Last month New Mexico passed its first money transmitter licensing law.
The State previously only required licensing for the sale of checks and money orders. The new law now covers money transmitters, check cashers and currency exchangers.
With the law, titled the “Uniform Money Services Act”, New Mexico joins the era of comprehensive state regulation of money transmitter licensing. “Money transmission” is defined in the New Mexico law as “selling or issuing payment instruments, stored value or receiving money or monetary value for transmission.” The definition explicitly excludes solely providing delivery, online or telecommunications services or network access. A “payment instrument” is “a check, draft, money order, traveler’s check or other instrument for the transmission or payment of money or monetary value, whether or not negotiable.” The “payment instrument” definition excludes credit card vouchers, letters of credit and instruments redeemable by the issuer in goods or services (i.e., closed-loop products). “Stored value” is defined simply as “monetary value that is evidenced by an electronic record.”
Money Transmitter Licensing Requirements
The New Mexico Law covers licensing application requirements, including information requested on the licensing application, the licensing fee and required security. The law imposes $4,000 in nonrefundable licensing fees, including a $2,000 application fee and $2,000 license fee. The application also must include a surety bond, letter of credit or similar security that is either a minimum of $300,000 or an amount equal to the greater of (a) one percent of the licensee’s total yearly dollar volume of money transmission business in New Mexico or (b) the applicant’s projected total volume of business in New Mexico during its first year of licensure, up to a maximum of $2,000,000. An applicant also must continue maintaining adequate security as a licensee, and the amount of security may be increased to as much as $5,000,000 if the state determines that the licensee’s financial condition requires.
Licensees also must maintain a net worth of at least $100,000, or up to at least $500,000 if (a) the licensee has five or more locations or authorized delegates in New Mexico or (b) the company is an “internet-based money services business”, meaning it provides money transmission, check cashing or currency exchange services to New Mexico residents through the internet. Further, a licensee must maintain permissible investments with a market value not less than the aggregate amount of (a) all its outstanding payment instruments and stored-value obligations issued or sold in all states and (b) money it transmits in all states.
Licensees are permitted to appoint authorized delegates provided certain notification, recordkeeping and contractual requirements in the law are met. However, the law explicitly states that authorized delegates may not use subdelegates.
There also are requirements in the law for annual license renewal, filing state quarterly reports, the basis for the state to conduct examinations, and recordkeeping requirements. Moreover, a licensee must submit for the state’s approval a written notice of a proposed change of control impacting at least 25% direct or indirect ownership within 15 days after learning of the proposal and include a $2,000 fee with the notice.
Exemptions
As with many other state money transmitter laws, New Mexico exempts banks from its licensing requirement. It defines “bank” for this purpose as a federal or state-organized institution that:
(1) accepts demand deposits or deposits that the depositor may use for payment to third parties and engages in the business of making commercial loans or
(2) engages in credit card operations and maintains only one office that accepts deposits, does not accept demand deposits or deposits that the depositor may use for payments to third parties, does not accept a savings or time deposit less than $100,000 and does not engage in the business of making commercial loans.
Effective Date and Context
The new law, effective January 1, 2017, is available here.
Until now, New Mexico was one of only three states without a money transmitter licensing law, the others being South Carolina and Montana. South Carolina currently has a money transmitter licensing bill that passed in the House and was referred to the Senate.
More on the implications of the new requirements will follow in a second post.
