HSB 630 (LSB 5394DP (8) 83)

SENATE/HOUSE FILE _____

BY  (PROPOSED DEPARTMENT OF COMMERCE/BANKING DIVISION BILL)

A BILL FOR

An Act relating to and making changes to matters under the purview of the division of banking of the department of commerce, making a penalty applicable, and including effective date provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 12C.1, subsection 2, paragraph a, Code 2009, is amended to read as follows:
   a.  “Bank” means a corporation or limited liability company engaged in the business of banking authorized by law to receive deposits and whose deposits are insured by the bank insurance fund or the savings association insurance fund of the federal deposit insurance corporation and includes any office of a bank and organized under the laws of this state, another state, or the United States. “Bank” also means a savings and loan, or savings association, or savings bank organized under the laws of this state, another state, or the United States.
    Sec. 2.  Section 12C.1, subsection 2, Code 2009, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  Oh.  “Superintendent" means the superintendent of banking of this state when the depository is a bank, and the superintendent of credit unions of this state when the depository is a credit union.
    Sec. 3.  Section 12C.23A, subsection 1, Code 2009, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  e.  Consent to the jurisdiction and authority of the superintendent as provided under section 12C.29.
    Sec. 4.  Section 12C.28, Code 2009, is amended to read as follows:
   12C.28  Electronic reporting.

   Any notice, information, report, or other communication required by this chapter shall be deemed effective and in compliance with this chapter if sent or given electronically as provided in rules adopted pursuant to chapter 17A by the appropriate superintendent or the treasurer of state.
    Sec. 5.  NEW SECTION.  12C.29  Authority of superintendent to issue orders.
   1.  If it appears to the superintendent that a bank is violating or has violated, or the superintendent has reasonable cause to believe that a bank is about to violate, any provision of this chapter or any rules adopted pursuant thereto, or if a bank is less than well capitalized as defined in 12 U.S.C. § 1831o(b)(1)(A), or if a bank is subject to a final order or written agreement subject to the public disclosure requirements of 12 U.S.C. § 1818(u), the superintendent may issue an order requiring the bank to do one or more of the following:
   a.  Not accept uninsured public funds deposits.
   b.  Reduce the amount of uninsured public funds accepted.
   c.  Return to the depositors some or all uninsured public funds held in demand deposits and, when deposit instruments or agreements mature, return to the depositors some or all uninsured deposits representing proceeds of such instruments or agreements.
   d.  Pledge collateral to the treasurer of state, with such collateral having a value at all times up to one hundred ten percent of the public funds held by the bank.
   e.  Comply with such other requirements as the superintendent may impose.
   2.  An order issued pursuant to this section shall become effective upon service of the order on the bank and shall remain effective except to such extent modified, terminated, or set aside by action of the superintendent or of the district court of Polk county as provided in subsection 3.
   3.  An order issued pursuant to this section shall contain a concise statement of the facts forming the basis for issuing the order and shall provide the bank an opportunity to appeal the order by requesting a hearing. If the bank requests a hearing, the hearing shall be fixed for a date not later than thirty days after the service of the order unless a later date is set at the request of the bank. If upon the record made at the hearing, the superintendent finds that the grounds for the order have been established, the superintendent may issue and serve upon the bank an order upholding the original order. If the superintendent finds the grounds for the order have not been established, the superintendent shall set aside the original order or modify the order, as the superintendent deems appropriate. An administrative law judge may assist the superintendent at the hearing or, at the superintendent’s request, preside over the hearing. The hearing shall not be open to the public. The superintendent’s decision shall be subject to judicial review in Polk county district court in accordance with the provisions of chapter 17A.
   4.  An order issued pursuant to this section shall be confidential, and the Polk county district court shall review the record in camera and shall maintain filings of any judicial review filed pursuant to section 3 under seal.
   5.  This section is intended to provide the superintendent additional authority and regulatory flexibility in regulating a bank that accepts public funds deposits and whose financial condition, level of public funds, or level of collateral may pose a greater than normal risk of loss coverage from the state sinking fund applicable for uninsured and unsecured public funds.
