Unraveling the Enigma of Money Transmitter License Rent in the United States
In our role as experienced banking and payment consultants, we frequently encounter ambitious entrepreneurs seeking clarity on a critical aspect of the US financial sector – the feasibility of renting or leasing money transmitter licenses. Given the prevalence of this query, it’s crucial for us to address the topic of “money transmitter license rent” in detail and dispel any lingering uncertainties.
To be direct, the answer to the question, “Can we rent or lease a money transmitter license in the United States?” is a resounding no. However, it’s crucial to explore this in depth to understand the reasoning behind it and shed light on the alternatives available for those aspiring to operate within the regulated financial framework.
In the past, some businesses tried to rent or lease licenses from principal license holders. State regulators, however, have since cracked down on these practices, deeming them illegal. Regulators insist that companies cannot simply approach existing principal license holders to effectively rent out their licenses.
A key example highlighting this regulatory clampdown is the 2013-14 action against the company PreCash, a case that serves as a stark warning against such practices. You can read more about this in a detailed report available under the sub-heading “Authorized Delegate”. This case emphasizes the regulators’ stance and the potential repercussions for those attempting to circumnavigate the rules.
It’s important to clarify the industry terminology surrounding this issue. Phrases like “rent a license” or “lease a license” are widely discouraged. Instead, when engaging with someone about the potential use of their license, more appropriate terms to use involve “regulatory coverage” or “licensing umbrella”.
For example, you might ask, “Is it possible to get regulatory coverage by working with you?” or “Can we come under a licensing umbrella by working with you?” These terms signify an intention to form a legal partnership with the principal license holder (PLH), rather than an attempt to dodge the legal requirements.
In a legitimate partnership with a PLH, the goal is to contribute business or subscribe to a core service they offer, such as payment processing, segregated name accounts, point of sale terminals, or ACH processing. By doing so, an alliance is formed with the PLH, who would then manage the program, thereby providing the necessary regulatory coverage.
To sum up, the idea of “money transmitter license rent” is not legally recognized. Instead, the advisable strategy is to partner with an existing PLH to gain the required regulatory coverage. The sincerity of this partnership and the resulting operations are what regulators will focus on, rather than the unsuitable renting or leasing of licenses.
We hope this clarifies any misconceptions around the renting or leasing of money transmitter licenses. If there are further queries or concerns, we encourage you to drop a comment below, and we’ll be more than happy to provide additional information. Until next time, remember: comprehending and complying with regulations is a cornerstone for a successful and legal business in the financial sector.
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This page was last updated on May 31, 2023.
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