NOTICE: In accordance with Governor Lamont's emergency declaration, employees and the public are asked to observe social distancing measures to ensure communal safety and to slow the spread of the novel coronavirus (COVID-19). People are asked to work from home and telecommute wherever possible. Adhering to these instructions, the Department of Banking has closed its offices to the public. However, agency staff will continue to provide services to consumers and industry through telework. When contacting the Department, please use electronic communication whenever possible. Agency staff will continue to check voicemails during this time. Consumers are encouraged to use our online form for complaints. If you are unsure where to send an inquiry, you may send it to Department.Banking@ct.gov and it will be routed appropriately. Thank you for your patience during this time.

2001 Banking and Related Legislation

Each year, the Department of Banking, with the coordination of the Government Relations and Consumer Affairs Division, conducts an active legislative program. In 2001, the General Assembly enacted six Department of Banking proposals concerning banks, credit unions, the securities industry, and consumer credit into law.

Brief summaries of these public acts are provided below. Please note that these summaries present certain key points for public information and do not represent complete statements of law. Copies of the complete public acts may be found on the Connecticut General Assembly website by following the links provided with the summaries.  All references on this page are to sections and titles of the Connecticut General Statutes, unless otherwise noted.

 Public Acts

Abusive Home Loan Lending Practices

Bank Transactions

Community Reinvestment by Community Credit Unions

Connecticut Uniform Securities Act and Notices Issued by the Department of Banking

Financial Privacy

Money Transmission

 
Public Act Number 01- 09
Substitute for Senate Bill 791 - An Act Concerning Community Reinvestment By Community Credit Unions

EFFECTIVE DATE: July 1, 2001

STATEMENT OF PURPOSE:
To establish a community reinvestment statute for a Connecticut credit union whose membership is limited to persons in a well-defined local community, neighborhood or rural district.

PREVIOUS LAW:
Section 36a-3 contained cross-references to terms that are defined in various provisions of Title 36a. Title 36a did not make the current community reinvestment statutes applicable to Connecticut credit unions.

EFFECT OF Public Act Number 01-09

Section 1.

This section amends Section 36a-3 to add cross-references to the definitions of "assessment area", "community credit union" and "community reinvestment performance".

Section 2.

This section provides definitions for the terms "assessment area", "community credit union" and "community reinvestment performance".

Section 3.

This section requires each community credit union to satisfy its continuing and affirmative obligation to help meet the credit needs of its local community, including low-income and moderate-income neighborhoods, consistent with the safe and sound operation of such credit union.

This section also requires each community credit union, within six months following the effective date of the act, to delineate and file with the Commissioner one or more assessment areas; sets forth the criteria that the Commissioner must use to assess such credit union's community reinvestment performance, and establishes the factors that the performance evaluation must address.

Section 4.

This section requires that copies of the most recent community reinvestment performance evaluation be provided to the public upon request and allows a community credit union to charge a reasonable fee for such copies; requires each community credit union to maintain a public file containing the performance evaluation, which may also contain any response to such performance evaluation that such credit union wants to make; requires the credit union to make a copy of such performance evaluation available for public inspection upon request and at no cost to the public, and requires each credit union that received a "less than satisfactory" rating to include in the public file a description of its current efforts to improve, with quarterly updates.

Section 5.

This section prescribes a form of public notice that each community credit union shall provide in the public lobby of its principal office and each subsidiary office in this state as to the availability of the recent community reinvestment performance evaluation.

Section 6.

This section authorizes the Commissioner to consider the community reinvestment performance of a community credit union in connection with approvals to establish or change the location of an office, change or expand fields of membership and to merge.

Section 7.

This section requires the Commissioner to annually prepare and submit to the State Treasurer a list of community credit unions that have received a rating of "needs to improve" or of "substantial noncompliance", and any such credit union listed may not receive public deposits.

Section 8.

This section authorizes the Commissioner to withhold or condition approval of an amendment to a community credit union's certificate of organization in connection with the establishment or change of location of an office or change in the field of membership, based upon such credit union's community reinvestment performance.

Section 9.

This section authorizes the Commissioner to withhold or condition approval of an amendment to a community credit union's certificate of organization to expand its field of membership, based upon such credit union's community reinvestment performance.

Section 10.

This section authorizes the Commissioner to withhold or condition approval of a merger involving a community credit union based upon such credit union's community reinvestment performance. Section 11. This section provides that the act shall take effect on July 1, 2001

BANKING COMMISSIONER'S POSITION:

This was a Department of Banking proposal. Since a community credit union's field of membership may cover all persons within the community, neighborhood or rural district, it is reasonable to require such a credit union to demonstrate that it will help to meet the credit needs of its community and that its performance may be considered as part of the approval process of transactions in which it becomes involved.

 
Public Act Number 01- 34

Substitute House Bill 6131 - An Act Concerning Abusive Home Loan Lending Practices

EFFECTIVE DATE: October 1, 2001

STATEMENT OF PURPOSE:
To establish a statutory scheme to curb abusive lending practices; and to prohibit mortgagees from charging a mortgagor or the mortgagor's attorney or agent a fee for the first payoff statement provided in a calendar year.

PRESENT LAW:
There is no statutory scheme in place directed toward addressing abusive lending practices that have recently emerged in the mortgage market.

Section 36a-3 sets forth the cross-references to the definitions in Title 36a.

Section 36a-50 authorizes the Commissioner to impose a civil penalty of up to $7,500 on any person for a violation of any statute under the jurisdiction of the Commissioner, or any regulation rule or order adopted or issued under such statute.

Section 36a-53(c) authorizes the Commissioner to impose a civil penalty on a Connecticut bank, Connecticut credit union, or an officer or director of such bank or credit union for certain violations and practices in accordance with Section 36a-50, provided the maximum penalty that may be imposed under this subsection is $1,000, unless certain requirements are met. It also requires the Commissioner to take into account certain factors in determining the amount of the penalty.

