AB500 - Provides for the licensure and regulation of payments banks. (BDR 55-999)

EXEMPT (Reprinted with amendments adopted on June 1, 2025) SECOND REPRINT A.B. 500 - *AB500_R2* ASSEMBLY BILL NO. 500–ASSEMBLYMEMBER YEAGER MARCH 24, 2025 ____________ Referred to Committee on Commerce and Labor SUMMARY—Provides for the licensure and regulation of payments banks. (BDR 55-999) FISCAL NOTE: Effect on Local Government: Increases or Newly Provides for Term of Imprisonment in County or City Jail or Detention Facility. Effect on the State: Yes. ~ EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted. AN ACT relating to financial institutions; providing for the licensure and regulation by the Commissioner of Financial Institutions of payments banks; setting forth various procedures and requirements for the organization and licensure of payments banks; setting forth the powers and duties of the Commissioner with respect to payments banks; imposing various requirements and restrictions concerning the operation of payments banks; establishing certain prohibited acts relating to payments banks; revising certain provisions relating to financial institutions; making an appropriation; providing penalties; and providing other matters properly relating thereto. Legislative Counsel’s Digest: Existing law provides for the licensure and regulation of various financial 1 institutions by the Commissioner of Financial Institutions. (Title 55 of NRS) This 2 bill provides for the licensure and regulation by the Commissioner of payments 3 banks. Under section 70 of this bill, a payments bank, with certain exceptions, has 4 all the powers, privileges and authorities that a state bank or national bank has, 5 including, engaging in money transmission, engaging in activities concerning the 6 maintenance of deposit accounts and the conducting of merchant acquiring 7 activities, which section 18 of this bill defines to mean activities associated with 8 effecting transactions within payment card networks. Section 70 prohibits a 9 payments bank from making loans and engaging in various activities relating to 10 loans. 11 Sections 3-29 of this bill define words and terms for the purposes of this bill. 12 – 2 – - *AB500_R2* Sections 30, 32-35, 37, 39 and 40 of this bill set forth various powers and 13 duties of the Commissioner with respect to the licensure and regulation of 14 payments banks. Section 31 of this bill prohibits an officer or employee of the 15 Division of Financial Institutions of the Department of Business and Industry from 16 having certain involvement with a payments bank. Section 36 of this bill sets forth 17 certain requirements for the provision of notices required under the provisions of 18 this bill. Sections 38 and 43-45 of this bill set forth procedures and requirements 19 for the organization and licensure of a payments bank. Section 44.5 authorizes the 20 Secretary of State to apply for and be issued a license to operate a payments bank, 21 which is authorized to provide services only to governmental entities. 22 Section 42 of this bill exempts a participant in the Regulatory Experimentation 23 Program for Product Innovation from the provisions of this bill. 24 Sections 46-49 of this bill require that: (1) the deposit accounts of a payments 25 bank be insured by the Federal Deposit Insurance Corporation or a private insurer 26 approved by the Commissioner and the Commissioner of Insurance; or (2) the 27 payments bank obtain the approval of the Commissioner to operate without such 28 insurance, in which case the payments bank must furnish a surety bond or pledge 29 certain assets. Section 50 of this bill requires a payments bank to maintain bond 30 coverage in an amount and form acceptable to the Commissioner. Sections 71 and 31 77 of this bill require a payments bank to maintain certain capital. Section 51 of 32 this bill authorizes the Commissioner to require: (1) a payments bank to provide a 33 letter of credit made payable to the Commissioner for the benefit of merchants; and 34 (2) the holding company of a payments bank to provide a certain guaranty to the 35 Commissioner to maintain certain minimum levels of capital. 36 Section 52 of this bill authorizes a payments bank to establish and maintain 37 offices in this State. Section 52 also requires a payments bank to provide certain 38 notice to the Commissioner relating to a change in the location of any such office. 39 Section 53 of this bill sets forth certain restrictions on advertising by a payments 40 bank. Section 54 of this bill imposes restrictions on the use of a business name and 41 the use of printed forms which may mislead or confuse the public. Sections 55-62 42 and 64-68 of this bill establish certain requirements and restrictions on the 43 operations of the board of directors of a payments bank. Section 63 of this bill 44 requires: (1) a payments bank to notify the Commissioner of certain changes or 45 proposed changes in the ownership of the payments bank; and (2) the 46 Commissioner to investigate such changes unless an exception applies. 