2000 Banking and Related Legislation
During the 2000 session, the General Assembly enacted several bills concerning banks, credit unions and consumer credit into law. Five of these public acts were Department of Banking proposals. We've provided brief summaries of each of the department's enacted proposals, along with hyperlinks to the text of other public acts of interest. (Listings are by public act number).
Please note that the summaries on this page present certain key legal points for public information and do not represent complete statements of the law. All references on this page are to sections and titles of the Connecticut General Statutes, unless otherwise noted. Hyperlinks for each public act lead to the Connecticut General Assembly web site.
Department of Banking Proposals
Bank and Credit Union Acquisitions
Credit Union Holidays and Emergency Closings
Bank Conversions
Enforcement and Examination Authority of Commissioner
Confidential Records of Department
Other Legislation of Interest
Charges for Stop Payment Orders
Bankers’ Bank Services to Credit Unions
Credit Union Powers
Annual Update on the Bank Powers Act
Reporting Delinquent Utility Bills to Credit Bureaus
Insurance Required by Mortgage Lenders
Fees Imposed by Small Loan Companies for Dishonored Checks
2000 Public Acts:
Public Act Number 00-02
s.H.B. 5016 – An Act Concerning Bank and Credit Union Acquisitions
EFFECTIVE DATE: On Passage - April 18, 2000
STATEMENT OF PURPOSE:
To clarify that for purposes of the bank holding company statutes, a holding company that is subject to the jurisdiction of the Banking Commissioner includes any company that controls any bank; to specify the filing requirements under the statutory provision governing the purchase of all or a significant part of the assets and business of a federal bank or federal credit union in Connecticut by a Connecticut bank and of a federal credit union in Connecticut by a Connecticut credit union; and to clarify that such provision also applies to the acquisition of all or a significant part of the assets and business of an out-of-state bank by a Connecticut bank pursuant to the interstate banking laws.
PREVIOUS LAW:
Section 36a-2(33) defines the term "holding company" in terms of the federal definitions of a "bank holding company" or a "savings and loan holding company", which would not include a company that controls a bank that is not insured by the Federal Deposit Insurance Corporation or does not take deposits.
Section 36a-210(g) prohibited any Connecticut bank from purchasing all or a significant part of the assets and business of a federal bank or of a federal credit union without the approval of the Commissioner and prohibited any Connecticut credit union from purchasing all or a significant part of the assets and business of a federal credit union without the approval of the Commissioner. It is not clear whether this section applied to the acquisition of the assets and business of out-of-state banks.
EFFECT OF s.H.B. 5016
Section 1.
This section amended Section 36a-2(33) to change the definition of "holding company" for purposes of Sections 36a-180 to 36a-191, inclusive, to mean any company that controls a Connecticut bank or controls a federal bank with its principal office in Connecticut.
Section 2.
This section amended Section 36a-210(g) to expressly make its provisions applicable to the purchase by a Connecticut bank of all or a significant part of the assets and business of an out-of-state bank.
It also provided that any Connecticut bank or Connecticut credit union seeking approval under this section shall file an application with the Commissioner that includes a copy of any notice, application or any other information filed with any federal or state banking or credit union regulator in connection with such purchase and such additional information as may be required by the Commissioner.
Section 3.
This section provided that the act took effect on passage.
BANKING COMMISSIONER’S POSITION:
This was a Department of Banking proposal. This bill was necessary because the filing and registration provisions of the Connecticut Bank Holding Company and Bank Acquisition Act previously did not apply to a company that controls a bank that is not insured by the Federal Deposit Insurance Corporation, other than a trust bank, or does not take deposits. In other words, the Act does not currently apply to entities that only make loans and do not take deposits. This bill was also necessary to clarify that Section 36a-210(g) applies to the acquisition of the assets and business of out-of-state banks and to specify the filing requirements under that section.
PUBLIC ACT NUMBER 00-06
S.B. 10 – An Act Concerning Credit Union Holidays And Emergency Closings
EFFECTIVE DATE: October 1, 2000
STATEMENT OF PURPOSE:
To clarify that any legal holiday proclaimed by the Governor as a bank holiday shall also be a credit union holiday; to authorize the Commissioner of Banking to approve the closing of Connecticut credit unions on a college campus or educational institution when such institution is not in regular session; to permit Connecticut credit unions to close in cases of emergency whenever the emergency does not afford an opportunity to obtain the commissioner’s prior approval.