Section 36a-680(a) describes the effect of inconsistencies between Connecticut's Truth-in-Lending Act and other state laws relating to the disclosure of information in connection with consumer credit transactions.

Section 36a-521(a), among other things, prohibits persons engaged in the secondary mortgage loan business in Connecticut from charging, in any secondary mortgage loan transaction, prepaid finance charges that exceed, in the aggregate, eight percent of the principal amount of the loan.

Section 49-10a requires a mortgagee to provide a mortgagor a written payoff statement within ten business days of the mortgagor's request and sets forth the penalty for failure to do so.

EFFECT OF PUBLIC ACT NUMBER 01-34:

Section 1.
This section amends Section 36a-3 to add cross-references to the definitions of "additional proceeds", "APR", "broker", "consummation", "high cost home loan", "prepaid finance charge", and "prepayment penalty".

Section 2.
This section provides that the act shall be cited as the "Connecticut Abusive Home Loan Lending Practices Act".

Section 3.
This section defines various terms that are used in the act, including "high cost home loan" which is defined in general as a high interest, consumer loan secured by property in Connecticut that is, or will be, the borrower's principal residence.

Section 4.
This section sets forth the disclosures that must be made by a lender making a high cost home loan.

Section 5.
This section prohibits the following terms in high cost home loans: (1) balloon payments in mortgages with a term of less than seven years, (2) negative amortization, (3) a payment schedule that consolidates more than two periodic payments and pays them in advance from the proceeds, (4) an increase in the interest rate after default or default charges that are more than five percent of the amount in default, (5) a refund of interest calculated by a method less favorable than a specified method, (6) a prepayment penalty after three years of consummation of the loan (with the maximum permissible penalty being three percent during the first year and reduced by one percent each year for the subsequent two years and certain other limitations), (7) a mandatory arbitration clause or waiver of participation in a class action, and (8) a call provision allowing the lender, in its sole discretion, to accelerate the indebtedness.

Section 6.
This section requires a lender who makes a high cost home loan, to report, annually, both the favorable and unfavorable payment history of the borrower to a nationally recognized credit bureau.

Section 7.
This section prohibits the following acts and practices by a lender in the making of a high cost home loan: (1) payment to a home improvement contractor from the proceeds of the loan except under certain conditions, (2) sale or assignment of the loan without notice to the purchaser or assignee that the loan is subject to the act, (3) imposition of prepaid finance charges that exceed the greater of five percent of the principal amount of the loan or $2,000 (when aggregated with the prepaid finance charges on previous high cost home loan financings, or financings subject to the provisions of section 13 of the act, by the same lender or its affiliate in the past two years), provided a lender may, additionally, impose prepaid finance charges in connection with additional proceeds received by a borrower in a refinancing, of up to five percent of the additional proceeds, (4) charging a borrower fees to modify, renew or extend a loan (except where it is 60 or more days delinquent and is modified, renewed or extended as part of a work-out process) if the loan will continue to be a high cost home loan or the annual percentage rate will not be reduced by at least two percentage points, provided a lender may charge prepaid finance charges in connection with additional proceeds received by a borrower in connection with the modification, extension or renewal of up to five percent of the additional proceeds, (5) making the loan unless the lender reasonably believes that the borrower will be able to make the scheduled payments based on certain factors, with the borrower being presumed to be able to make the scheduled payments if the borrower's monthly debts do not exceed 50 percent of the borrower's monthly gross income, (6) advertising that refinancing pre-existing debt with the loan will reduce the monthly debt payment without also disclosing that it may increase the number of monthly debt payments and the aggregate amount paid by the borrower over the term of the loan, (7) recommending or encouraging default on an existing loan prior to the closing of the loan, (8) making a loan that refinances an existing loan unless the new loan provides a benefit to the borrower, (9) making a loan with an interest rate that is unconscionable, and (10) charging the borrower fees for services that are not actually performed or which are not bona fide and reasonable.

Section 8.
This section requires a lender who in connection with making a high cost home loan offers credit insurance on a prepaid single premium basis also to give the borrower the option of purchasing such insurance on a monthly premium basis. It provides that a borrower who purchases credit insurance from a lender shall have the right to cancel such insurance at any time and receive a refund of any unearned premiums paid and requires the lender to notify the borrower of such right between ten and thirty days after consummation of the loan.

Section 9.
This section requires the lender and any assignee of the lender to refund or credit the borrower for any default charges, prepayment penalties or prepaid finance charges collected in excess of the limits set forth in Sections 5 and 7 of the act.

Section 10.
This section amends Section 36a-50(a)(2) to authorize the Commissioner to impose a maximum civil penalty of $15,000 on any person for a violation of Sections 4 to 9, inclusive, of the act.

Section 11.
This section amends Section 36a-53(c) to authorize the Commissioner to impose a maximum civil penalty of $15,000 on a Connecticut bank, Connecticut credit union, or an officer or director of such bank or credit union for violations of Sections 4 to 9, inclusive, of the act without meeting the requirements of that section for penalties over $1,000. It makes the requirement that the Commissioner take into account certain factors in determining the amount of the penalty inapplicable to such violations.

Section 12.
This section amends Section 36a-680(a) to provide that Sections 4 to 9, inclusive, of this act shall not be deemed inconsistent with the provisions of the Connecticut Truth-in-Lending Act and shall control where applicable. It also amends the provision that requires the Commissioner to exempt, by regulation, creditors who comply with the Connecticut Truth-in-Lending Act from complying with inconsistent disclosure laws relating to consumer credit transactions by deleting the requirement that the exemption be by regulation and giving the Commissioner discretion to grant the exemption.

