2007 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 2007 session, three department proposals concerning consumer credit, securities and other issues were enacted into law by the General Assembly.
Please note that the listing is arranged by Public Act number. We have provided brief summaries, along with hyperlinks that lead to the Connecticut General Assembly website for the full text of each Public Act.
Department of Banking Proposals
An Act Making Technical Revisions to Various Statutes Relative to the Banking and Securities Laws of Connecticut
This act makes technical changes to the banking statutes.
The act was a Department of Banking proposal.
Effective Date: October 1, 2007
Public Act 07-91 - SB-1143
An Act Concerning Mortgage, Small Loan and Money Transmitter Licensees, Mortgage Loans and Emergency Orders of the Banking Commissioner and Adopting the Uniform Prudent Management of Institutional Funds Act.
The act makes a number of changes to banking statutes.
It enacts the following:
- authorizes the banking commissioner to, under certain circumstances, require a person to take or refrain from taking actions, in order to effectuate the purposes of the law;
- consolidates statutes concerning mortgage closings, requires loan proceeds to be paid at loan consummation or when the right of rescission terminates, if one exists, and extends certain requirements to second mortgages;
- allows the commissioner to adopt regulations and make necessary findings for the conduct of small loan licensees in their association with other businesses and the conduct of those associated businesses, rather than doing so just for the licensee; and
- makes a number of changes to the money transmitter laws to specify that certain provisions apply to monetary value, rather than just money and Connecticut payment instruments.
The act changes the duties of the advisory panel established to oversee the program that uses the interest on lawyers' clients' funds accounts (IOLTA).
It provides guidelines for the management, investment, and expenditure of institutional funds by establishing the Uniform Prudent Management of Institutional Funds Act. The Act applies to institutions, which are defined as entities organized and operated exclusively for charitable purposes; government or governmental subdivisions, agencies or instrumentalities, to the extent that they hold funds exclusively for a charitable purpose; and trusts that had both charitable and non-charitable interests, after all non-charitable interests have terminated.
The term “charitable purpose” includes purposes related to the relief of poverty, the advancement of education or religion, the promotion of health, and others that are communally beneficial.
Finally, the act defines a number of terms, makes a technical change and conforming changes.
The act was a Department of Banking proposal.
Effective Date: October 1, 2007, except for the provisions on small loan licensees and the commissioner's authority regarding enforcement activities, which are effective on passage, and the provision on the IOLTA advisory panel which is effective July 1, 2007.
Public Act 07-156 - SB-7116
An Act Allowing Participation in the National Mortgage Licensing System
The act allows the banking commissioner to participate in the national mortgage licensing system.
The act:
- requires mortgage originators to be licensed rather than registered;
- allows the system to process mortgage lender, broker, and originator licenses in Connecticut and receive and maintain related records; and
- makes a number of conforming changes regarding confidentiality, criminal history record checks, and license fees. The act defines the national mortgage licensing system as the system that the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators will implement under a uniform mortgage licensing project. The system is expected to be fully operational by 2008.
The act requires the banking commissioner to submit to the Banks Committee three consecutive annual reports, including financial statements of the State Regulatory Registry, LLC, on the licensing system. Each financial statement must cover a 12-month period. The reports must be submitted within 10 days after the commissioner receives the financial statements.
The legislation also specifies the people who might be authorized to access records from the system, limits how that information may be used and shared, and adds the reporting provisions.
The act was a Department of Banking proposal.
Effective Date: September 30, 2008
BACKGROUND
National Mortgage Licensing System
The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators are developing a national Residential Mortgage Licensing System that will provide uniform licensing applications for residential mortgage lenders and mortgage brokers, as well as a central repository of information about licensing and publicly adjudicated enforcement actions. The National Association of Securities Dealers has been selected to design and operate the system.
The system's basic features will be a central licensing system and repository containing licensing information, enforcement actions, and background data for every participating state-licensed mortgage lender, broker, and branch and loan originator.
The system will be accessible over the Internet, allowing prospective and current licensees to apply for or renew licenses for one or more jurisdictions through a secure website. The system will also collect licensing fees at the time of application or renewal and disburse these to the respective state agencies. The system will only process license applications or renewals. Each state agency will retain its regulatory authority to approve, deny, suspend or revoke a license.
