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Senate Bill Report SB 5602 — Service Providers Working with State-Regulated Financial Institutions

Summary

Senate Bill Report SB 5602, as of January 11, 2022, concerns service providers working with state-regulated financial institutions. It names Senator Mullet as sponsor, by request of Department of Financial Institutions. The summary of the bill states that a regulatory framework is created giving the director of DFI the authority to examine third party service providers that provide covered services to banks, to the same extent as if the bank itself performed the covered service. The director may take enforcement action against a service provider that has violated state or federal law or engaged in an unsafe or unsound practice. The staff summary of public testimony lists a PRO statement that third party servicers need to be regulated.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Issuer
Congressional materials
Document type
Report
Date
2022-01-13
Case
2022 01 13 A29379 D237181 Bill Report 5602 Sbr Bfst Ta 22

Cite this document

“Senate Bill Report SB 5602 — Service Providers Working with State-Regulated Financial Institutions.” Original at app.leg.wa.gov, dated 2022-01-13. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2022-01-13-2022-01-13-a29379-d237181-bill-report-5602-sbr-bfst-ta-22/, SHA-256 cd2061a3d06b5bf4ff385eba64418961f9712c62948d35cba0fc20150e54750a.

Full text

                            SENATE BILL REPORT
                                  SB 5602

                                      As of January 11, 2022

Title: An act relating to service providers working with state-regulated financial institutions.

Brief Description: Concerning service providers working with state-regulated financial
     institutions.

Sponsors: Senator Mullet; by request of Department of Financial Institutions.

Brief History:
     Committee Activity: Business, Financial Services & Trade: 1/11/22.


                                     Brief Summary of Bill
           • Authorizes the Department of Financial Services to examine third party
             service providers to banks and take enforcement actions against them
             under certain circumstances.


SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES & TRADE

     Staff: Clinton McCarthy (786-7319)

     Background: The Washington State Department of Financial Institutions (DFI) regulates
     state chartered depository institutions, such as:
         • banks;
         • credit unions;
         • savings banks;
         • non-depository trust companies; and
         • foreign bank branches.

     Under current statute, DFI has limited ability to examine third party providers that contract
     with banks to provide a wide range of services. Banks rely on third party servicers to
     provide or enable key functions and services.



     This analysis was prepared by non-partisan legislative staff for the use of legislative
     members in their deliberations. This analysis is not part of the legislation nor does it
     constitute a statement of legislative intent.

Senate Bill Report                              -1-                                             SB 5602
     Summary of Bill: A regulatory framework that gives the director of DFI the authority to
     examine third party service providers that provide covered services to banks is created. The
     director can examine and regulate service providers to the same extent as if the covered
     service was performed by the bank itself. The director has rulemaking authority to
     implement its framework for examining third party providers.

     The director has broad discretion to enter into joint examinations or joint enforcement
     actions with other states or federal agencies. The director may also accept examinations
     made by other states or federal agencies, and has the authority to enter into information
     sharing agreements with any state or federal agency that has a joint or concurrent
     jurisdiction over a service provider.

     Examinations written by or received by the director are confidential and subject to
     applicable state and federal bank confidentiality laws. The director is authorized to take
     enforcement action against a service provider that:
        • has violated or is currently violating state or federal law; or
        • has engaged or is currently engaging in an unsafe or unsound practice.

     Appropriation: None.

     Fiscal Note: Available.

     Creates Committee/Commission/Task Force that includes Legislative members: No.

     Effective Date: Ninety days after adjournment of session in which bill is passed.

     Staff Summary of Public Testimony: PRO: The bill is very straightforward. No agency
     does a better job of working their stakeholders to get a bill right than DFI. DFI does their
     homework and gets these bills right. Third parties are playing a larger and larger role in
     banking. You want to be able to look at the banks and the contractors that are helping
     banks do core services. Third party servicers need to be regulated.

     Persons Testifying: PRO: Senator Mark Mullet, Prime Sponsor.

     Persons Signed In To Testify But Not Testifying: No one.




Senate Bill Report                            -2-                                        SB 5602

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2022-01-13_a29379_d237181_bill-report-5602-sbr-bfst-ta-22.pdf
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Our copy
2022-01-13_a29379_d237181_bill-report-5602-sbr-bfst-ta-22.pdf
Original
app.leg.wa.gov
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