisting of the proceeds of the sale of payment instruments that are not past due or doubtful of collection shall not exceed thirty per cent of the permissible investments held by the licensee and receivables due from any one person shall not exceed ten per cent of the value of permissible investments held by the licensee.
(b) Each licensee that engages in the business of money transmission in this state by receiving, transmitting, storing or maintaining custody or control of virtual currency on behalf of another person shall at all times hold virtual currency of the same type and amount owed or obligated to such other person. As used in subsection (a) of this section, outstanding money transmissions does not include any virtual currency held pursuant to this subsection, and “value” means the lower of book or market value, except that with regard to debt obligations which the licensee as a matter of policy retains until maturity, “value” means the greater of book or market value unless the commissioner orders that for some or all investments of a particular licensee, “value” means the lower of book or market value.
(c) Permissible investments and virtual currency held pursuant to subsection (b) of this section, even if commingled with other assets of the licensee, shall be deemed by operation of law to be (1) property interests of any claimants against the licensee, on a pro rata basis and in the type and amount of virtual currency to which such claimants are entitled, without regard to the time when (A) such claimants became entitled to such virtual currency, or (B) the licensee obtained control of such virtual currency, (2) held in trust for the benefit of any claimants against the licensee to serve the faithful performance of the obligations of the licensee and the licensee's authorized delegates with respect to the licensee's money transmission business in this state in the event of the bankruptcy of the licensee, and (3) immune from attachment by creditors or judgment creditors.
(P.A. 81-264, S. 10; P.A. 01-56, S. 10; P.A. 04-14, S. 8; P.A. 07-91, S. 10; P.A. 13-253, S. 9; P.A. 17-233, S. 20; P.A. 25-66, S. 2.)
History: Sec. 36-539 transferred to Sec. 36a-603 in 1995; P.A. 01-56 amended Subsec. (a) by making a technical change and added new Subsec. (c) re permissible investments deemed to be held in trust for benefit of claimants; P.A. 04-14 amended Subsec. (a) to insert reference to “stored value”, and amended Subsec. (c) to insert references to “monetary value”, effective April 16, 2004; P.A. 07-91 amended Subsecs. (a) and (c) to insert reference to “Connecticut” payment instruments; P.A. 13-253 amended Subsec. (a) to change “Connecticut payment instruments and stored value” to “money transmissions in this state” and add provision re value of receivables due from authorized delegates and amended Subsec. (c) to add reference to licensee's authorized delegates and replace provision re sale and issuance of Connecticut payment instruments or transmission of money with provision re licensee's money transmission business in this state; P.A. 17-233 amended Subsec. (b) by adding provisions licensees engaging in business of money transmission to hold virtual currency equal to the amount owed or obligated to other persons and re outstanding money transmissions, and amended Subsec. (c) by adding “and virtual currency held pursuant to subsection (b) of this section”; P.A. 25-66 amended Subsec. (c) to designate existing provisions as Subdivs. (2) and (3), add Subdiv. (1) re property interests of claimants and delete “shall be”.
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Sec. 36a-607. (Formerly Sec. 36-543). Conduct of business authorized by delegate. Prohibited practices. Deadline to remit value received for transmission. (a) Except as provided in subdivision (2) of subsection (f) of section 36a-613, a licensee may conduct its business at one or more locations within this state as follows:
(1) The business may be conducted by the licensee or through or by means of such authorized delegates as the licensee may periodically designate or appoint on the system in such form and manner as required by the commissioner. The licensee shall pay any associated processing fees imposed by the system. The licensee shall notify the commissioner on the system of all authorized delegates that act on its behalf. An authorized delegate may not engage in the business of money transmission in this state on behalf of a licensee through or by means of any person who is not identified on the system as an authorized delegate of the licensee.
(2) No license under sections 36a-595 to 36a-612, inclusive, shall be required of any authorized delegate.
(3) Each authorized delegate shall, from the moment of receipt, hold the proceeds of a sale or delivery of a licensee's money transmissions in this state in trust for the benefit of such licensee.
