Washington Amends Its Consumer Loan Act Licensing Regulations


The Washington Department of Financial Institutions (Department) recently issued a new rule clarifying the licensing requirements for individual managers of Consumer Loan Company Licensees. The new rule became effective on January 1, 2014.

The rule states that a Consumer Loan Company Licensee's managers, including branch managers, must be licensed individually as MLOs if they conduct any of the following activities:

  • Take residential mortgage loan applications, negotiate the terms or conditions of residential mortgage loans, or hold themselves out as being able to conduct these activities
  • Supervise a licensee's loan processors or underwriting employees
  • Supervise a licensee's licensed MLOs

In response to questions from the industry, the Department issued guidance clarifying the new rule, which includes several significant points:

  • All Washington MLOs must work from a licensed location.
  • Any manager who directly supervises loan processor or underwriting employees must hold an MLO license. That manager's MLO license can be from any state, however.
  • Any manager who directly supervises Washington-licensed MLOs must themselves hold a Washington MLO license.
  • Regarding managers who directly supervise Washington-licensed MLOs, loan processors, or underwriters, the Department requires licensure of the day-to-day operational supervisors.
  • A written supervisory plan must be kept as part of a licensee's business books and records. This plan must include consideration of the location of the supervisor and the employees supervised, the number of employees supervised, and the volume of work performed by the supervised employees.

Separately, the Department amended an existing rule related to office licensing requirements. According to the revised rule, no licensing is required for offices that solely provide loan processing or underwriting or other back-office services on loans and only have incidental contact with borrowers. Any location where a licensed MLO works must be licensed, however.

Despite the Department's guidance, a number of issues remain unclear, including the number of employees a single, licensed manager can oversee, and whether employees can be managed from an MLO at another location. While not entirely clear, based on the interplay of the two rules, it appears that the Department contemplates a possible scenario in which processing and underwriting activity can occur at an unlicensed location, and be managed by a licensed MLO working out of a different, licensed location.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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