2004 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.  During the 2004 session, five department proposals concerning banks, consumer credit, securities and other issues were enacted into law by the General Assembly.  We've provided information on each of the Public Acts and other legislation for your information. 

Please note that the listing is arranged by Public Act number.  Hyperlinks for each Public Act lead to the Connecticut General Assembly website.

Department of Banking Proposals

Public Act 04-14 - HB 5409
An Act Concerning Check Cashing Services and Money Transmission

Public Act 04-14 requires limited liability companies applying for check cashing or money transmission licenses to include certain information in their applications. It requires the banking commissioner, if he determines that a check filed with his office to pay license, application, or certain other fees has been dishonored, to suspend the license automatically and give the licensee notice and an opportunity for a hearing.

It expands money transmission laws to apply to stored and monetary value, in addition to money.  It also allows surety companies to cancel money transmitters' surety bonds at any time by giving notice to the licensee and the commissioner.

Effective Date: October 1, 2004, except for the provisions applying money transmission laws to stored and monetary value and allowing surety companies to cancel their bonds, which take effect upon passage.

Public Act 04-45 - SB 360
An Act Concerning The Connecticut Uniform Securities Act

Public Act 04-45 makes several changes to the Connecticut Uniform Securities Act. It removes provisions allowing investment advisers registered with the federal Securities and Exchange Commission (SEC) to avoid certain application, notification, and fee requirements applicable to Connecticut investment advisers.

It also sets a $50 per agent fee for transferring broker-dealer or investment adviser agents from one broker-dealer or investment adviser to another, and makes several fees nonrefundable. Finally, it extends the statute of limitations for certain actions related to misrepresentation and fraud in investment advisory services.

Effective Date: October 1, 2004

Public Act 04-69 - HB 5411
An Act Concerning Consumer Credit Licensees and Creditors' Collection Practices

Public Act 04-69 requires the Commissioner to suspend several Banking Department licensees' licenses automatically if a check used to pay their license fees is dishonored. It allows surety companies issuing bonds to certain licensees to cancel the bond by giving 30 days notice and requires the commissioner to suspend the license if a new or renewal bond is not in place. It increases the commissioner's enforcement authority over actions that constitute banking law violations. The act expands debt adjusters' bond requirements and permits the commissioner to allow them to carry insurance if they cannot meet the required bond threshold.

Effective Date: October 1, 2004

Public Act 04-105 - SB 157
An Act Concerning Mortgage Rate Lock-Ins

For purposes of the mortgage rate lock-in statutes, Public Act 04-105 includes first mortgage correspondent lenders in the definition of a mortgage lender and includes lines of credit in the definition of a loan. The act also explicitly allows a mortgage rate lock-in to include electronically transmitted confirmations stating mortgage rates and allows the applicant's representative, in addition to the applicant himself, to receive such a confirmation.

Current law prohibits mortgage lenders from entering into a mortgage rate lock-in agreement unless the agreement is in writing. The act instead prohibits a lender from committing to a first mortgage loan applicant or his representative that the lender will make a loan at a specified rate if the loan is closed by the expiration of a specified period of time except by issuing a mortgage rate lock-in. It eliminates the requirement that the lock-in be in writing.

The act prohibits a mortgage broker from (1) collecting a rate lock-in fee, except where a governmental agency requires it to collect the fee directly; (2) issuing a mortgage rate lock-in; or (3) otherwise representing to a first mortgage loan applicant or his representative that the loan will be made at a specified rate if it is closed by a certain time. But it specifies that a mortgage broker may provide a mortgage lender's mortgage rate lock-in to an applicant or his representative on the lender's behalf and collect a rate lock-in fee, payable to the lender, on the lender's behalf.