(4) A licensee shall be liable for the loss caused to any purchaser or holder of the licensee's payment instruments or stored value sold in this state by the failure of an authorized delegate to forward to the licensee the amount due from the proceeds of a sale or delivery of the licensee's payment instruments or stored value, or money or monetary value received for transmission.
(5) The licensee shall enter into a contract with each of its authorized delegates that requires the authorized delegate to operate in full compliance with sections 36a-595 to 36a-612, inclusive, and provides that appointment of the authorized delegate is not effective during any period when the license of the licensee has been suspended. The licensee shall provide each authorized delegate with policies and procedures sufficient to ensure compliance with sections 36a-595 to 36a-612, inclusive.
(6) An authorized delegate shall remit all money owing to the licensee in accordance with the terms of the contract between the licensee and the authorized delegate.
(7) An authorized delegate shall not provide money transmission services in this state outside the scope of activity permissible under the contract between the authorized delegate and the licensee.
(b) For purposes of subsection (a) of this section, “licensee” means any person that has obtained a license from the commissioner as provided in section 36a-600.
(c) No person who is required to be licensed and who is subject to the provisions of sections 36a-595 to 36a-612, inclusive, and no control person shall, directly or indirectly: (1) Employ any scheme, device or artifice to defraud or mislead any person in connection with a money transmission; (2) engage in any unfair or deceptive practice toward any person in connection with a money transmission; (3) obtain property by fraud or misrepresentation; (4) fail to comply with the provisions of sections 36a-595 to 36a-612, inclusive, or the rules or regulations adopted under said sections, or fail to comply with any other state or federal law, including the rules and regulations thereunder; (5) make, in any manner, any false or deceptive statement or representation in connection with a money transmission or engage in bait and switch advertising; (6) 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, or in connection with any investigation conducted by the commissioner or another governmental agency; (7) fail to truthfully account for moneys belonging to a party to a money transmission transaction; (8) fail to perform any written agreement with any party to a money transmission transaction; (9) fail to comply with any demand or requirement made by the commissioner under and within the authority of sections 36a-595 to 36a-612, inclusive; and (10) fail to establish, enforce and maintain policies and procedures for supervising employees, agents and office operations that are reasonably designed to achieve compliance with applicable money transmission laws and regulations.
(d) Each licensee shall remit any money or monetary value received for transmission by the licensee or its authorized delegates to the person designated by the purchaser of such transmission not later than seven calendar days from the date of receipt of such money or monetary value from the purchaser unless otherwise directed by the purchaser.
(P.A. 81-264, S. 14; P.A. 92-12, S. 98; P.A. 01-56, S. 14; P.A. 03-61, S. 5; P.A. 07-91, S. 11; P.A. 09-208, S. 19; P.A. 13-253, S. 14; P.A. 17-233, S. 21; P.A. 18-173, S. 58; P.A. 25-66, S. 3.)
History: P.A. 92-12 redesignated Subdivs.; Sec. 36-543 transferred to Sec. 36a-607 in 1995; P.A. 01-56 amended Subdivs. (3) and (4) by changing “Connecticut instruments” to “Connecticut payment instruments” and amended Subdiv. (4) by adding language re money transmission; P.A. 03-61 designated existing provisions as Subsec. (a) and added Subsec. (b) providing that licensee includes entity or person exempt under Sec. 36a-609; P.A. 07-91 amended Subsec. (a)(4) to insert reference to “monetary value”; P.A. 09-208 amended Subsec. (a) by prohibiting agent of a licensee from engaging in the business of issuing Connecticut payment instruments or of money transmission on behalf of a licensee through or by means of a subagent in Subdiv. (1), by deleting references to subagents in Subdivs. (1) to (4) and making a conforming change in Subdiv. (3), and by adding Subdivs. (5) to (7) re contracts between licensees and their agents and amended Subsec. (b) by redefining “licensee”; P.A. 13-253 amended Subsec. (a) by changing references to agent to references to authorized delegate, requiring notification of authorized delegates acting on licensee's behalf, deleting reference to issuing Connecticut payment instruments, adding requirement that money transmission occur in this state and changing “subagent” to “any person who is not an authorized delegate of the licensee” in Subdiv. (1), adding reference to Secs. 36a-611 and 36a-612 and changing “agent of a licensee” to “authorized delegate” in Subdiv. (2), changing “agent of a licensee” to “authorized delegate” and “Connecticut payment instruments” to “money transmissions in this state” in Subdiv. (3), deleting “Connecticut”, adding “or stored value sold in this state” and changing “agent of the licensee” to “authorized delegate” in Subdiv. (4), changing references to agent to references to authorized delegate and adding references to Secs. 36a-611 and 36a-612 in Subdiv. (5), and changing references to agent to references to authorized delegate in Subdivs. (6) and (7), and amended Subsec. (b) by deleting reference to any entity or person exempt under Sec. 36a-609 and making a technical change; P.A. 17-233 added Subsec. (c) re acts by persons required to be licensed and subject to provisions of Secs. 36a-595 to 36a-612 and control persons, and added Subsec. (d) re licensees to remit money or monetary value received for transmission not later than seven calendar days from date of receipt; P.A. 18-173 amended Subsec. (a)(1) by adding references to the system and adding provision re licensee to pay any associated processing fees imposed by the system; P.A. 25-66 amended Subsec. (a) to add exception for Sec. 36a-613(f)(2) in introductory language.
