A new Money Services Business (MSB) Call Report was released on April 18, 2017 and is the next step for state regulators towards standardization of MSB regulation, including regulation of certain FinTech companies. The Conference of State Bank Supervisors (CSBS), which is a nationwide organization of financial regulators from all 50 states that coordinates supervision and represents the members in legislative activities, has been encouraging states to adopt and implement its licensing practices for MSBs on its National Mortgage Licensing System (NMLS). For states that have adopted the MSB licensing system, MSB licensees must file the MSB Call Report by May 15, 2017. The MSB Call Report enables MSBs to comply with quarterly and annual reporting obligations in multiple participating states under one filing system. It is the next step towards MSB supervisory standardization at the state level, and is a state tool to compete with a proposed federal FinTech charter.

The MSB Call Report, according to CSBS, applies to licensees in states that adopt the report and engage in the following activities: money transmission, check cashing, issuing or selling travelers checks, issuing or selling drafts, foreign currency dealing and exchange, issuing or selling money orders, bill paying, issuing or selling prepaid access/stored value products, and virtual currency.

The MSB Call Report includes four sections.

  1. Financial condition section collects financial information at the company level.
  2. Transaction activity reporting section collects transaction details company-wide in every state in which the MSB operates.
  3. Permissible investments report section collects details for specific license types at the company level.
  4. Transaction destination country section, which is only required for licensees that transmit money outside of the United States to a foreign country, reports on international transactions.

While the MSB Call Report is the baseline for reporting, certain states have reporting obligations in addition to the MSB Call Report.

CSBS is expecting the MSB Call Report to be a tool for FinTech companies to comply with state law reporting obligations. FinTech companies and other MSB licensees often struggle to comply with a plethora of differing, and in some instances contradicting, state laws. In connection with the MSB Call Report release, a CSBS spokeswoman stated that using NMLS as a platform will create a uniform system for MSBs including FinTech companies, bring transparency to non-depository regulation, and provide meaningful information for risk analysis. It will also promote regulatory collaboration among state regulators.

Against this state law development backdrop, the Office of the Comptroller of the Currency (OCC) is in the process of creating a FinTech charter under federal law. Such a charter would allow a FinTech company to obtain a license and report to one federal regulator. Competing supervisory charters and licensing has caused conflict between state and federal regulators. Indeed, CSBS has sued the OCC for its plans to offer a FinTech charter. CSBS claims that the OCC is unlawfully expanding its chartering authority for the “business of banking” granted by Congress for national banks. The outcome of the litigation is unclear.

Regardless, CSBS is making efforts to provide a framework for a state system that is a viable meaningful alternative to a federal chartering system if the federal FinTech charter goes forward. Not all states are participating. So far, 17 state agencies and Puerto Rico have adopted the MSB Call Report for the first quarter 2017, including California and Illinois. According to CSBS, several additional states are expected to adopt the MSB Call Report in the near future. If more states join the NMLS for MSBs, in particular larger states such as New York, Florida and Texas, the state regulatory structure will become a more attractive alternative for FinTech companies with state licenses, as well as for state licensed MSBs.

MSBs, including FinTech companies, should be cognizant of potentially changing licensing and filing requirements in states in which they operate.