47 Sections 69, 70, 72, 73, 76, 79, 80, 82 and 83 of this bill set forth various 48 powers of a payments bank. Section 78 of this bill sets forth the investments in 49 which a payments bank is authorized to invest. Section 81 of this bill prohibits the 50 aggregate amount of all borrowing of a payments bank from exceeding an amount 51 which would impair the insurance of the deposit accounts of the payments bank, if 52 any. Section 74 of this bill sets forth certain restrictions on the sale or issuance of 53 certain stock of a payments bank, including by prohibiting a payments bank from 54 selling or issuing such stock without a license issued by the Commission which 55 authorizes the action. Section 75 of this bill sets forth provisions governing the 56 issuance and renewal of any such license. 57 Sections 84 and 85 of this bill require a payments bank to provide certain 58 reports and information to the Commissioner. Sections 86-92 of this bill set forth 59 various powers and duties of the Commissioner with respect to examinations of 60 payments banks and other powers relating to the investigation and enforcement of 61 the provisions of this bill. Sections 86 and 137 of this bill provide for the 62 confidentiality of certain information obtained by the Commissioner. Section 93 of 63 this bill requires a payments bank to obtain an annual audit at its own expense. 64 Section 94 of this bill requires a payments bank to cooperate with any audits and 65 examinations performed by the Commissioner. Sections 95 and 96 of this bill 66 – 3 – - *AB500_R2* authorize the Commissioner to take certain disciplinary actions against a payments 67 bank. 68 Existing law requires the Commissioner to establish by regulation rates to be 69 paid by banks and other financial institutions for supervision and examinations by 70 the Commissioner or the Division of Financial Institutions. (NRS 658.101) Section 71 129.5 of this bill excludes payments banks from the applicable financial institutions 72 to which those rates apply. Section 128.5 similarly exempts payments banks from 73 provisions requiring the Commissioner to levy an assessment upon each licensed 74 financial institution for costs relating to the employment of a certified public 75 accountant and the performance of audits and examinations. (NRS 658.055) 76 Section 97 of this bill sets forth requirements for the reorganization, merger or 77 consolidation of a payments bank. Section 98 of this bill sets forth certain 78 requirements for the voluntary liquidation of a payments bank. Sections 99-116 of 79 this bill establish procedures and requirements for the liquidation of a payments 80 bank whose deposit accounts are insured by the Federal Deposit Insurance 81 Corporation. Section 117 of this bill establishes procedures and requirements for 82 the reorganization of a dissolved payments bank. 83 Sections 118-125 of this bill impose certain requirements upon a payments 84 bank relating to the exploitation of older persons and vulnerable persons. 85 Sections 128-136 and 138 of this bill add references to payments banks and the 86 provisions of this bill to various provisions of existing law pertaining to financial 87 institutions so that payments banks are treated similarly to other financial 88 institutions for certain purposes. 89 Section 138.3 of this bill makes an appropriation to the Division of Financial 90 Institutions for certain costs associated with carrying out the provisions of this bill. 91 Section 138.7 of this bill requires the Commissioner, on or before December 31, 92 2026, to submit to the Director of the Legislative Counsel Bureau for transmittal to 93 the Legislature a report concerning the implementation of the provisions of this bill. 94 THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS: Section 1. Title 55 of NRS is hereby amended by adding 1 thereto a new chapter to consist of the provisions set forth as 2 sections 2 to 127, inclusive, of this act. 3 Sec. 2. As used in this chapter, unless the context otherwise 4 requires, the words and terms defined in sections 3 to 29, 5 inclusive, of this act have the meanings ascribed to them in those 6 sections. 7 Sec. 3. “Accumulative investment certificate” means an 8 investment certificate, not full-paid and without an expressed date 9 of maturity, upon which the holder has the option of making 10 payments at such times and in such amounts as the holder elects 11 and as the payments bank permits. 