Effective Date: Upon passage

Public Act 04-136 - SB 358
An Act Concerning Banks In Receivership and Bank Branching

Public Act 04-136 makes a number of changes to the banking statutes regarding trust banks, uninsured banks, receiverships, conservatorships, franchise tax, and bank branching, including:

1. requiring trust and uninsured banks to maintain at least $1 million in assets on deposit for the benefit of the banking commissioner for use in a receivership, if necessary; 
2. decreasing the franchise tax newly organized capital stock Connecticut banks with more than 10,000 authorized shares must pay; 
3. providing for a four-year phase-in for existing trust banks and uninsured banks to reach the $1 million threshold ($250,000 per year); 
4. protecting client interests in receiverships and conservatorships; 
5. expanding the circumstances under which an independent person may serve as a receiver or conservator; 
6. requiring a trust or uninsured bank's receiver to publish notice of the bank's receivership and depositors', clients', and creditors' rights; 
7. expanding the receiver's reporting and notice requirements; 
8. creating a specific order of priority for distributing trust and uninsured banks' assets; 
9. directing receivers to substitute successor fiduciaries to take over the bank's fiduciary positions; 
10. requiring certain claimants to file a proof of claim, specifying its content, and establishing procedures for claimants to file claims against a bank in receivership; 
11. creating receiver and conservator immunity and indemnity for acts within the scope of their employment; and 
12. allowing certain out-of-state banks with Connecticut branches to establish additional branches without following the statutory process.

The act exempts coin and currency services provided to a financial service company, such as a bank or credit union, by or through another such company from the 6% sales and use tax. It also makes minor and technical changes.

Effective Date: Upon passage

Other Legislation

Public Act 04-23 - SB 363
An Act Concerning Conversions and Reorganizations of Mutual Savings Banks

When a mutual savings bank converts to a capital stock bank, Public Act 04-23 requires its conversion plan to be approved by (1) a majority of the converting bank's corporators, provided the bank has at least 25 corporators at the time (unless the banking commissioner allows otherwise) and (2) a majority of the bank's independent corporators who constitute at least 60% of all corporators.

The approval must be given at a meeting held in accordance with the bank's charter, certificate of incorporation, or bylaws. If a mutual savings bank reorganizes into a mutual holding company, the act requires approval by the same numbers and proportions of corporators.

The act requires a converting or reorganizing mutual savings bank, before the meeting for approval, to provide the corporators with information on the plan. The information must be filed with and approved by the commissioner before distribution and include disclosures summarizing the (1) conversion or reorganization, (2) share distribution, and (3) management compensation plans.

The bank also must provide the commissioner with the following information on the corporators eligible to vote at the meeting to approve the plan:

1. the number of corporators who are (a) not bank employees, officers, directors, or trustees; (b) employees, but not officers, directors, or trustees; and (c) officers, directors, or trustees;
2. a description of any loan relationships, outstanding within the five years before the meeting, between the mutual savings bank and any of its corporators who are not also employees, officers, directors, or trustees; and
3. a description of any commercial relationships (sale or lease of real or personal property or provision of commercial services), other than the loan relationships with corporators described above, in existence within five years before the meeting between the bank and any of the corporators who are not the bank employees, officers, directors, or trustees.

The converting or reorganizing bank's secretary must file with the commissioner a certification that the corporators approved the plan at the required meeting.

Effective Date: Upon passage.

Public Act 04-61 - HB 5102
An Act Imposing A Penalty For Engaging In The Business of Transmitting Money Without A License

Public Act 04-61 makes it a class D felony (punishable by imprisonment for one to five years, a fine up to $5,000, or both) to knowingly engage in the business of (1) issuing Connecticut payment instruments or (2) money transmission, without obtaining a money transmitter's license from the banking commissioner. It specifies that each transaction in violation of this provision constitutes a separate offense.

Effective Date: October 1, 2004

Public Act 04-170 - SB 476
An Act Concerning Income Tax Refund Anticipation Loan Disclosures

Public Act 04-170 requires refund anticipation loan facilitators to disclose certain facts when a borrower applies for the loan. A "refund anticipation loan" is a loan arranged to be paid directly from the proceeds of the borrower's income tax refund.