Other Legislation
Public Act 07-2 - HB 5003
An Act Requiring Notice of Imposition of Dormancy Fees on Inactive Deposit Accounts
The act requires financial institutions that impose dormancy fees on inactive deposit accounts to notify account holders at least 15 days before the institution can impose the fee. The notice must state, in at least 12 point bold-face type, that the account will become inactive and a dormancy fee may be imposed.
The notice must be mailed to the depositors' last-known mailing address. The requirement does not apply to deposit accounts for which the institution sends periodic statements.
Effective Date: October 1, 2007
Public Act 07-14 -HB 7108
An Act Prohibiting Bank Branching in Certain Retail Locations
- The act prohibits Connecticut and out of state banks from establishing or maintaining a branch in this state on the premises or property of their affiliates if the affiliates engage in commercial activities; and
- restricts Connecticut banks from establishing or maintaining a limited branch in this state on the premises or property of their affiliates if the affiliates engage in commercial activities.
The act defines “commercial activities” as those in which a bank or financial holding company, national bank, or national bank financial subsidiary may not engage under federal law.
Effective Date: Upon passage
Public Act 07-55 - HB 7004
An Act Promoting Investment With Federal Credit Unions
The act makes certain federal credit unions eligible for funds that the state treasurer may make available under a program to provide funding to community financial institutions. Under current law, the treasurer can establish a program under which he or she may, based on cash availability, make available up to $100 million for investment in community banks and community credit unions.
Current law defines a “community credit union,” for these purposes, as a Connecticut credit union with assets between $10 million and $500 million and membership limited to people in a well-defined community, neighborhood or rural district.
The act changes the definition of community credit union to include federal and state credit unions meeting the same membership limit requirements and $500 million asset maximum as under current law, but eliminating the $10 million asset minimum. It defines a state credit union in the same way as the law defines a Connecticut credit union, which is as a cooperative, nonprofit financial institution that;
- is organized under the Connecticut banking laws;
- has a limited membership;
- operates for the benefit and general welfare of its members; and
- is governed by a volunteer board of directors elected by and from its membership.
Effective Date: Upon passage
Public Act 07-111 - SB 1151
An Act Concerning Alias Tax Warrants and Executions Against Debts Due to Judgment Debtors Served Upon Financial Institutions
The act prohibits tax collectors or officers from serving alias tax warrants or executions relating to a single person or business on more than one financial institution at a time.
The act also prevents a collector from serving, or directing others to serve, more than 15 alias tax warrants on one financial institution in the same day without first confirming that the taxpayers have funds held with that institution and sets out the procedures for obtaining this confirmation.
Effective Date: October 1, 2007
An Act Protecting Consumers' Privacy in Mortgage Applications
The act prohibits lenders and brokers of first and second mortgages from engaging in any unfair or deceptive act or practice, as defined in the act, when soliciting a mortgage secured by residential property in Connecticut if the solicitation is based in any way on a mortgage trigger lead. It makes a violation of its provisions an unfair or deceptive trade practice under the Connecticut Unfair Trade Practices Act.
Effective Date: October 1, 2007
BACKGROUND
Mortgage Trigger Leads
The act defines a “mortgage trigger lead” as a consumer report that is:
- obtained in accordance with the provisions of the federal Fair Credit Reporting Act (FCRA) governing the issuance of consumer reports when the transaction is not initiated by the consumer and;
- issued as a result of an inquiry to a consumer reporting agency (CRA) in connection with a consumer's credit application. The act excludes from the definition a consumer report obtained by a lender that holds or services the applicant's existing debt.
Unfair or Deceptive Acts or Practices
The act defines “unfair or deceptive act or practice” as
- failing to clearly and conspicuously state in the initial phase of the solicitation that (a) the solicitor is not affiliated with the lender or broker with which the consumer initially applied and (b) the solicitation is based on information about the consumer purchased from a CRA without the initial lender's or broker's permission or knowledge;
- failing to comply with FCRA's provisions on pre-screened offers of credit; or
- knowingly or negligently using information from a mortgage trigger lead to solicit consumers who have, in accordance with FCRA, opted-out of receiving pre-screened offers of credit or who are on the federal or state “Do Not Call” list.