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Sec. 36a-611. Maintenance of records. Unique identifier of license. Advertising of license. (a) Each licensee shall maintain and prepare such records as will enable the commissioner to determine whether the licensee and any of its authorized delegates are complying with the provisions of sections 36a-595 to 36a-612, inclusive, at the office named in the license, or, if requested by the commissioner, shall make such records available at such office or send such records to the commissioner by registered or certified mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt, not later than five business days after such request by the commissioner. Upon request, the commissioner may grant a licensee additional time to make such records available or send such records to the commissioner.
(b) Each licensee shall maintain the following records for at least five years:
(1) A record of each payment instrument or stored-value obligation sold within this state;
(2) A general ledger posted at least monthly containing all asset, liability, capital, income and expense accounts;
(3) Bank statements and bank reconciliation records;
(4) Records of outstanding money transmissions in this state;
(5) Records of each payment instrument and stored value obligation paid during the previous five years;
(6) A list of the last known names and addresses of all of the licensee's authorized delegates; and
(7) Any other records the commissioner may require.
(c) (1) The unique identifier of any person licensed under section 36a-600 shall be clearly shown on all solicitations and advertisements, including any business card used to solicit money transmission business and Internet web site, and any other documents as established by rule, regulation or order of the commissioner, and shall be clearly stated in all audio solicitations and advertisements. The solicitations or advertisements of any person licensed under section 36a-600 (A) shall not include any statement that such person is endorsed in any way by this state, except that such solicitations and advertisements may include a statement that such person is licensed in this state; (B) shall not include any statement or claim that is deceptive, false or misleading; (C) except as provided in subdivision (3) of this subsection, shall not include any statement or claim that funds deposited with such person are eligible for Federal Deposit Insurance Corporation protections; (D) shall otherwise conform to the requirements of sections 36a-595 to 36a-612, inclusive, any regulations issued thereunder and any other applicable law; and (E) shall be retained for two years from the date of use of such solicitation or advertising.
(2) Notwithstanding the provisions of subdivision (1) of this subsection, an advertisement or solicitation on a third-party Internet web site need not include the unique identifier of a person licensed under section 36a-600, provided such advertisement or solicitation contains a link to a solicitation, advertisement or Internet web site that clearly shows the unique identifier of such person.
(3) The solicitations or advertisements of a person licensed under section 36a-600 may include a statement or claim that funds deposited with such person are eligible for Federal Deposit Insurance Corporation protections if (A) such funds are placed in a deposit account at a depository institution insured by the Federal Deposit Insurance Corporation in a manner that qualifies such funds for deposit insurance coverage under applicable federal law; and (B) such statement or claim (i) clearly identifies such insured depository institution; (ii) accurately describes the extent and conditions of such coverage; and (iii) does not suggest or imply that such person or any nondeposit product, virtual currency or digital asset is insured by the Federal Deposit Insurance Corporation.
(P.A. 13-253, S. 18; P.A. 18-173, S. 60; P.A. 25-66, S. 6.)