Section 13.
This section prohibits prepaid finance charges that exceed the greater of five percent of the amount of the loan or $2,000 (when aggregated with the prepaid finance charges in previous financings, if any, by the same lender or its affiliate in the past two years) in connection with first mortgage loans made by licensees under the first mortgage lender and broker provisions, banks, credit unions, and small loan licensees and licensees under the secondary mortgage lender and broker provisions that are exempt from licensure under the first mortgage lender and broker provisions. However, a lender may, additionally, impose prepaid finance charges in connection with additional proceeds received by a borrower in a refinancing, of up to five percent of the additional proceeds.

Section 14.
This section amends Section 36a-521(a) to clarify that prepaid finance charges in a secondary mortgage loan transaction do not include the time-price differential.

Section 15.
This section amends Section 49a-10 to prohibit mortgagees from charging a mortgagor or the mortgagor's attorney or agent a fee for the first payoff statement provided in a calendar year unless such statement is provided on an expedited basis, as requested by the mortgagor or the mortgagor's representative.

BANKING COMMISSIONER'S POSITION:
This was a Department of Banking bill. In recent years, there has been a nationwide increase in abusive lending practices in the mortgage market. These practices are directed at low-income and elderly buyers. North Carolina has enacted a law and other states, such as New York and Massachusetts, have proposed statutes or regulations to deal with the problem. This bill seeks to curb abusive lending practices in Connecticut.

The Department has received complaints from mortgagors that mortgagees are charging high fees to provide a payoff statement. This bill addresses that problem by prohibiting such fees for the first payoff statement requested in a calendar year.

Public Act Number 01- 48

Substitute House Bill 6130 - An Act Concerning The Connecticut Uniform Securities Act and Notices Issued By The Department Of Banking

EFFECTIVE DATE: October 1, 2001

STATEMENT OF PURPOSE:
To conform the definitions of "broker-dealer" and "investment adviser" to the definitions of those terms under federal securities laws; to make withdrawal of an application for registration effective ninety days after receipt of a notice of intent to withdraw unless a proceeding to deny the application for registration is pending, to allow the commissioner to place conditions on a withdrawal if a proceeding to deny is pending or is instituted within the ninety days after receipt of the notice of intent to withdraw, and to allow for the institution of a denial proceeding within one year after withdrawal becomes effective; to extend administrative restitutionary and disgorgement remedies against control persons to cover regulation, rule or order violations; to allow the commissioner to enter a written consent order with a respondent at any time after the issuance of a notice of intent to impose a fine; to replace the term "civil penalty" with the term "fine" to conform with language used throughout title 36b; to amend titles 36a and 36b to make corresponding changes allowing the commissioner to use an express delivery carrier that provides a dated delivery receipt, in lieu of registered or certified mail, return receipt requested, when sending out notices and orders.

PRESENT LAW:
Section 36b-3(5) defines the term "broker-dealer" and provides exclusions from the definition for purposes of the Connecticut Uniform Securities Act (the "Act").

Section 36b-3(10) defines the term "investment adviser" and provides exclusions from the definition for purposes of the Act.

Section 36b-15(e)(1) provides the period of time after which withdrawal from registration as a broker-dealer, agent, investment adviser and investment adviser agent becomes effective in Connecticut, and permits the Commissioner to institute revocation or suspension proceedings within one year after withdrawal becomes effective.

Section 36b-27 authorizes the Commissioner to order any person that controls a person liable for violations of the Act or dishonest or unethical practices to provide restitution or disgorgement of sums obtained as a result of such violations or practices; requires that notices of intent to fine and orders imposing fines shall be sent by registered mail, return receipt requested; and empowers the Commissioner to enter into written consent orders with persons named in certain specified orders, in lieu of an administrative proceeding.

Section 36b-72(b) requires that a notice of intent to impose a fine or any order imposing fine for any violation of the Connecticut Business Opportunity Investment Act must be mailed to the person named in the notice or order by certified mail, return receipt requested, and provides that the Commissioner may impose a civil penalty on such persons who violate the Connecticut Business Opportunity Investment Act.

Section 36b-33 provides that when the Commissioner is served with process on behalf of those who have filed an irrevocable consent to service of process or any persons who have engaged in conduct prohibited or made actionable under the Act, the regulations, or an order, the service is not effective unless the Commissioner sends the notice of the service and a copy of the process to the named defendant or respondent, at the last address on file with the Commissioner, by registered mail, return receipt requested.

Section 36b-62 provides that when the Commissioner is served with process on behalf of a seller of a business opportunity which has filed an irrevocable consent to service of process or has engaged in conduct prohibited by the Connecticut Business Opportunity Investment Act, the regulations, or an order, the service is not effective until the Commissioner sends notice of the service and a copy of the process to the named defendant or respondent, at the last address on file with the Commissioner, by registered mail.

Section 36a-50(a)(1) requires the Commissioner to mail a notice of intent to impose fine by registered or certified mail, return receipt requested, and provides that any such notice is deemed received on the earlier of the date of actual receipt or seven days after mailing.

Section 36a-51(a) requires the Commissioner to mail notices of intent to suspend, revoke or refuse to renew any license, by registered or certified mail, return receipt requested, and provides that any such notices are deemed received on the earlier of the date of actual receipt or seven days after mailing.

Section 36a-52(a) requires the Commissioner to mail a notice of intent to issue an order to cease and desist by registered or certified mail, return receipt requested, and provides that any such notice is deemed received on the earlier of the date of actual receipt or seven days after mailing.

Section 36a-53(a) requires the Commissioner to mail a notice of intent to remove an officer or director by registered or certified mail, return receipt requested, and provides that any such notice is deemed received on the earlier of the date of actual receipt or seven days after mailing.

Section 36a-428n(h)(1) requires the Commissioner, after taking possession of the business and property in Connecticut of a foreign bank, to send notification to the owners of personal property in the custody of the bank or lessees of any safe by registered mail.