PREVIOUS LAW:
Section 36a-23(a) authorizes the Governor, by proclamation, to designate and appoint one or more legal holidays to be known as bank holidays; requires that all banking transactions during such designated holiday periods be suspended, except that the Commissioner, with the approval of the Governor, may prescribe conditions and restrictions for the conduct of banking business during such holiday period.
Section 36a-23(b) authorizes the closing of all banks in the state or all banks in specific towns or counties or any office of any bank whenever it appears to the Commissioner that such action is required as a result of an emergency.
Section 36a-23(c) authorizes any bank to close any offices of such bank located on a college or university campus or in a building of an educational institution during any period when the college, university or educational institution is not in regular session, provided the bank shall give notice to the Commissioner in advance.
Section 36a-23(d) authorizes any bank to close any office on its own initiative whenever an emergency does not afford an opportunity to obtain the Commissioner’s approval.
Section 36a-23(f) makes the period of any closing pursuant to this section or pursuant to any similar provisions of federal law, as well as the holidays otherwise provided by law, legal holidays for purposes of the Uniform Commercial Code and otherwise for the affected banks or offices of such banks.
Section 4-33(c) provides relief from personal responsibility for public funds for any person acting on behalf of, or as custodian or trustee for, the state who deposits public funds in any depository if the laws of this state have in all other respects been complied with and there is, among other events, a bank holiday.
Section 7-402(c) provides relief from personal responsibility for public funds for any person acting on behalf of, or as custodian or trustee for, any municipality who deposits public funds in any depository if the laws of this state have in all other respects been complied with and there is, among other events, a bank holiday.
Section 38a-20 permits the Insurance Commissioner to issue and enforce regulations for the management and operation of insurance companies located or doing business in this state during a period that the Governor has proclaimed as a bank holiday.
EFFECT OF S.B. 10:
Section 1.
This section amends Sections 36a-23 to make the provisions applicable to Connecticut credit unions.
Section 2.
This section makes a technical amendment to Section 4-33(c) to provide relief from personal responsibility during a bank and credit union holiday.
Section 3.
This section makes a technical amendment to Section 7-402(c) to provide relief from personal responsibility during a bank and credit union holiday.
Section 4.
This section makes a technical amendment to Section 38a-20 to permit the issuance of regulations by the Insurance Commissioner during a period that the Governor has proclaimed as a bank and credit union holiday.
BANKING COMMISSIONER’S POSITION:
This is a Department of Banking proposal. This bill is necessary to clarify that the provisions regarding legal holidays and emergency closings that apply to banks shall likewise apply to Connecticut credit unions.
PUBLIC ACT 00-14
s.H.B. 5015 – An Act Concerning Bank Conversions
EFFECTIVE DATE: On Passage - April 25, 2000
STATEMENT OF PURPOSE:
To delete statutory provisions that are inconsistent with federal regulations concerning bank conversions and to give the Banking Commissioner the authority to waive regulations that are inconsistent with such federal regulations or with the requirements of the Federal Deposit Insurance Corporation.
PREVIOUS LAW:
Section 36a-3 contains cross-references to terms that are defined in various provisions of Title 36a.
Section 36a-136 sets forth the provisions governing the conversion of a mutual bank to a capital stock bank.
EFFECT OF s.H.B 5015:
Section 1.
This section amended Section 36a-3 by adding a cross-reference to the definition of "deposit account" contained in Section 2 of this proposal.
Section 2.
This section amended Section 36a-136 by adding a definition of "deposit account" and made conforming changes to the definition of "qualifying deposit".
It repealed various provisions including those that limited the subscription rights of eligible account holders to one-half percent of the shares of stock being offered; permited the qualifying deposit for participation with subscription offering to be set at $50 or any lesser amount as set by the board; and require the converting institution to mail notice to eligible account holders not later than 15 days after the plan of conversion is submitted to the Banking Commissioner. It also repealed the requirement that the liquidation account need only be maintained for 10 years and the provision that the converting institution may either maintain or annually reduce the amount of the liquidation account and the subaccount balances for savings accounts held by eligible account holders as provided by regulation.