When a borrower is completing a loan application, the bill requires a facilitator to disclose in a separate document:

1. the estimated fee for preparing and electronically filing a tax return, 
2. the refund anticipation loan fee schedule, 
3. the annual percentage rate (APR) using guidelines established by official staff interpretations of Regulation Z of the federal Truth in Lending Act, 
4. the estimated total cost to the borrower for the refund anticipation loan, 
5. the estimated number of days within which the loan will be paid if the borrower's application is approved, 
6. that the borrower must repay the loan and related fees if the tax refund is not paid or not paid in full, and 
7. that electronic filing is available and the average time the Internal Revenue Service says a consumer can expect to receive a refund if the return is filed electronically and the borrower does not obtain an anticipation loan.

Effective Date: October 1, 2004

Public Act 04-216 - HB 5692
An Act Making Adjustments To The State Budget For The Biennium Ending June 30, 2005, And Making Appropriations Therefor, Making Deficiency Appropriations For The Fiscal Year Ending June 30, 2004, And Making Adjustments to State And Municipal Revenues

The State of Connecticut's budget for Fiscal Year 2004-05 makes no major changes to the Department of Banking.

The only minor change occurs in Section 34(a) in which funds ($250,000) for equipment will be carried forward into the 2004-05 fiscal year.

Effective Date: July 1, 2004 

Public Act 04-225 - HB 5410
An Act Concerning The Connecticut Student Loan Foundation

Public Act 04-225 broadens the Connecticut Student Loan Foundation's (CSLF) authority by allowing it to grant loans to anyone for elementary, secondary, or higher education expenses, regardless of whether they are attending school in, or are residents of, Connecticut. Currently, the group may only grant loans for post-secondary education.

Effective Date: July 1, 2004

Public Act 04-2, May Special Session - HB 5801
An Act Concerning Budget Implementation

This year's budget implementation bill provided for numerous changes to the banking department. The changes are as follows:

Section 16 of the act requires the banking commissioner, within 30 days after the end of each quarter of FY 2005, to submit to the Appropriations Committee, through the Office of Fiscal Analysis, a report showing the amount of each fee, charge, assessment, fine, civil penalty, settlement payment, and other revenue the Banking Department collected during the preceding quarter.

Section 46 deals with abandoned property fees on property held by banks or financial institutions. The act exempts certain abandoned property held by banks and financial institutions from the general prohibitions against (1) holders of abandoned property that reverts to state custody from imposing dormancy, abandonment, inactivity, or similar charges or fees on it and (2) the property or any agreement concerning it suggesting that the property may be subject to such a fee.

This section continues to prohibit the imposition of escheat charges or fees on the property. The act applies to:

1. demand or savings deposits in the state, 
2. funds paid in the state to buy shares or interests in a financial organization or a deposit made with them, 
3. matured time deposits made in this state, and 
4. property or funds in safe deposit boxes on which the rental periods have expired.

Section 47 addresses the issue of the disposition of abandoned property from a safe deposit box. By law, the holder of abandoned personal property from a safe deposit box must sell the property and give the state treasurer the sale proceeds, minus any charges that may be lawfully withheld. The act:

1. allows a holder to contract with a third party to store and sell the property and pay the proceeds to the treasurer, as long as the third party is bonded or insured in his performance of these activities; 
2. exempts the property holder from responsibility for claims related to these transactions; 
3. if the treasurer exempts the property from requirements that it be sold and the proceeds remitted to her, allows the holder to dispose of the abandoned property in any way it considers appropriate and exempts the holder from responsibility for any claims related to the property disposition or the property itself; and 
4. specifies that the charges that may lawfully be withheld from abandoned property sale proceeds paid to the treasurer include costs for storage, appraisal, advertising, and sales commissions as well as any charges owing under the safe deposit box rental contract.

Section 74 allows up to $133,700 appropriated to the Department of Banking for Equipment in FY 04 to be carried forward in FY 05. This funding would be utilized for equipment related to the agency's anticipated relocation (see Section 97).

Effective Date: Sections 16 and 74 are effective on July 1, 2004. Sections 46, 47 and 97 are effective upon passage.

Legislative Program Index