History: P.A. 18-173 amended Subsec. (a) by deleting reference to Sec. 36a-596, added Subsec. (c) re unique identifier of license and requirements for solicitations or advertisements, and made technical changes, effective July 1, 2019; P.A. 25-66 amended Subsec. (c)(1) to add new Subpara. (C) re prohibition of statement or claim that funds deposited are eligible for Federal Deposit Insurance Corporation protections and redesignate existing Subparas. (C) and (D) as Subparas. (D) and (E), and amended Subsec. (c) to add Subdiv. (3) re authorization of statement or claim that funds deposited are eligible for Federal Deposit Insurance Corporation protections.
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Sec. 36a-613. Licensees that engage in money transmission by receiving, transmitting, storing or maintaining virtual currency. Virtual currency kiosks. Disclosures. Receipts. Prohibitions. Fee and commission. Maximum daily transaction limits. Cancellation and refund. Requirements. (a) Each licensee that engages in the business of money transmission in this state by receiving, transmitting, storing or maintaining custody or control of virtual currency 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) 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;
(6) Any bond maintained by the licensee for the benefit of the customers of such licensee may not be sufficient to cover all losses incurred by such customers; and
(7) Virtual currency transactions are irreversible and are used by persons seeking to defraud customers, including, but not limited to, a person impersonating a customer's loved one, threatening jail time, stating that a customer's identity has been stolen, insisting that a customer withdraw money from the customer's bank account and purchase cryptocurrency or alleging a customer's personal computer has been hacked.
(b) Each licensee that engages in the business of money transmission in this state by receiving, transmitting, storing or maintaining custody or control of virtual currency 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 licensee 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 licensee will, absent a court or government order, disclose information concerning the customer's account to third parties;
(4) The requirement that the licensee communicate to the customer what customer information may be disclosed to third parties;
(5) For any transaction that utilizes a virtual currency kiosk, the customer's right to receive a physical, printed receipt for a virtual currency transaction at the time of the transaction; and
(6) Upon any change in the rules or policies of the licensee, the customer's right to consent to such changed rules or policies prior to performing any transaction after such change.
(c) Each licensee that engages in the business of money transmission in this state by receiving, transmitting, storing or maintaining custody or control of virtual currency shall, prior to each virtual currency transaction 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) For any transaction that utilizes a virtual currency kiosk, the applicable daily virtual currency transaction limit established pursuant to subsection (h) of this section; and
(6) The difference in the sale price of the virtual currency versus the current market price.
(d) Each licensee that engages in the business of money transmission in this state by receiving, transmitting, storing or maintaining custody or control of virtual currency shall ensure that each customer acknowledges receipt of all disclosures required under this section.
(e) (1) Each licensee that engages in the business of money transmission in this state by receiving, transmitting, storing or maintaining custody or control of virtual currency shall, upon the completion of any virtual currency transaction, provide to the customer a receipt containing the following information:
(A) The name of, and contact information for, the licensee, including, but not limited to, the licensee's business address and a customer service telephone number established by the licensee to answer questions and register complaints;
(B) The name of the customer;
(C) The type, value, date and precise time of such virtual currency transaction, and each virtual currency address;
(D) The amount of such virtual currency transaction expressed in United States currency;
(E) The full unique transaction hash or identification number;
(F) The public virtual currency address of the customer;
(G) The unique identifier;
(H) Any fee charged, including, but not limited to, any fee charged directly or indirectly by the licensee or a third party involved in such virtual currency transaction;
(I) The exchange rate, if applicable;
(J) Any tax collected by the licensee for such virtual currency transaction;
(K) A statement of the liability of the licensee for nondelivery or delayed delivery;
(L) A statement of the refund policy of the licensee;
(M) The name and telephone number of the Department of Banking and a statement disclosing that the licensee's customers may contact the department with questions or complaints about the licensee's virtual currency services; and
(N) Any additional information the Banking Commissioner may require.
(2) The receipt required under subdivision (1) of this subsection:
(A) Shall be provided in (i) a retainable form, (ii) the English language, and (iii) the language principally used by the licensee to advertise, solicit or negotiate, either orally or in writing; and
(B) May be provided electronically, provided, if the transaction utilizes a virtual currency kiosk, the customer requests or agrees to receive an electronic receipt.