Section 36a-718 requires the Commissioner to send notice of intent to order restitution against a mortgage servicing company by certified mail, return receipt requested.

EFFECT OF PUBLIC ACT NUMBER 01-48:

Section 1.
This section amends Section 36b-3(5) to conform the definition of "broker-dealer" to the federal definitions of "broker" and "dealer" set forth in the Securities Exchange Act of 1934.

Section 2.
This section amends Section 36b-3(10) to conform the definition of "investment adviser" to the federal definition of "investment adviser" set forth in the Investment Advisers Act of 1940.

Section 3.
This section amends Section 36b-15(e)(1) to make the withdrawal of an application for registration effective 90 days after a notice of intent to withdraw such application is received, to allow the Commissioner to place conditions on the effectiveness of a withdrawal if a proceeding to deny is pending or is instituted within 90 days after the receipt of the notice of intent to withdraw, and to allow for the institution of a denial proceeding within one year after the withdrawal became effective.

Section 4.
This section amends Section 36b-27 to permit the Commissioner to order restitution or disgorgement against control persons based on violations by persons they control of any regulation, rule and order adopted or issued under the Act. The section also permits the Commissioner to send notices of intent to impose a fine and orders imposing fines by any express delivery carrier that provides a dated delivery receipt. The section clarifies that the Commissioner may enter into consent orders with respondents at any time after a notice of intent to impose a fine is issued, and makes various technical conforming changes.

Section 5.
This section amends Section 36b-72(b) of the Connecticut Business Opportunity Investment Act to permit the Commissioner to send notices of intent to impose a fine and orders imposing fines by any express delivery carrier that provides a dated delivery receipt, and makes a technical correction replacing "civil penalty" with the word "fine".

Section 6.
This section amends Section 36b-33 to provide that service of process on the Commissioner is effective once the notice of service and copies of the process served on the Commissioner are sent to defendants or respondents by registered mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt.

Section 7.
This section amends Section 36b-62 of the Connecticut Business Opportunity Investment Act to provide that service of process on the Commissioner is effective once the notice of service and copies of process served on the Commissioner are sent to defendants or respondents by registered mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt.

Section 8.
This section amends Section 36a-50(a)(1) to allow the Commissioner to send notices of intent to fine against any person who has violated any statute within the jurisdiction of the Commissioner or any regulation, rule or order adopted thereunder, by any express delivery carrier that provides a dated delivery receipt, and makes technical conforming changes.

Section 9.
This section amends Section 36a-51(a) to allow the Commissioner to send notices of intent to suspend, revoke or refuse to renew any license by any express delivery carrier that provides a dated delivery receipt, and makes technical conforming changes.

Section 10.
This section amends Section 36a-52(a) to allow the Commissioner to send notices of intent to issue an order to cease and desist against any person who has violated, is violating or is about to violate any provision of the general statutes, regulation, rule or order within the jurisdiction of the Commissioner, by any express delivery carrier that provides a dated delivery receipt, and makes technical conforming changes.

Section 11.
This section amends Section 36a-53(a) to allow the Commissioner to send notices of intent to issue an order removing an officer or director of a Connecticut bank or Connecticut credit union by any express delivery carrier that provides a dated delivery receipt, and makes technical conforming changes.

Section 12.
This section amends Section 36a-428n(h)(1) to allow the Commissioner, after taking possession of the business and property in Connecticut of a foreign bank, to send notification to the owners of personal property in the custody of the bank or lessees of any safe, by registered mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt, and makes technical conforming changes.

Section 13.
This section amends Section 36a-718 to allow the Commissioner to send notice of intent to order restitution against a mortgage servicing company by any express delivery carrier that provides a dated delivery receipt, and makes technical conforming changes.

BANKING COMMISSIONER'S POSITION:
This was a Department of Banking proposal. The Gramm-Leach-Bliley Financial Modernization Act of 1999 ("Gramm-Leach") eliminated the blanket exemption provided for banks from securities regulation on the federal level. Therefore, to promote the functional regulation contemplated by Gramm-Leach, it is necessary to conform the bank exclusions from the definition of "broker-dealer" and "investment adviser" under the Act with the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940. The proposed amendment to Section 36b-15(e)(1) is necessary to address the current gap in the statute which allows a person, or class of persons, who have violated the Act, to withdraw an application for registration without any penalty. The proposed amendments to Section 36b-27 will address the current inequity in penalties that may be imposed on persons who violate the Act and their control persons by making the penalties imposed on both parties identical. In an effort to allow the Commissioner to settle matters expeditiously, the proposal will also clarify that the Commissioner may enter into consent orders with respondents at any time after a notice of intent to impose a fine is issued. The amendment to Section 36b-72 removes the term "civil penalty" and replaces it with the term "fine" to conform to the language used throughout Title 36b. Finally, the proposed amendments to Titles 36a and 36b allowing the Commissioner to use an express mail delivery carrier will allow the Commissioner to use a method for delivering documents to respondents, other than the U.S. Postal Service, when time is of the essence.

Public Act Number 01- 56
Substitute Senate Bill Number 793 - An Act Concerning Money Transmission

Effective Date: October 1, 2001

STATEMENT OF PURPOSE:
To update the statutory scheme governing the licensing and supervision of issuers of Connecticut payment instruments and money transmitters in order to take into account modern forms of money transmission.

PRESENT LAW:
Section 36a-3 contains cross-references to terms that are defined in various provisions of Title 36a.

Section 36a-595 provides a short title for Sections 36a-595 to 36a-610, inclusive ("the Act").

Section 36a-596 contains definitions used in the Act.

Section 36a-597 prohibits any person from engaging in the business of issuing Connecticut instruments or engaging in the business of receiving money for transmitting the same without first obtaining a license from the Banking Commissioner.

Section 36a-598 provides the application requirements for a license.

Section 36a-599 provides the nonrefundable investigation fees and license fees.