   6.  An act or omission by the superintendent pursuant to this section shall not subject the state to liability.
    Sec. 6.  Section 524.213, Code 2009, is amended to read as follows:
   524.213  Duties and powers of superintendent.

   The superintendent shall have general control, supervision and regulation of all state banks and shall be charged with the administration, interpretation, and execution of the laws, rules, and regulations of this state relating to banks and banking and with such other duties and responsibilities as are imposed upon the superintendent by the laws of this state. The superintendent shall have power to adopt and promulgate such rules and regulations as necessary to carry out and enforce, properly and effectively, the provisions of this chapter and chapter 12C applicable to banks.
    Sec. 7.  Section 524.215A, Code 2009, is amended by adding the following new subsection:
   NEW SUBSECTION.  4.  The division of banking may adopt a record retention policy authorizing the division to destroy communications received by electronic mail that are more than six months old.
    Sec. 8.  Section 524.310, Code 2009, is amended by adding the following new subsection:
   NEW SUBSECTION.  5.  A state bank using a fictitious name to transact business in this state may file its fictitious name with the secretary of state by delivering to the superintendent for filing with the secretary of state a copy of the resolution of its board of directors certified by its secretary, adopting the fictitious name. A state bank using a fictitious name shall comply with the requirements of section 524.1206 and with any other regulatory requirements governing use of its name. The fictitious name must be distinguishable upon the record of the secretary of state from all of the following:
   a.  The corporate name of a business or nonprofit corporation incorporated or authorized to transact business in this state.
   b.  A corporate name reserved, registered, or protected as provided in section 490.402, 490.403, 504.402, or 504.403.
   c.  The fictitious name of another foreign business or nonprofit corporation authorized to transact business in this state.
    Sec. 9.  Section 524.602, Code 2009, is amended to read as follows:
   524.602  Board of directors —— election.
    1.  At Except as provided in subsection 2, at the first annual meeting of shareholders and at each annual meeting thereafter the shareholders shall elect directors to hold office until the next succeeding annual meeting. Directors shall hold office for one year or until their successors have been elected and qualified, unless removed in accordance with provisions of section 524.606. When the shareholders determine the number of directors at an annual meeting or at a special meeting, they shall, at the same meeting, elect a director to fill each directorship.
   2.  The articles of incorporation of a state bank may authorize directors to be elected to staggered terms of three years. At the first meeting of shareholders or at an annual or special meeting where the shareholders adopt staggered terms for directors, and at each annual meeting thereafter, the shareholders shall elect directors to hold office for any vacant position. A director shall hold office until the director’s term expires or until the director’s successor has been elected and qualified, unless the director is removed in accordance with the provisions of section 524.606.
    Sec. 10.  Section 524.814, subsection 1, Code 2009, is amended to read as follows:
   1.  To secure deposits of the state bank or a bank that is an affiliate of the state bank when a customer is required to obtain such security, or a bank is required to provide security, by the laws of the United States, by any agency or instrumentality of the United States, by the laws of the state of Iowa or another state, by the state board of regents, by a resolution or ordinance relating to the issuance of bonds, by the terms of any interstate compact or by order of any court of competent jurisdiction. The lending of securities to a bank that is an affiliate, or the pledging of securities for the account of a bank that is an affiliate, shall be on terms and conditions that are consistent with safe and sound banking practices.
    Sec. 11.  Section 524.901, subsection 2, Code 2009, is amended to read as follows:
   2.  A state bank shall not invest for its own account more than fifteen percent of its aggregate capital in investment securities of any one obligor. Any The par value of the investment securities shall be used to determine the amount that may be invested under this subsection, and any premium paid by a state bank for any investment securities shall not be included in determining the amount that may be invested under this subsection.
    Sec. 12.  Section 536.13, subsection 7, paragraph d, Code 2009, is amended by striking the paragraph and inserting in lieu thereof the following:
   d.  Except as provided in this subsection, the provisions of the Iowa consumer credit code, chapter 537, apply to loans regulated by this chapter and supersede conflicting provisions of this chapter. Section 537.2402, subsection 1, does not apply to loans regulated by this chapter.