(f) A licensee that engages in the business of money transmission in this state by receiving, transmitting, storing or maintaining custody or control of virtual currency shall not:
(1) Sell, transfer, assign, lend, hypothecate, pledge or otherwise use or encumber virtual currency stored, held, controlled, maintained by, or under the custody or control of, such licensee on behalf of a person, except for the sale, transfer of ownership or assignment of such virtual currency at the direction of such person; or
(2) Directly or indirectly use or engage any other person, including, but not limited to, a virtual currency control services vendor, to store or hold custody or control of virtual currency for or on behalf of a customer, unless such other person is (A) licensed pursuant to sections 36a-595 to 36a-612, inclusive, (B) a federally insured federal bank, out-of-state bank, Connecticut bank, Connecticut credit union, federal credit union or out-of-state credit union that is exempt from licensure under section 36a-609, or (C) approved by the Banking Commissioner to store or hold custody or control of virtual currency for or on behalf of a customer.
(g) The total amount of any fee and commission charged by an owner or operator of a virtual currency kiosk for a virtual currency transaction shall not exceed fifteen per cent of the amount of the virtual currency transaction.
(h) There are established the following maximum daily virtual currency kiosk transaction limits:
(1) Two thousand dollars for each new customer of a virtual currency kiosk; and
(2) Five thousand dollars for each existing customer of a virtual currency kiosk.
(i) The owner or operator of a virtual currency kiosk shall allow a new customer, upon the request of the new customer, to cancel and receive a full refund for any fraudulent virtual currency transactions that occurred not later than seventy-two hours after the new customer registered as a customer of such owner or operator if, not later than thirty days after the last virtual currency transaction that occurred during such seventy-two hour period, the new customer:
(1) Contacts such owner or operator and a government or law enforcement agency to inform such owner or operator and government or law enforcement agency of the fraudulent nature of such virtual currency transaction; and
(2) Files a report with a government or law enforcement agency memorializing the fraudulent nature of such virtual currency transaction.
(j) Each owner or operator of a virtual currency kiosk shall:
(1) Obtain a copy of a government-issued identification card that identifies each customer of such owner or operator;
(2) Maintain restrictions that prevent more than one customer of such owner or operator from using the same virtual currency wallet;
(3) Be able to prevent designated virtual currency wallets from being used at any virtual currency kiosk owned or operated by such owner or operator;
(4) Use an established third party that specializes in performing blockchain analyses to preemptively perform such analyses to identify and prevent high risk or sanctioned virtual currency wallets from being used by customers at virtual currency kiosks owned or operated by such owner or operator;
(5) Define, in such owner or operator's policies and procedures, a risk-based method of monitoring customers of such owner or operator on a post-transaction basis;
(6) Offer, during the hours of operation of the virtual currency kiosks owned or operated by such owner or operator, live customer support by telephone from a telephone number prominently displayed at or on such virtual currency kiosks;
(7) Identify and speak by telephone with any new customer over sixty years of age prior to such new customer completing such new customer's first virtual currency transaction with such owner or operator. During such communication, which shall be recorded and retained by such owner or operator, the owner or operator shall (A) reconfirm any attestations made by such new customer at a virtual currency kiosk owned or operated by such owner or operator, (B) discuss the transaction, and (C) discuss types of fraudulent schemes relating to virtual currency. Such owner or operator's approval of the transaction shall be dependent upon such owner or operator's assessment of such communication;
(8) Identify and speak by telephone with any new customer attempting to perform a virtual currency transaction that exceeds an amount that has been predesignated by such owner or operator as a large transaction amount before such transaction may be completed. During such communication, which shall be recorded and retained by such owner or operator, the owner or operator shall (A) positively identify such new customer, (B) review such new customer's stated purpose of the transaction, and (C) discuss types of fraudulent schemes relating to virtual currency. Such owner or operator's approval of the transaction shall be dependent upon such owner or operator's assessment of such communication;
(9) Designate and employ a chief compliance officer who shall:
(A) Be qualified to coordinate and monitor a compliance program to ensure compliance with this section and all other applicable federal and state laws, rules and regulations;
(B) Be employed on a full-time basis by such owner or operator; and
(C) Not own more than twenty per cent of the virtual currency kiosk owner or operator that employs such officer; and
(10) Use full-time employees to fulfill such owner or operator's compliance responsibilities under federal and state laws, rules and regulations.