Section 36a-600 provides that the Commissioner shall approve conditionally any application for a license if the Commissioner finds the factors set forth in this section.

Section 36a-601 provides that no investigation fee shall be payable to the Commissioner in connection with a renewal application.

Section 36a-602 provides that the proceeds of the bond shall constitute a trust fund for the exclusive benefit of the purchasers and holders of Connecticut instruments issued by a licensee and that any investment made, in lieu of a bond, shall be maintained in trust for the exclusive benefit of such purchasers and holders.

Section 36a-603 requires each licensee at all times to maintain permissible investments having a value at least equal to the aggregate amount of its outstanding instruments.

Section 36a-604 establishes net worth requirements for licensees.

Section 36a-605 provides that at least once each year, the Commissioner shall visit each licensee and examine its books and records to ascertain whether it is in sound financial condition and whether its business has been and is being carried on pursuant to law. This section also provides that in lieu of or in addition to any examination, the Commissioner may require a licensee to file a report certified by an independent certified public accountant.

Section 36a-606 requires each licensee to file certain specified information with the Commissioner, including the dollar amount of the licensee's aggregate outstanding Connecticut instruments.

Section 36a-607 authorizes a licensee to conduct its business at one or more locations within this state subject to certain conditions.

Section 36a-608 requires that the Commissioner investigate to determine whether any licensee or other person has violated any provision of the Act; authorizes the Commissioner to suspend or revoke a license in accordance with Section 36a-51 for any wilful violation of the Act; to impose civil penalties in accordance with Section 36a-50; and to order a licensee to terminate its agency relationship with any agent who refuses to allow an examination of its books and records.

Section 36a-609 provides an exemption from the Act for certain entities, including any bank the insurable deposits of which are insured by the Federal Deposit Insurance Corporation, except in its capacity as an agent of a licensee, and, the receipt of money by an incorporated telegraph or cable company for immediate transmission by telegraph or cable.

Section 36a-610 authorizes the Commissioner to adopt regulations which are necessary or appropriate for the enforcement of the Act.

EFFECT OF PUBLIC ACT NUMBER 01-56

Section 1.
This section amends Section 36a-3 to add cross-references to the definitions of "material litigation", "money transmission" and "payment instrument".

Section 2.
This section amends Section 36a-595 to provide a new short title for the Act.

Section 3.
This section amends Section 36a-596 to add definitions for the terms "material litigation", "money transmission" and "payment instrument". It also deletes other definitions and makes conforming changes to others.

Section 4.

This section amends Section 36a-597 to make conforming changes to incorporate terms added by the amendments to Section 36a-596.

Section 5.
This section amends Section 36a-598 to require that the application include the identity of any shareholder owning 10 percent or more of each class of securities, and sufficient information, in a form acceptable to the Commissioner, on the partners, directors, trustees, principal officers and 10 percent shareholders, as the Commissioner deems necessary to make the findings required for his approval of the application.

This section also amends Section 36a-598 to require that each application include the history of material litigation and criminal convictions for the five-year period prior to the date of the application of (A) the individual, if the applicant is an individual, (B) the partners, if the applicant is a partnership, or (C) the directors, trustees, principal officers and any shareholders owning 10 percent or more of each class of securities.

This section further amends Section 36a-598 to require that each application contain a statement of whether the applicant will engage in the business of issuing money orders, travelers checks, electronic payment instruments or engage in the business of money transmission.

Section 6.
This section amends Section 36a-599 to eliminate the requirement that each application for a renewal license be accompanied by a nonrefundable investigation fee of $500, yet the license renewal fee of $1,000 will remain in effect. However, the applicable license fee shall be refundable if the application for an original license is denied, if the Commissioner refuses to issue a renewal license or if an application for a license or renewal license is withdrawn prior to issuance of a license or renewal license by the Commissioner.

Section 7.
This section amends Section 36a-600 to add the requirement that the Commissioner find, before issuing a conditional approval of a license, that the applicant is in all respects properly qualified and of good character; if the applicant is a partnership, each partner is in all respects properly qualified and of good character; and if the applicant is a corporation or association, each president, chairperson of the executive committee, senior officer responsible for the corporation's business, chief financial officer or any other person who performs similar functions as determined by the commissioner, director, trustee, and each shareholder owning 10 percent or more of each class of the securities of such corporation is in all respects properly qualified and of good character.

Section 8.
This section amends Section 36a-601 to require that an application for renewal of a license contain the surety bond required by Section 36a-602.

Section 9.
This section amends Section 36a-602 to provide that the proceeds of the bond required by this section or the proceeds of investments made in lieu of such bond shall be deemed to be held in a statutory trust for the benefit of any claimants against a licensee.

Section 10.
This section amends Section 36a-603 to provide that permissible investments shall be deemed to be held in a statutory trust for the benefit of any claimants against a licensee.

Section 11.
This section amends Section 36a-604 to make conforming changes to incorporate terms added by the amendments to Section 36a-596.

Section 12.
This section amends Section 36a-605 to provide that in connection with an examination of a licensee under the Commissioner's general examination authority contained in Section 36a-17, the Commissioner may also examine the agents and subagents of such licensee. The section also provides that the Commissioner, in lieu of conducting an examination, may accept the report of examination of any other state or federal supervisory agency or other organization affiliated with or representing such supervisory agency with respect to the examination or other supervision of any person subject to the Act, or a report prepared by an independent accounting firm, and reports so accepted are considered for purposes of the Act as an official examination report of the Commissioner.

This section also amends Section 36a-604 to authorize the Commissioner to enter into cooperative, coordinating and information sharing agreements with any other state or federal supervisory agency or organization affiliated with or representing such supervisory agency with respect to the examination, examination fees, or other supervision of persons subject to the provisions of the Act.

Section 13.
This section amends Section 36a-606 to make conforming changes to terms added by the amendments to Section 36a-596.

