Consumer Finance Companies come in all shapes and sizes, and they engage in many different types of business. Traditional Installment Lenders make consumer loans that are repayable in equal periodic installments, and such loans may be secured or unsecured. When loans are secured, the collateral is often personal property such as household goods or vehicles.
Some consumer finance companies also make loans secured by residential real property. And, some engage—often as a sideline—in a money service business (MSB). MSB activities include:
- Currency dealer or exchanger
- Check casher
- Issuer of traveler's checks, money orders, or stored value
- Seller or redeemer of traveler's checks, money orders, or stored value
- Money transmitter
These terms are defined in the applicable regulation but have pretty straight forward meaning. There is a $1000 per person per day threshold for the first four items above. There is no activity threshold applicable to the definition of a money transmitter.
MSB activity or residential lending activity creates the obligation on the business to comply with the regulations of FinCen, a bureau of the United States Department of the Treasury that collects and analyzes information about financial transactions to combat domestic and international money laundering, terrorist financing, and other financial crimes. If a traditional consumer finance company engages in such business, it should be aware of the compliance requirements of FinCen reporting.
Being an MSB or a residential mortgage lender also makes the BSA regulations applicable to a finance company. Such regulations require reporting of currency transactions and suspicious activity. In addition, businesses subject to the BSA are required to have customer identification programs in effect.
Just when you thought that you had it all covered, there always seem to be more bases to touch.
Please note: This is the seventy-fourth blog in a series of Back to Basics blogs, in which relevant and resourceful information can be easily accessed by clicking here.