(P.A. 23-82, S. 3; P.A. 24-146, S. 4; P.A. 25-66, S. 4.)
History: P.A. 24-146 amended Subsec. (a) to delete former Subdiv. (5) re continued acceptance of virtual currency, redesignate existing Subdiv. (6) as Subdiv. (5), delete former Subdiv. (7) re risk of fraud or cyber attack, delete former Subdiv. (8) re technological difficulties, redesignate existing Subdiv. (9) as Subdiv. (6) and add new Subdiv. (7) re irreversibility of virtual currency transactions and use of such transactions to defraud, amended Subsec. (b) to delete former Subdiv. (4) re statements and valuations, add new Subdiv. (4) re disclosure of information, add “physical, printed”, replace “trade ticket or other evidence of” with “for” and add “at the time of the transaction” in Subdiv. (5) and add provision re upon any change in rules or policies of owner or operator and replace “prior notice of a change in the” with “consent to such changed” and “of the owner or operator” with “prior to performing any transaction after such change” in Subdiv. (6), amended Subsec. (e) to designate existing introductory language re receipts as Subdiv. (1), redesignate existing Subdiv. (1) as Subdiv. (1)(A), add “but not limited to, the owner or operator's business address and” and “customer service” in redesignated Subdiv. (1)(A), add Subdiv. (1)(B) re name of customer, redesignate existing Subdiv. (2) as Subdiv. (1)(C), add Subdiv. (1)(D) re transaction amount, add Subdiv. (1)(E) re transaction hash or identification number, add Subdiv. (1)(F) re virtual currency address, add Subdiv. (1)(G) re unique identifier, redesignate existing Subdiv. (3) as Subdiv. (1)(H), change “The fee” to “Any fee” and add provision re fee charged directly or indirectly in redesignated Subdiv. (1)(H), redesignate existing Subdiv. (4) as Subdiv. (1)(I), add Subdiv. (1)(J) re tax collected, redesignate existing Subdivs. (5) and (6) as Subdiv. (1)(K) and (L), add Subdiv. (1)(M) re contacting Department of Banking, redesignate existing Subdiv. (7) as Subdiv. (1)(N), add Subdiv. (2) re receipt requirements and receipts may be provided electronically, amended Subsec. (f) to replace provision authorizing Banking Commissioner to establish maximum fees with provision re amount of fee and commission shall not exceed 15 per cent of transaction, amended Subsec. (g) to replace transaction limit of $2,500 with transaction limits of $2,000 for new customers and $5,000 for existing customers, amended Subsec. (h) to delete provision re at owner's or operator's cost and within 72 hours after virtual currency transaction, add provisions re allowing cancelation and refund upon request of new customers, change “the virtual currency” to “any fraudulent virtual currency”, delete former Subdivs. (1) and (2) re cancelation and refund, add provision re allowing cancelation and refund for transactions that occurred not later than 72 hours after registration if new customer satisfies certain requirements not later than 30 days after certain transaction and add new Subdivs. (1) and (2) re requirements for cancelation and refund, added Subsec. (i) re requirements applicable to owners or operators of virtual currency kiosks and made technical and conforming changes throughout; P.A. 25-66 replaced “The owner or operator of a virtual currency kiosk” with “Each licensee that engages in the business of money transmission in this state by receiving, transmitting, storing or maintaining custody or control of virtual currency” in the introductory language of Subsecs. (a) to (d) and (e)(1), replaced references to “owner or operator” with references to “licensee” in Subsecs. (a)(6), (b) and (e), replaced “The” with “For any transaction that utilizes a virtual currency kiosk, the” in Subsec. (b)(5), replaced “transaction in virtual currency” with “virtual currency transaction” in the introductory language of Subsec. (c), amended Subsec. (c)(5) to replace “A” with “For any transaction that utilizes a virtual currency kiosk, the applicable”, replace “in accordance with” with “established pursuant to” and make a conforming change, replaced references to “owner or operator's” with references to “licensee's” in Subsec. (e)(1)(A) and (M), deleted “kiosk” in Subsec. (e)(1)(M), amended Subsec. (e)(2) to replace “owner or operator of the virtual currency kiosk” with “licensee” in Subpara. (A)(iii) and to replace “, if” with “provided, if the transaction utilizes a virtual currency kiosk,” in Subpara. (B), added new Subsec. (f) re prohibitions applicable to licensees that engage in money transmission by receiving, transmitting, storing or maintaining virtual currency, redesignated existing Subsecs. (f) to (i) as Subsecs. (g) to (j).