Section 14.
This section amends Section 36a-607 to make conforming changes to terms added by amendments to Section 36a-596.

Section 15.
This section amends Section 36a-608 to require the Commissioner to make such investigations and conduct such hearings as the Commissioner considers necessary to determine whether any licensee or any other person is about to violate any provision of the Act, to remove the requirement that a violation of the Act be willful before the Commissioner may suspend or revoke a license issued under the Act, and to authorize the Commissioner to order a licensee to terminate its agency relationship with a subagent who refuses to allow an examination of its books.

Section 16.
This section amends Section 36a-609 to provide exemptions from the Act for any federally insured bank, out-of-state bank, Connecticut credit union, federal credit union or out-of-state credit union, except in its capacity as an agent of a licensee, provided such institution does not issue or sell Connecticut payment instruments or transmit money through an agent or subagent who is not such an entity. The section also exempts a person whose activity is limited to the electronic funds transfer of governmental benefits for or on behalf of a federal, state or other governmental agency, quasi-governmental agency or government sponsored enterprise.

Section 17.
This section amends Section 36a-610 to broaden the Commissioner's authority to adopt regulations which are necessary or appropriate for the administration of the Act.

BANKING COMMISSIONER'S POSITION:
This is a Department of Banking proposal. This proposal is necessary to update the Connecticut money order and travelers check statutes to take into account modern forms of money transmission in order to safeguard the Connecticut public from default in the payment of these instruments or transmissions.

The requirement that a corporation or association provide the identity of any 10 percent shareholder is necessary because such a shareholder could have significant influence over a licensee. The requirement that all applications include the history of material litigation and criminal convictions is necessary to determine if persons who may have a significant influence over a licensee are in all respects properly qualified and of good character, which is a requirement added by this proposal.

The statutory trust language is being added in response to the industry's concern that the present language would not totally protect customers of a failed licensee. The proposal to allow the Commissioner to accept the examination reports of another state or federal supervisory agency or other organization affiliated with or representing such supervisory agency and to enter into cooperative, coordinating and information sharing agreements follows the trend to provide an efficient mechanism to adequately supervise the multistate activity of licensees.

The addition of authority to examine agents and subagents of licensees, the ability to take enforcement action without having to find a willful violation of the Act and to order termination of agency relationships with subagents who impede the examination function are appropriate and necessary enforcement tools. The exemption from licensing for out-of-state banks and credit unions is consistent with the philosophy that such entities' activities are adequately supervised by their primary regulators, and is also the basis for the proposed addition of an exemption for persons whose activity is limited to the electronic funds transfer of governmental benefits.
 

Public Act Number 01- 76 
Substitute House Bill Number 6132 - An Act Concerning Financial Privacy

EFFECTIVE DATE: July 1, 2001

STATEMENT OF PURPOSE:
To incorporate the privacy provisions of the federal Gramm-Leach-Bliley Financial Modernization Act of 1999 applicable to banks, credit unions, out-of-state trust companies, licensees under title 36a and persons subject to the jurisdiction of the commissioner under title 36b into state law; to make a conforming change to section 36a-41; to amend section 36a-412(a) to specifically include the provisions concerning disclosure of financial records in the list of consumer protection laws that are applicable to branches of out-of-state banks in Connecticut and repeal an obsolete provision; and to make a clarifying change to section 36a-412(b).

PREVIOUS LAW:
Section 36a-3 set forth the cross-references to the definitions in Title 36a.

Sections 36a-41 et seq. prohibited financial institutions from disclosing a customer's financial records to any person without the authorization of the customer. There are several exceptions to this prohibition.

Section 36a-412 governed mergers, consolidations and acquisitions between out-of-state banks and in-state banks.

EFFECT OF PUBLIC ACT NUMBER 01-76:

Section 1.
This section amends Section 36a-3 to amend the cross-references to the definitions of "financial institution" and "financial records".

Section 2.
This section amends Section 36a-41 to make technical changes to the definition of "financial institution" and "financial records".

Section 3.
This section requires a bank, Connecticut credit union, federal credit union, an out-of-state bank that maintains a branch in Connecticut, an out-of-state trust company or out-of-state credit union that maintains an office in this state, a licensee under Title 36a or any person subject to the jurisdiction of the Commissioner under Title 36b, which is a financial institution, as defined in Section 509 of the federal Gramm-Leach-Bliley Financial Modernization Act of 1999 (the "Act"), to comply with privacy provisions of the Act. It also provides that to the extent this section is inconsistent with Sections 36a-41 to 36a-44, inclusive, the provisions that afford the customer greater protection shall control.

Section 4.
This section amends Section 36a-412 to repeal an obsolete provision; include the statutory provisions concerning disclosure of financial records in the list of consumer protection laws that are applicable to branches of out-of-state banks in Connecticut; and clarify that a reference to "such bank" in subsection (b) refers to the "out-of-state bank".

Section 5.
This section provides that the act shall take effect on July 1, 2001

BANKING COMMISSIONER'S POSITION:
This Department of Banking proposal keeps intact the state's current financial privacy laws while adopting the privacy provisions of the federal Gramm-Leach-Bliley Financial Modernization Act of 1999 with respect to certain individuals and entities that are subject to the Commissioner's jurisdiction. This proposal would not subject these individuals and entities to any additional regulatory burden since they are already subject to the federal privacy provisions. The federal privacy provisions prohibit "financial institutions", as defined, from disclosing nonpublic personal information to nonaffiliated third parties unless the customer or consumer is given the opportunity to opt-out of having the information disclosed and does not opt-out. Connecticut privacy laws protect a much narrower range of information than is protected under the federal act. However the state law is stricter than the federal law in that it is an opt-in provision requiring the customer's consent for disclosure, and it limits disclosure to any person and not just nonaffiliated third parties. This proposal, by incorporating into state law those opt-out privacy provisions of the federal act that are applicable to specified individuals and entities subject to the jurisdiction of the Commissioner, would give the Commissioner enforcement authority with respect to such federal provisions.
 

