Exemption for Nonprofit Community Service Organization

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January 19, 2016

 Re:       ___________– Opinion Request

Dear ___________:


Thank you for your letter to the Department of Business Oversight (Department) dated November 23, 2015.  ___________ has requested clarification regarding the licensing requirements under the Money Transmission Act (Fin. Code, § 2000 et seq.). 


In your letter, you stated that ___________ is a 501(c)(3) nonprofit organization that assists consumers with financial education and debt management plans.  ___________ is a member of the National Foundation of Credit Counseling, as well as certified by the Council on Accreditation, a certifying organization for nonprofits.

___________ counselors work with the consumer to prepare a financial assessment and tailor the counseling and education session around the willingness and financial capacity of the consumer.  In cases where appropriate, the counselor will recommend a Debt Management Program (Program).  If the consumer determines that he or she would benefit from participation in a Program, a proposal is submitted to the consumer’s creditors.  If both the creditor and consumer agree to the terms as requested in the proposal, the consumer enters into an agreement with ___________ to make single, monthly payments to ___________, which are then disbursed to the creditors as agreed upon in the Program.  Creditors do not forgive this debt, but provide a reduction in the amount of interest charged as a concession to ensure the receipt of an on-time monthly payment from the consumer.

___________ also claims that it is exempt from the licensing requirements under Section 12104 of the Check Sellers, Bill Payers and Proraters Law (Fin. Code, § 12000 et seq.).  Among other things, Section 12104 requires a nonprofit community service organization that is seeking an exemption from licensing, to submit certain forms and financial statements to the Department on an annual basis. ___________ has submitted the information required by Section 12104.


 Financial Code section 2003(q)(3) defines “money transmission” to include receiving money for transmission.  Financial Code section 2003(u) defines “receiving money for transmission” to mean receiving money or monetary value in the United States for transmission within or outside the United States by electronic or other means.

Financial Code section 2030 prohibits a person from engaging in the business of money transmission in this state, unless the person is licensed or exempt from licensure or is an agent of a person licensed or exempt from licensure.

Financial Code section 2011 authorizes the Commissioner to exempt from the Money Transmission Act any person, if the Commissioner finds such action to be in the public interest and that the regulation of such persons or transactions is not necessary.

Because ___________ receives money from consumers to disburse to a consumer’s creditors as part of a Program, ___________’s activities would fall under the definition of money transmission unless it is exempt.

In October 2015, the Department adopted a regulation that specifies exemptions from the Money Transmission Act.  (Cal. Code Regs., tit. 10, § 80.3002.)  Section 80.3002(a) provides, in relevant part:

 The Commissioner finds that exempting the persons and transactions specified in subdivision (a) of this Section from the Money Transmission Act is in the public interest and that the regulation of such persons and transactions is not necessary for the purposes of the Money Transmission Act. Accordingly, in addition to the persons exempt pursuant to Financial Code Section 2010, the Commissioner exempts from the Money Transmission Act:


(2) A public benefit nonprofit which has received recognition of tax exemption under Internal Revenue Code Section 501(c)(3);

***; and

(4) a nonprofit community service organization that meets all of the criteria in Financial Code Section 12104 of the Check Sellers, Bill Payers and Proraters Law.


Because ___________ is an Internal Revenue Code Section 501(c)(3) nonprofit organization and because ___________ has filed the annual reports and met other criteria required for an exemption under Financial Code section 12104 of the Check Sellers, Bill Payers and Proraters Law, ___________ is exempt from the Money Transmission Act pursuant to subdivisions (a)(2) and (a)(4) of section 80.3002 of Title 10 of the California Code of Regulations.

This opinion is based solely on the facts as represented in your correspondence, and may change if any of the conditions or circumstances under which ___________ provides products or services is altered in the future.

If you have any questions, please feel free to contact me at (415) 263-8528.




Jan Lynn Owen

Commissioner of Business Oversight




                                        Jennifer L.W. Rumberger

                                        Senior Counsel



                cc:       Robert Venchiarutti, Department of Business Oversight, San Francisco