This section gave the Commissioner the authority to waive regulations that are inconsistent with the regulations of the Office of Thrift Supervision ("OTS") governing mutual to stock conversions or, if such waiver is necessary, to comply with the requirements of the Federal Deposit Insurance Corporation ("FDIC"). It also made a technical correction substituting the word "recognized" for "reorganized".
Section 3.
This section provided that the act took effect on passage.
BANKING COMMISSIONER’S POSITION:
This is a Department of Banking proposal. Prior to the enactment of this proposal, the bank conversion statute clearly confirmed the intent that the conversion process be similar to the process for conversions under regulations of the OTS. In addition, with respect to recent conversion applications, the Department was informed by the FDIC that the OTS regulations set the standard for FDIC approvals of conversions. Inasmuch as there are provisions in the state statutes that were inconsistent with OTS regulations, and the Commissioner’s authority to waive compliance with the conversion regulations was very limited, there was a risk that Connecticut institutions seeking to convert may not receive FDIC approval unless our requirements conformed with OTS requirements. This amendment deleted specific, detailed provisions from the statute that were inconsistent or may have become inconsistent with OTS regulations, and gives the Commissioner the authority to waive compliance with regulations that are inconsistent with OTS regulations or FDIC requirements.
Public Act Number 00-15
sHB 5572 – An Act Concerning Charges for Stop Payment Orders
EFFECTIVE DATE: October 1, 2000
STATEMENT OF PURPOSE:
To ensure that a financial institution does not charge two fees in order for a customer to stop payment of a check for one year.
Public Act Number 00-28
sSB 320 - An Act Permitting a Bankers’ Bank to Provide Service to and Receive Investments From Credit Unions
EFFECTIVE DATE: October 1, 2000
STATEMENT OF PURPOSE:
To allow a bankers’ bank to serve credit unions as it does banks.
Public Act Number 00-38
SB 318 – An Act Concerning Credit Union Powers
EFFECTIVE DATE: October 1, 2000
STATEMENT OF PURPOSE:
To create parity between state-chartered credit unions and federally chartered credit unions.
Public Act Number 00-40
sSB 323 - An Act Concerning an Annual Update on the Bank Powers Act
EFFECTIVE DATE: October 1, 2000
STATEMENT OF PURPOSE:
To require the Commissioner of Banking to update the banks committee annually on the commissioner's use of discretionary powers.
Public Act Number 00-41
sSB 324 – An Act Concerning Reporting Delinquent Utility Bills to Credit Bureaus
EFFECTIVE DATE: October 1, 2000
STATEMENT OF PURPOSE:
To require utilities to notify customers of the utilities’ right to notify credit agencies of delinquent utility bills.
PUBLIC ACT NUMBER 00-61
s.H.B. 5017 – An Act Concerning the Enforcement and Examination Authority of the Banking Commissioner.
EFFECTIVE DATE: July 1, 2000
STATEMENT OF PURPOSE:
To allow the Banking Commissioner to consider certain factors when establishing the annual assessment for foreign banks that have established a state branch or state agency in this state; to allow the commissioner to impose a civil penalty against first and secondary mortgage lenders and brokers who fail to perform any agreement with a borrower; to permit applicants for a sales finance company license and persons licensed as a sales finance company, the option of keeping books and records at a location other than at the place of business specified in the license, provided that the licensee shall make the books and records available at such place of business not later than five business days after requested by the commissioner; to prohibit the making of false and misleading oral statements to the commissioner in a proceeding, investigation or examination; and to prohibit licensees under Title 36a from engaging in fraudulent conduct.
PREVIOUS LAW:
Section 36a-428b(e) provides that for purposes of Section 36a-65, when assessing a foreign bank, the Banking Commissioner take into account only the assets of the state branches or state agencies located in Connecticut.
Section 36a-494(b) sets forth the grounds for imposition of a civil penalty against first mortgage lenders and brokers.