Public Act Number 01- 183
Substitute Senate Bill Number 1064 - An Act Concerning Bank Transactions

EFFECTIVE DATE:
On passage, except Section 1. shall take effect July 1, 2001

STATEMENT OF PURPOSE:
To reorganize, reduce, eliminate or establish certain application fees required to be charged by the Department of Banking; to increase the percentage of the stock of a capital stock community bank that a person may own to increase attractiveness of the community bank charter; to require accountants conducting annual examinations of the books and records of Connecticut banks to submit a signed report of the audit to the governing board within a reasonable period of time; to allow a Connecticut bank that is a subsidiary of a holding company, with the prior approval of the commissioner, to submit a signed consolidated report of the holding company in lieu of an annual report of the bank to allow individual banks to take advantage of the economies of scale available in a holding company structure; to require accountants who perform annual audits to provide the commissioner with access to their work papers; to require a capital stock Connecticut bank that converts to a national banking association to give the commissioner notice of the conversion; to require a Connecticut bank to notify the commissioner prior to the proposed closing of any predetermined mobile branch location; to ensure that sufficient funds are available to cover the costs and expenses incurred by the commissioner and fees and assessments due the commissioner in the event a Connecticut bank organized to function solely in a fiduciary capacity or an uninsured bank is placed in receivership or conservatorship; to delete the requirement that a holding company or banking corporation obtain the approval of the commissioner to establish or maintain a nondepository office of a subsidiary in Connecticut; to permit a Connecticut bank that functions solely in a fiduciary capacity to convert to a Connecticut bank that is authorized to accept retail deposits; and to permit a Connecticut bank that is authorized to accept retail deposits or a Connecticut bank organized to function solely in a fiduciary capacity to convert to an uninsured bank.

PREVIOUS LAW:
Section 36a-65(d) provided the statutory fees for investigating and processing applications filed with the Commissioner.

Section 36a-70(r)(2) prohibited any person from subscribing, purchasing or otherwise acquiring, by merger, acquisition or otherwise, in excess of 9.9 percent of the stock of a capital stock community bank.

Section 36a-86 required accountants selected by the governing board of a Connecticut bank to conduct an annual audit or examination to submit a signed report of the audit or examination to the governing board of such bank within 90 days of the start of the audit or examination.

Section 36a-137 governed the conversion of a capital stock bank into another capital stock bank but does not require a capital stock Connecticut bank seeking to convert to a national banking association to notify the Commissioner of the proposed conversion or submit its charter upon consummation of the conversion.

Section 36a-145, which governs branching by Connecticut banks, did not specifically authorize the conversion of a limited branch to a branch. In addition, this section did not require the bank to notify the Commissioner of the proposed closing of any predetermined location of a mobile branch.

Section 36a-215 authorized the Commissioner for a period of three years from April 8, 1992, to waive various requirements of the banking law in order to facilitate and expedite transactions involving troubled financial institutions.

Section 36a-252 authorized a community bank to expand its powers, with the Commissioner's approval, and sets forth the filing and other requirements applicable to such expansion.

Section 36a-425(b) prohibited, among other things, a foreign banking corporation, holding company, subsidiary of a holding company, or subsidiary or affiliate of a banking corporation from establishing or maintaining an office in this state if such office will be used to enable such corporation, holding company or subsidiary or affiliate to engage in banking business in Connecticut. Section 36a-425(d) excepts from this prohibition an office established or maintained by a holding company, either directly or through any subsidiary of such holding company that is not a banking corporation, and an office established or maintained by a banking corporation that is not a subsidiary of a holding company through any of its subsidiaries that are not banking corporations, for the purpose of engaging in banking business other than to provide deposit services in this state, with the approval of the Commissioner.

Section 8 of Public Act 99-158 authorized an uninsured bank organized pursuant to Section 36a-70 to expand its powers to accept retail deposits with the approval of the Commissioner, and sets forth the filing and other requirements applicable to such expansion

EFFECT OF PUBLIC ACT NUMBER 01-183:

Section 1.
This section amends Section 36a-65(d) for clarity by reorganizing the fees based on the type of transaction involved and reduces, eliminates and establishes certain application fees. Specifically, Section 36a-65(d)(1)(A)(v) and Section 36a-65(d)(1)(A)(vi) respectively reduce the fees for the establishment of an out-of-state branch, limited or mobile branch by a Connecticut bank by allowing for the deduction of fees paid to other states in connection with such establishment; Section 36a-65(d)(1)(C)(ii) reduces the fee for applications to relocate a branch or limited branch from $1,500 to $500; Section 36a-65(d)(2) reduces the fee for investigating and processing acquisition statements filed under Section 36a-184 when the acquisition statement is filed in connection with a transaction that requires one or more applications; Section 36a-65(d)(3) clarifies that there is no fee for processing a notice of closing of any mobile branch; Section 36a-65(d)(1)(J) establishes a fee of $2,500 for conversion from an uninsured bank to an insured bank, and for a trust bank or a community bank to a full-service bank; Section 36a-65(d)(1)(J) also establishes a fee of $15,000 for conversions from an insured bank or a trust bank to an uninsured bank; Section 36a-65(d)(1)(K) establishes a fee of $500 for acquiring, altering or improving real estate when the written approval of the Commissioner is required; Section 36a-65(d)(1)(B) eliminates the fee charged to a Connecticut bank selling a branch when the branch is being sold to another Connecticut bank or a Connecticut credit union; Section 36a-65(d)(1)(D) changes the fees for conversions from a branch to a limited branch and a limited branch to a branch from a reasonable fee not to exceed $2,000 to $500; and Section 36a-65(d)(4) changes the fee for miscellaneous investigations from $150 per day to the actual cost of the investigation.

