QUESTION
Due to the pandemic, most of our loan officers moved to remote. Basically, they work from
home.
Some of them have come back to the office, but most prefer to work from their home office. Our management has no problem with this arrangement. Whatever works and is safe – that’s management’s view. But their homes are not licensed locations.
However, our banking department is starting to take the view that there are certain features of licensing that may require their home offices to be licensed. We are concerned.
What would you say are the types of home office situations for our remote loan officers that require licensing requirements?
ANSWER
Indeed, some
banking departments have begun to monitor remote locations for possible
licensing violations. Generally, this comes under the rubric of telecommuting
as it relates to licensing requirements.
Telecommuting is a catchall phrase for financial services activities taken by employees on behalf of their employers through the Internet, email, telephone, or direct mail. In such cases, an employee makes contact with potential applicants or consumers in person, by phone or email, or through direct mail while, at all times, representing their business location as a licensed office of the individual’s employer.
That configuration can come up against a banking department’s rule that a mortgage broker or mortgage lender may only engage in covered activities at any location for which it holds a license. That said, I have noticed that many banking departments are fully aware of the challenges caused by the pandemic. There seems to be an understanding that technological changes, such as remote computing, are continuing trends that grow unabatedly. So, the departments are grappling with how to balance their licensing rule while ensuring that opportunities to work in non-commercial locations are acceptable under certain conditions.
There’s not much debate about applying business location licensing requirements in instances where an individual employee or the individual’s employing company does not indicate that the employee is engaging in particular financial services activities on behalf of the licensee at any unlicensed location.
I would suggest
that at least three remote practices implicate licensing requirements, as
follows:
1. Advertising, or including within any
business documents or forms (except in documents used in communications
directly between the individual employee and their employer), an address that
is not a licensed business location;
2. Advertising, making available to the
general public, or including within any business documents or forms (except in
documents used in communications directly between the individual employee and
their employer), a telephone number in a manner that indicates an employee
conducts activities at a place other than a licensed business location (i.e.,
using a published residential telephone number in promotions); and,
3. Representing, in any manner, directly or indirectly, a location at which financial services activity on behalf of the licensee may occur if such representation indicates the activity would occur at an unlicensed location or would mislead a consumer to believe an unlicensed location is an authorized location from which the employee or their employer conducts licensable financial services activity.
I would also
suggest, at minimum, three cautionary practices need to be implemented for the
unlicensed, remote locations, as follows:
1. Data security requirements should include
provisions for the employee to access the company’s secure origination system
from any out-of-office device the employee uses through the use of a VPN or
other system that requires passwords or identification authentication. The company is responsible for maintaining
any updates or other requirements to keep information and devices secure;
2. Neither the employee nor the company is
to do any act that would indicate or tend to indicate that the employee is
conducting business from an unlicensed location. Such acts include but are not
limited to:
a. Advertising in any form, including
business cards and social media, the unlicensed residence address or landline
telephone or facsimile number associated with the unlicensed residence;
b. Meeting consumers at, or having
consumers come, to an employee’s unlicensed residence;
c. Holding out in any manner, directly or
indirectly, by the employee or company licensee, the residence address that
would suggest or convey to a consumer that the residence is a licensed location
for conducting licensable activities; and,
3. Employees and companies must exercise
due diligence in safeguarding company and customer data, information and
records, whether in paper or electronic format, and protecting them against
unauthorized or accidental access, use, modification, duplication, destruction,
or disclosure.