Section 36a-517 sets forth the grounds, including failure to perform a written agreement with a borrower, for suspension, revocation or refusal to renew a secondary mortgage lender or broker license. It also sets forth the grounds for imposition of a civil penalty against secondary mortgage lenders and brokers.
Section 36a-545 requires sales finance companies to keep books and records at the place of business specified in their license.
Section 36b-23 prohibits the making of false or misleading statements in any document filed with the Commissioner or in any proceeding, investigation or examination under the Connecticut Uniform Securities Act.
Section 36b-80 prohibits the making of false or misleading statements in any document filed with the Commissioner or in any proceeding, investigation or examination under the Connecticut Business Opportunity Investment Act.
Section 3 of Public Act 99-158 prohibits the making of false or misleading statements in any document filed with the Commissioner or in any proceeding, investigation or examination under Title 36a.
EFFECT OF s.H.B. 5017:
Section 1.
This section amends Section 36a-428b(e) to allow the Commissioner, in setting the annual assessment of a foreign bank, to consider the assets of the foreign bank relative to the assets of other foreign banks with a state branch or agency in Connecticut, the cost of any examination of the foreign bank under Section 36a-428l, the amount allocated to each Connecticut bank and each Connecticut credit union under Section 36a-65, and any other factor the Commissioner deems appropriate.
Section 2.
This section amends Section 36a-494(b) to authorize the Commissioner to take action in accordance with Section 36a-50, including the imposition of a civil penalty against a first mortgage lender or broker licensee for failure to perform any agreement with a borrower.
Section 3.
This section amends Section 36a-517 to make failure to perform any agreement, instead of just a written agreement, with a borrower grounds for revocation, suspension or refusal to renew a secondary mortgage lender or broker license. It also amends that section to authorize the Commissioner to take action in accordance with Section 36a-50, including the imposition of a civil penalty, against a secondary mortgage lender or broker licensee for failure to perform any agreement with a borrower.
Section 4.
This section amends Section 36a-545 to permit sales finance companies to make books and records available at the place of business specified in the license not later than five business days after requested by the Commissioner.
Section 5.
This section amends Section 36b-23 to prohibit the making of false or misleading oral statements in any proceeding under the Connecticut Uniform Securities Act.
Section 6.
This section amends Section 36b-80 to prohibit the making of false or misleading oral statements in any proceeding under the Connecticut Business Opportunity Investment Act.
Section 7.
This section prohibits licensees under Title 36a, including banks, nondepository lenders, money forwarders and check cashers from engaging in fraudulent conduct or making materially false or misleading statements in connection with the activity for which such person is licensed.
Section 8.
This section amends Section 3 of Public Act 99-158 to prohibit the making of false or misleading oral statements under Title 36a.
Section 9.
This section provides that the act shall take effect on July 1, 2000.
BANKING COMMISSIONER’S POSITION:
This is a Department of Banking proposal. Currently, a foreign bank with a state branch or state agency in Connecticut must pay an annual assessment as well as the cost of any examination, whereas Connecticut banks need only pay an annual assessment. This proposal would provide a more balanced approach to foreign bank assessments by specifying certain factors that the Commissioner must consider before setting the annual assessment for foreign banks. Failure to perform an agreement with the borrower is currently a basis for revocation, suspension or failure to renew first and secondary mortgage broker and lender licenses. The proposal also makes such failure a basis for imposition of civil penalty on first and secondary mortgage broker and lender licensees. Currently, persons licensed as a sales finance company are required to keep books and records at the place of business specified in the license. This proposal would lessen the administrative burden on persons licensed as sales finance companies by providing them with flexibility as to where they may keep books and records. The proposal also clarifies that the prohibition against making false and misleading statements to the Commissioner extends to oral statements. Current law prohibits persons from engaging in fraudulent conduct in connection with the offer and sale of securities but there is no prohibition against licensees under Title 36a engaging in fraudulent conduct. By prohibiting such conduct, the proposal gives the Commissioner the ability to take enforcement action against licensees who engage in such conduct.