Section 2.
This section amends Section 36a-70(r)(2) to increase the percentage from 9.9 percent to 99.9 percent of the stock of a capital stock community bank that a person may subscribe for, purchase, or otherwise acquire, by merger, acquisition or otherwise.

Section 3.
This section amends Section 36a-86 to require that accountants conducting the annual audit of the books and records of a Connecticut bank submit a signed report of the audit to the governing board of such bank within a reasonable period of time; to allow a Connecticut bank that is a subsidiary of a holding company, with the prior approval of the Commissioner, to submit a signed consolidated report of the holding company in lieu of that of the bank, under certain circumstances; and to require that the governing board of a Connecticut bank procuring an annual audit or examination select accountants who have agreed to provide related working papers, policies and procedures to the Commissioner, if requested.

Section 4.
This section amends Section 36a-137 to require a capital stock Connecticut bank that converts to a national bank to give the Commissioner notice of its intent to convert concurrently with submission of its application to the Office of the Comptroller of the Currency, as well as submit its charter to the Commissioner upon consummation of the conversion, and makes certain technical corrections.

Section 5.
The proposal amends Section 36a-145(b) to clarify that a limited branch may convert to a branch; amends Section 36a-145(f) to provide the Commissioner with the authority to require a Connecticut bank proposing to close a branch, limited branch or mobile branch to submit any additional information requested; prescribes specific notice requirements for a Connecticut bank which proposes closing any mobile branch; and requires a Connecticut bank to notify the Commissioner prior to closing any predetermined location of a mobile branch.

Section 6.
The proposal amends Section 36a-215 to repeal obsolete provisions regarding troubled banks and to give the Commissioner authority to require a Connecticut bank organized to function solely in a fiduciary capacity or an uninsured bank that is financially troubled to pledge assets in an amount that is sufficient to meet the costs and expenses incurred by the Commissioner, should the bank be placed in receivership or conservatorship.

Section 7.
This section amends Section 36a-252 to make the language consistent with other conversion provisions in Title 36a.

Section 8.
This section amends Section 36a-425(d) to eliminate the requirement that a holding company or a banking corporation receive the approval of the Commissioner in order to establish or maintain an office of a subsidiary in Connecticut for the purpose of engaging in banking business other than to provide deposit services.

Section 9.
This section amends Section 8 of Public Act 99-158 to set forth a procedure whereby a Connecticut bank that functions solely in a fiduciary capacity can convert to a Connecticut bank that is authorized to accept retail deposits, and to make the language consistent with other conversion provisions in Title 36a.

Section 10.
This section sets forth a procedure whereby a Connecticut bank can convert to an uninsured bank.

Section 11.
This section provides that the act shall take effect on passage, except Section 1 which shall take effect on July 1, 2001.

Banking Commissioner’s position:
This is a Department of Banking proposal. This proposal alleviates some of the regulatory burden associated with applications and more accurately reflects the expenses incurred by the Department. Currently, no person may acquire more than 9.9 percent of the stock of a capital stock community bank. This restriction hampers the formation of capital stock community banks and increasing the percentage should increase the charter’s attractiveness to potential organizers. Currently, accountants conducting an annual audit or examination of the books and records of a Connecticut bank are required to submit a report to the governing board of such bank and the Commissioner within 90 days of the start of the audit or examination. Changing the timeframe for the report to a reasonable period of time is necessary to ensure that there is adequate time to complete an examination and prepare a report. The proposal also allows the Commissioner to approve the submission of a consolidated report of a holding company in lieu of an annual report of the audit or examination of a subsidiary bank to allow individual banks to take advantage of the economies of scale available in a holding company structure. The proposal also requires accountants who perform annual audits to provide the Commissioner with access to work papers to provide greater detail concerning the condition of the bank. Under current law, there is no mechanism whereby the Commissioner would be apprised of the conversion of a capital stock Connecticut bank to a national bank since the converting bank does not have to obtain the Commissioner’s approval. This proposal requires such converting bank to give the Commissioner notice of the conversion. Under current law, there is a fee for converting from a limited branch to a branch, but no enabling statute exists. In addition, a Connecticut bank does not have to notify the Commissioner of the proposed closing of any location of a mobile branch. This proposal requires a Connecticut bank to notify the Commissioner of the closing of any predetermined location of a mobile branch. When an insured Connecticut bank goes into receivership or conservatorship, the FDIC is generally appointed receiver or conservator and the Department does not have to bear the associated costs and expenses. In the case of a Connecticut bank organized to function solely in a fiduciary capacity or an uninsured bank, the Department would have to bear the costs and expenses of administering the receivership or conservatorship and of the liquidation. This proposal ensures that sufficient funds are set aside to cover these costs and expenses as well as fees and assessments due the Commissioner if it appears that the bank is in danger of being placed in receivership or conservatorship. Currently, a holding company or a banking corporation must obtain the Commissioner’s approval to establish or maintain an office of a subsidiary in Connecticut to engage in banking business other than to provide deposit services. Since Connecticut allows interstate branching, and these subsidiaries must obtain a license before they can engage in any activity requiring a license in Connecticut, the requirement that the holding company or banking corporation obtain the Commissioner’s approval for each office of a subsidiary located in Connecticut no longer serves its original function, is an unnecessary burden and is inconsistent with financial modernization and interstate banking. Under current law, there is no mechanism whereby a Connecticut bank that functions solely in a fiduciary capacity may convert to a Connecticut bank that is authorized to accept retail deposits, or for a Connecticut bank that is authorized to accept retail deposits or for a Connecticut bank organized to function solely in a fiduciary capacity to convert to an uninsured bank. This proposal enhances the state chartering system by setting forth procedures for these types of conversions to enable the industry to meet changing market demands and provide a broad array of services to consumers.


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