    Sec. 13.  Section 536A.23, subsection 1, Code 2009, is amended to read as follows:
   1.  No industrial loan company licensed under the provisions of this chapter shall have the power and authority to:
   a.  (1)  Charge, receive, or collect interest at a rate exceeding ten cents on the hundred by the year, except that the interest may be computed when the note is made on the full amount of the cash advanced on the loan from the date of the note to the date of the final installment thereof, and the interest so computed may be included in the note, notwithstanding any agreement to pay the entire amount in installments; or the interest may be computed on the amount of the note and discounted or collected in advance when the loan is made, notwithstanding any agreement to pay the entire amount in installments. If the note is repayable in other than equal monthly installments, the interest may be an amount computed on the basis of the effective rates permitted as provided above; provided, however, there shall be no compounding of interest and when an interest rate as authorized herein is advertised, or negotiated for with a prospective borrower, with intent that it be computed by either of the two methods authorized herein, they being the “add on” method or the “discount” method, in such case such rate shall be further described as to the method of computation to be used, but interest computed by either method shall be stated to the borrower as provided in section 537.3210.
   (2)  If a borrower elects to repay a loan secured by a mortgage or deed of trust upon real property which is a single-family or two-family dwelling or agricultural land at a date earlier than is required by the terms of the loan, the licensee shall be governed by section 535.9.
   (3)  The limitation on interest rate which is contained in this paragraph “a” shall not apply to any loan in which the borrower is a corporation or investment trust or any other person who is referred to in section 535.2, subsection 2.
   b.  Charge, receive, or collect in advance, a service charge in excess of one dollar for each fifty dollars of the amount of the note, not to exceed a total of one hundred twenty dollars.
   a.  Charge, receive, or collect interest at a rate exceeding the maximum rate of interest allowable for regulated loan companies and fixed by the superintendent in accordance with the provisions of section 536.13.
   c.  b.  Require any borrower to purchase insurance from the lender as a condition for obtaining a loan. However, an industrial loan company may collect from the borrower, at the option of the borrower, and transmit the premiums charged for insuring real or personal property used by the borrower as security for a loan and provided that such insurance is obtained from a licensed insurance producer for an insurance company authorized to do business in Iowa; and the premiums charged for insuring the life of one party on the loan in an amount not to exceed the total amount of the note or contract, including cash advance, interest and service charge, provided that no licensee shall require that the contract of life insurance be outstanding for more than the unpaid balance of the indebtedness and provided that such insurance is obtained from a licensed insurance producer for an insurance company authorized to do business in Iowa; and an industrial loan company may receive and transmit the premiums charged for accident and health insurance on the borrower, provided such insurance bears a reasonable relationship to the existing hazards or risk of loss, and the aggregate benefits of which shall not exceed the approximate amount of the contractual payments on the loan outstanding at the time of loss, and provided that such insurance is obtained from a licensed producer for an insurance company authorized to do business in Iowa. However, all life insurance rates in connection with industrial loans shall be subject to the rules and regulations of the insurance commissioner of the state of Iowa.
   d.  c.  Engage in commercial activities or have an affiliate that engages in commercial activities. This paragraph shall not apply to an industrial loan company with an affiliate that is engaged in commercial activities prior to January 1, 2006, if control of the industrial loan company is not thereafter transferred to an entity that engages in commercial activities directly or through an affiliate.
   e.  d.  Obtain or arrange a residential mortgage loan for a potential borrower from a third person, unless the industrial loan company also has a mortgage broker license and complies with all provisions of chapter 535B.
    Sec. 14.  Section 536A.31, subsection 3, Code 2009, is amended by striking the subsection and inserting in lieu thereof the following:
   3.  Except as provided in this subsection, the provisions of the Iowa consumer credit code, chapter 537, apply to loans regulated by this chapter and supersede conflicting provisions of this chapter. Section 537.2402, subsection 1, does not apply to loans regulated by this chapter.