Public Act Number 00-95
SB 445 – An Act Concerning Insurance Required by Mortgage Lenders
EFFECTIVE DATE: October 1, 2000
STATEMENT OF PURPOSE:
To prohibit mortgage lenders from requiring a prospective mortgagor to obtain fire insurance including flood insurance or extended coverages in excess of the replacement value of the covered premises.
PUBLIC ACT NUMBER 00-123
s.S.B. 9 – An Act Concerning the Confidential Records of the Department of Banking
EFFECTIVE DATE: October 1, 2000
STATEMENT OF PURPOSE:
To specify the records of the Department of Banking that are confidential notwithstanding any state law to the contrary and provide measures for protecting the confidentiality of such records, including the sealing of such records in court proceedings.
PREVIOUS LAW:
Section 36a-21 provides that all information obtained by the Banking Commissioner shall be confidential except such as should, in the opinion of the Commissioner be imparted in the performance of official duties. It also makes examination, operating and condition reports prepared by, on behalf of, or for the use of the Commissioner confidential, and prohibits their disclosure by any director, officer, employee or agent of any Connecticut bank, federal bank located in Connecticut, Connecticut credit union or federal credit union without the prior written consent of the Commissioner.
EFFECT OF s.S.B. 9:
This proposal amends Section 36a-21 to prohibit the disclosure of certain specified records of the Department of Banking notwithstanding any provision of state law. Such records include examination and investigation reports and information contained in or derived from such reports, and confidential supervisory or investigative information received from other regulatory or law enforcement agencies. They also include information obtained, collected or prepared in connection with examinations, inspections or investigations as well as complaints from the public, if such records would be protected from disclosure under state or federal law or such records, in the opinion of the Commissioner, would disclose (1) investigative information the disclosure of which would be prejudicial to the investigation until such time as the investigation and related administrative and legal actions are concluded; (2) personal or financial information pertaining to a person without such person’s written consent; or (3) information that would harm the reputation of any person or affect the safety and soundness of any person whose activities are subject to the Commissioner’s supervision and the disclosure of such information would not be in the public interest. The Commissioner may disclose such records for any appropriate supervisory, governmental, law enforcement or other public purpose. The proposal also requires disclosure to be made under safeguards designed to prevent further dissemination of such records. It provides that in a court proceeding, the court may issue a protective order and order that such records be sealed and that the public be excluded from any portion of the proceeding where any such record is disclosed.
This section narrows the scope of the information that cannot be disclosed by financial institutions without the prior written consent of the Commissioner, from examination, operating and condition reports, to information contained in examination reports which is not otherwise a matter of public record. It also limits the financial institutions whose directors, officers, employees and agents may not disclose such information without the prior consent of the Commissioner to Connecticut banks and Connecticut credit unions.
BANKING COMMISSIONER’S POSITION:
This is a Department of Banking proposal. Currently under Section 36a-21, all information obtained by the Department of Banking is confidential. However, notwithstanding the language of the statute and the fact that the Freedom of Information Act, specifically Section 1-210, requires disclosure of public records "[e]xcept as otherwise provided by any federal law or state statute", federal courts have required disclosure of information contained in examination reports of Connecticut banks. In addition, current law is overly broad in that it protects from disclosure all information obtained by the Commissioner, yet too narrow in that it does not protect records such as examiner work papers, analyses, correspondence and memoranda related to bank examinations. The proposal addresses these problems by specifying the information that shall be confidential and providing in Section 36a-21 that the information shall be confidential notwithstanding any provision of state law. It also limits the types of information that must be kept confidential by financial institutions to information contained in examination reports, and narrows the financial institutions in question to Connecticut banks and Connecticut credit unions. Finally, the proposal provides for measures to protect the further dissemination of confidential information once it has been disclosed, including sealing in a court proceeding. Without these protections, the confidentiality of sensitive documents, including documents shared between state and federal regulators as well as personal financial information of depositors and borrowers would be compromised.
Public Act Number 00-164
SB 378- An Act Concerning Fees for Dishonored Checks Imposed by Small Loan Companies
EFFECTIVE DATE: October 1, 2000
STATEMENT OF PURPOSE:
To provide small loan licensees with the ability to recoup from a borrower, in accordance with the provisions of section 52-565a, the costs incurred from loan payment checks that are dishonored.