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HB 5798

Financial institutions: money transmitters; money transmission modernization act; create. Creates act & repeals 2006 PA 250 (MCL 487.1001 - 487.1047).

2023-2024 Regular Session Introduced by John Fitzgerald and 3 co-sponsors

Michigan HB 5798 modernizes money transmission law with licensing, clearer scope, stronger supervision, and better consumer protections for transmitters, banks, and users.

REFERRED TO COMMITTEE ON GOVERNMENT OPERATIONS
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Bill Summary · HB 5798

HB 5798 — Money Transmission Modernization Act (Substitute H‑1)

Summary prepared: January 22, 2025

Summary

HB 5798 (Substitute H‑1) creates the "Money Transmission Modernization Act," a comprehensive update to Michigan's money‑transmitter law that would replace the current Money Transmission Services Act (2006 PA 250, MCL 487.1001–487.1047). The bill establishes a modern licensing and supervisory framework for the business of money transmission, clarifies covered activities and exemptions, prescribes regulator powers and duties, and provides for penalties and civil sanctions.

Purpose / Legislative Intent

The bill’s stated objectives are to:
- Improve state coordination in regulation, licensing, and supervision to reduce unnecessary regulatory burden;
- Protect the public from financial crime;
- Standardize what activities require licensing or are exempt; and
- Modernize safety‑and‑soundness rules to protect customer funds while supporting innovation and competition.

Key provisions and definitions (highlights)

  • Repeals and replaces the 2006 money transmission statute with a new, consolidated act.
  • Licensing: Requires persons engaged in money transmission to be licensed (explicit licensing provisions are central to the act; full licensing rules appear elsewhere in the bill).
  • Money transmission defined to include: selling/issuing payment instruments, selling/issuing stored value, receiving money for transmission, and payroll processing services; excludes solely providing network access or telecommunications services.
  • Important defined terms:
    • “Department” = Michigan Department of Insurance and Financial Services (DIFS); “Director” = DIFS director or designee.
    • “Average daily money transmission liability” — measured by day‑end outstanding obligations in Michigan, averaged across calendar quarter end dates (quarters ending March 31, June 30, Sept. 30, Dec. 31).
    • “Closed‑loop stored value” — redeemable only for issuer’s goods/services (except where law requires cash redemption).
    • Control thresholds: “Control” defined as voting power of 25%+ (presumption of control at 10% voting power, rebuttable for passive investors); family interests aggregated for control determinations.
    • “Eligible rating” and “eligible rating service” — sets minimum credit rating standards (long‑term A‑ or higher by S&P or equivalent; short‑term A‑2 or SP‑2 or equivalent).
    • “In this state” — clarifies when a person is considered located in Michigan (physical location for in‑person; for remote transactions, licensees may rely on address and account records).
  • Authorizes designation of “authorized delegates” to perform transmission on a licensee’s behalf.
  • Prescribes powers/duties for state and local officials, and establishes penalties and civil remedies (details in subsequent sections of the bill).

Who is affected

  • Money transmitters and prospective licensees (including fintechs, payment processors, payroll processors).
  • Banks and federally insured depository institutions that hold funds or provide custodial services to transmitters.
  • Authorized delegates, key individuals (executive officers/managers), and investors (control rules).
  • Consumers in Michigan (through licensing, supervision, and consumer‑protection provisions).

Procedural status / timeline

  • Introduced: June 6, 2024 (Rep. John Fitzgerald).
  • Substitute (H‑1) adopted; passed House on December 12, 2024 (Roll Call #461 — Yeas 56, Nays 53) with immediate effect.
  • Referred to Committee on Government Operations (December 18, 2024).
  • Referred to Joint Committee on Appropriations (January 22, 2025).
  • Current status (as of Jan 22, 2025): Referred to committee for further consideration.

Potential implications

  • Modernizes and clarifies regulatory obligations for money‑transmission activities and may increase regulatory consistency across states.
  • Likely to affect compliance processes, licensing costs, and control/ownership reporting for businesses in the payments ecosystem.
  • Aims to strengthen consumer protections and anti‑financial‑crime controls, while providing clearer standards for capital/creditworthiness through rating and liability definitions.

For full implementation details (licensing criteria, capital or custody requirements, examination powers, and penalties), refer to the complete bill text and any rules the Department of Insurance and Financial Services promulgates under the act.

Compiled from official sources — confirm details with the bill’s official record.

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