Common enforcement violations (a reprint of a DFI newsletter)

This is a reprint of a Department of Financial Institutions (DFI) Newsletter, Spring 2013, concerning Common Enforcement Violations.The Enforcement Unit receives and analyzes complaints related to potential violations of the Mortgage Broker Practices Act, the Consumer Loan Act, the Check Cashers and Sellers Act, the Escrow Agent Registration Act, and the Uniform Money Services Act. During the course of the investigative review, the Enforcement Unit must decide whether to resolve matters in an informal or formal manner.The formal Enforcement actions brought by DFI’s Consumer Services Division are available on the DFI website. These actions are generally the culmination of months of investigative review and analysis. A significant portion of the Enforcement Unit’s time is spent investigating unlicensed activity. Typically, DFI will pursue formal Enforcement action against unlicensed entities; however, when there has been no consumer harm or where the company can demonstrate a likelihood of future compliance, DFI may resolve the complaint without issuing charges by proceeding directly to a negotiated consent order.Many violations are resolved at an informal level at the complaint stage of the process. Complaint resolutions are not posted to the DFI website, nor are they available on NMLS. Over the past year, the Consumer Services’ Enforcement Unit has closed 1,707 complaints, 240 of which cited violations of a specific statute.To assist our licensees in evaluating their own potential compliance issues, the Enforcement Unit has provided a list of the most common violations cited against licensees in the complaint process.Check Cashers and Sellers – RCW 31.45

• RCW 31.45.084(1) – failed to convert loan to payment plan after borrower request
• RCW 31.45.100 – failed to comply with investigative authority
• RCW 31.45.093 – failed to update information in vendor database

Consumer Loan Act – RCW 31.04

• RCW 31.04.145 - failed to comply with investigative authority
• RCW 31.04.027(2) – engaged in an unfair or deceptive practice
• RCW 31.04.027(12) – failed to comply with applicable federal statutes (generally advertising violations)

Escrow Agent Registration Act – RCW 18.44

• RCW 18.44.071 – conducted escrow transaction without supervision of licensed escrow officer
• WAC 208-680-265 – failed to notify DFI of a significant event (e.g. closure, new location, new officer, etc.)

Uniform Money Services Act – RCW 19.230

• RCW 19.230.330(1) – failed to transmit all moneys received from a customer for transmission
• RCW 19.230.330(3) – failed to refund all monies within 10 days of written request for refund
• RCW 19.230.150(3) – failed to notify DFI of the occurrence of event within one business day

Mortgage Broker Practices Act

• RCW 19.146.235 – failed to comply with investigative authority
• RCW 19.146.0201(8) – negligently made a false statement or omission of material fact to DFI
• WAC 208-660-400 – failed to notify DFI of a significant event (esp. expired bond, new officer, regulatory action)

As a whole, the most common violation by licensees is failure to respond in a timely manner and completely to Department-issued Directives and Subpoenas. For more information on how to avoid being cited for this violation, please refer to the article in the Fall 2012 newsletter on this topic.