    Sec. 15.  EFFECTIVE UPON ENACTMENT.  The sections of this Act amending sections 12C.1, 12C.23A, and 12C.28 and enacting section 12C.29, being deemed of immediate importance, take effect upon enactment.
EXPLANATION
   This bill makes changes regarding provisions governing the administration and regulation of banks.
   The definition of “bank” contained in Code section 12C.1 currently refers to a corporation authorized by law to receive deposits insured by the bank insurance fund or savings association insurance fund of the federal deposit insurance fund of the federal deposit insurance corporation. The bill adds a limited liability company to the definition and substitutes the reference to insured deposits to organization under the laws of Iowa, another state, or the United States. The bill also adds a savings bank organized under the laws of Iowa, another state, or the United States to the definition of “bank”. The bill also amends Code section 12C.1 to add a definition of “superintendent”. “Superintendent” is defined to refer to either the superintendent of banking in Iowa when the depository is a bank and the superintendent of credit unions in Iowa when the depository is a credit union. The bill makes a corresponding amendment to Code section 12C.28.
   The bill adds new Code section 12C.29, giving the superintendent authority to issue orders in the event it appears a bank is, has, or is about to violate any provision of Code chapter 12C or any rules adopted pursuant thereto, if a bank is less than well capitalized as defined in a provided reference to the United States Code, or if a bank is subject to a final order or written agreement subject to the public disclosure requirements of another provided reference to the United States Code. If such authority exists, the bill provides that the superintendent may issue an order requiring the bank not to accept uninsured public funds deposits, to reduce the amount of uninsured public funds accepted, to return to depositors some or all deposits as specified, to pledge collateral to the treasurer of state up to 110 percent of the public funds held by the bank, and to comply with such other requirements as the superintendent may impose. The bill additionally establishes procedures regarding the issuance of an order and resulting hearings, states that these are intended to provide the superintendent additional authority and regulatory flexibility, and provides that an act or omission by the superintendent pursuant to this section shall not subject the state to liability. The bill provides that the acceptance of public funds by a bank constitutes consent to the jurisdiction and authority of the superintendent of banking.
   Further, the bill specifies that the duties and powers of the superintendent shall include administration, interpretation, and execution of the laws, rules, and regulations of Iowa relating to banks and banking. This authorization would facilitate the establishment of policy for the implementation and administration of the Code chapter. The bill authorizes the division of banking to adopt a record retention policy authorizing the division to destroy e-mails more than six months old, adds provisions regarding state bank utilization of a fictitious name, establishes election procedures regarding the election of directors by bank shareholders, and requires that the par value of investment securities be used in determining the amount of aggregate capital that a state bank may invest in investment securities of any one obligor.
   The bill amends Code section 524.814 to authorize the lending or pledging of state bank assets when a customer is required to obtain security or a bank is required to provide security pursuant to the laws of another state. Violation of this section is a serious misdemeanor punishable by confinement for no more than one year and a fine of at least $315 but not more than $1,875.
   The bill provides, with respect to regulated loans under Code chapter 536 and industrial loans under Code section 536A.31, that unless otherwise provided the provisions of the Iowa consumer credit code contained in Code chapter 537 are applicable and supersede conflicting provisions of Code chapter 536 and Code section 536A.31. The bill states, however, that the provisions of Code section 537.2402, subsection 1, relating to creditors authorized to make supervised loans contracting for and receiving a finance charge without limitation as to amount or rate with respect to a loan pursuant to open-end credit, do not apply to loans regulated under Code chapter 536 or Code section 536A.31.
   Additionally, the bill deletes provisions currently applicable to industrial loan companies in Code section 536A.23 regarding the charging, receiving or collection of interest, prepayment of loans secured by specified mortgages or deeds of trust, and imposition in advance of service charges. The bill substitutes in their place the statement that a licensed industrial loan company may not charge, receive, or collect interest at a rate exceeding the maximum rate of interest allowable for regulated loan companies and fixed by the superintendent in accordance with the provisions of Code section 536.13.
   The sections of the bill amending Code chapter 12C take effect upon enactment, and the sections of the bill amending Code chapters 524, 536, and 536A take effect July 1, 2010.