12 Sec. 4. “Chargeback” means a transaction that is returned to 13 a payments bank through a payment card network. 14 Sec. 5. “Commissioner” means the Commissioner of 15 Financial Institutions. 16 – 4 – - *AB500_R2* Sec. 6. “Corporate office” means the office of a payments 1 bank identified as such in the application submitted pursuant to 2 subsection 4 of section 44 of this act or the location to which the 3 corporate office is changed pursuant to subsection 12 of section 44 4 of this act or other applicable law. 5 Sec. 7. “Deposit” means that part of the liability of a 6 payments bank which is credited to the account of the holder 7 thereof and which is eligible to be insured by the Federal Deposit 8 Insurance Corporation or insured by a private insurer in 9 accordance with the provisions of this chapter. 10 Sec. 8. “Deposit account” means an account that holds 11 deposits, whether in a commercial, demand, time, checking, 12 savings or similar type of account, or which is evidenced by a 13 certificate of deposit, investment certificate, certificate of 14 indebtedness or other similar name, for which a payments bank is 15 primarily liable. 16 Sec. 9. “Depository institution” means any state bank or 17 payments bank, association, limited-liability company, corporation 18 or other person organized for the purpose of conducting a banking 19 business, whether chartered by this State, another state or the 20 Federal Government, which: 21 1. Holds or receives deposits, savings or share accounts; 22 2. Issues certificates of deposit; or 23 3. Provides to its customers other deposit accounts which are 24 subject to withdrawal by checks, drafts or other instruments or by 25 electronic means to effect payment to a third party. 26 Sec. 10. “Director” means the Director of the Department of 27 Business and Industry. 28 Sec. 11. “Division of Financial Institutions” means the 29 Division of Financial Institutions of the Department of Business 30 and Industry. 31 Sec. 12. “Full-paid investment certificate” means an 32 investment certificate, with or without an expressed date of 33 maturity, for which the payments bank has received the principal 34 amount thereof at or prior to the time of the issuance of the 35 certificate. 36 Sec. 13. “Insolvency” or “insolvent” means one or more of 37 the following: 38 1. When a payments bank cannot meet its deposit liabilities as 39 they become due in the regular course of business. 40 2. When the actual cash market value of the assets of a 41 payments bank is insufficient to pay its liabilities to depositors and 42 other creditors. 43 3. When the reserves of a payments bank fall under the 44 amount required by this chapter, and the payments bank fails to 45 – 5 – - *AB500_R2* make good such reserve within 30 days after being required to do 1 so by the Commissioner. 2 4. When the undivided profits and surplus of a payments 3 bank are inadequate to cover losses of the payments bank and the 4 stockholders’ or members’ equity in the payments bank has been 5 reduced below the requirements of law. 6 Sec. 14. “Insured depository institution” means a depository 7 institution, the deposit accounts of which are insured wholly or in 8 part by the Federal Deposit Insurance Corporation or by a private 9 insurer in accordance with the provisions of this chapter. 10 Sec. 15. “Investment certificate” means any certificate or 11 contract, either paid up or purchasable on an installment basis, 12 which is issued for the purpose of providing a means of investment 13 or savings. 14 Sec. 16. “Leverage capital ratio” means the ratio of the tier 1 15 capital of a payments bank to the average of the total assets of the 16 payments bank, not including goodwill, intangible assets and 17 money ultimately payable to merchants, at the end of each day 18 during the immediately preceding month. 19 Sec. 17. “Merchant” means a person authorized by a 20 payment card network to accept payments in exchange for goods 21 or services. 22 Sec. 18. “Merchant acquiring activities” means activities 23 associated with effecting transactions within payment card 24 networks, including, without limitation: 25 1. Obtaining and maintaining membership in one or more 26 payment card networks; 27 2. Signing up and underwriting merchants to accept payment 28 cards branded by a payment card network; 29 3. Providing the means to authorize valid card transactions at 30 client merchant locations; 31 4. Facilitating the clearing and settlement of the transactions 32 through a payment card network; 33 5. Providing access to one or more payment card networks to 34 customers of the payments bank, affiliates of the payments bank 35 and customers of affiliates of the payments bank; 36 6. Sponsoring the [Text truncated for display. Full text available on LegiScan.]