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Sec. 36a-614a. Sponsoring, opening or establishing money sharing application account for or on behalf of minor. Deletion of account. (a) For the purposes of this section:
(1) “Authenticate” means to use reasonable means and make a commercially reasonable effort to determine whether a request to exercise any right afforded under subsection (c) of this section has been submitted by, or on behalf of, the minor who is entitled to exercise such right;
(2) “Consumer” has the same meaning as provided in section 42-515;
(3) “Licensee” has the same meaning as provided in section 36a-596;
(4) “Minor” means any consumer who is younger than eighteen years of age;
(5) “Money sharing application” means an Internet-based service or application that is (A) owned or operated by a licensee, (B) used by a consumer in this state, and (C) primarily intended to allow users to send and receive money. “Money sharing application” does not include any Internet-based service or application that is owned or operated by a person that is exempt from the provisions of sections 36a-597 to 36a-607, inclusive, and sections 36a-611 and 36a-612 pursuant to section 36a-609; and
(6) “Personal data” has the same meaning as provided in section 42-515.
(b) On and after October 1, 2025, no licensee shall allow an individual to sponsor, open or establish a money sharing application account for or on behalf of a minor unless such licensee has (1) received an attestation from such individual attesting that such individual is such minor's parent or legal guardian, and (2) (A) received a copy of such individual's motor vehicle operator's license or other valid government-issued identification card, or (B) verified the identity of such individual in accordance with the provisions of the Bank Secrecy Act, 31 USC 5311 et seq., as amended from time to time, and the regulations promulgated thereunder.
(c) (1) Not later than thirty business days after a licensee receives a request from a minor or such minor's parent or legal guardian to delete such minor's money sharing application account with such licensee, the licensee shall delete such minor's money sharing application account and cease processing such minor's personal data except where the preservation of such minor's money sharing application account or personal data is otherwise permitted or required by applicable law, including, but not limited to, sections 42-515 to 42-525, inclusive. A licensee may extend such thirty-business-day period by an additional thirty business days if such extension is reasonably necessary considering the complexity and number of the minor's, parent's or legal guardian's requests, provided the licensee informs the minor or such minor's parent or legal guardian, as applicable, within the initial thirty-business-day response period of such extension and the reason for such extension.
(2) Any request made pursuant to subdivision (1) of this subsection may include a request by the minor or such minor's parent or legal guardian to provide to the minor or such minor's parent or legal guardian, as applicable, all data associated with the money sharing application account that is the subject of such request. Such data shall include, but need not be limited to, an itemization of each transaction associated with such account and the identity of the person who opened such account. A licensee shall provide such data to the minor or such minor's parent or legal guardian, as applicable, within the timeframe established by the provisions of subdivision (1) of this subsection.
(3) A licensee shall establish, and shall describe in a notice provided to consumers that have a money sharing application account with such licensee, one or more secure and reliable means for submitting a request pursuant to this subsection. A licensee that provides a mechanism for a minor or the minor's parent or legal guardian to initiate a process to delete such minor's money sharing application account shall be deemed to be in compliance with the provisions of this subdivision.
(d) If a licensee is unable to authenticate a request submitted pursuant to subsection (c) of this section, the licensee shall (1) not be required to comply with such request, and (2) provide a notice to the minor, parent or legal guardian who submitted such request disclosing that such licensee (A) is unable to authenticate such request, and (B) will not be able to authenticate such request until such minor, parent or legal guardian provides the additional information that is reasonably necessary to authenticate such request.
(P.A. 25-66, S. 7.)
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