2009 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. The following bills represent the agency's 2009 legislative proposals.
Please note that the hyperlinks for each bill lead to the Connecticut General Assembly website. The following bill summaries were written by the Office of Legislative Research.
Department of Banking Proposals
Public Act 09-100 - SB 617
An Act Concerning Branching and Authority to Implement the National Defense Authorization Act.
This act allows the banking commissioner, between October 1, 2009 and September 30, 2011, to accept applications for “expedited” Connecticut banks. These are banks organized primarily for the purpose of assuming liabilities and purchasing assets from the Federal Deposit Insurance Corporation (FDIC) when it is acting as receiver or conservator of an insured depository institution. Additionally, the act allows the banking commissioner to waive the filing of a Community Reinvestment Act (CRA) plan for banks that meet certain standards, and expedites the process for them to establish bank branches.
The act also:
- allows Connecticut banks to open “special need limited branches” for high school students, under certain conditions;
- provides that no fee can be charged for an application to relocate a Connecticut bank's main office;
- allows a Connecticut capital stock bank to declare a dividend on its capital stock if it has received the commissioner's prior approval;
- clarifies the laws applicable to, and allowable activities of, out-of-state banks;
- requires Connecticut institutions subject to a federal law that limits the consumer credit interest rate that can be charged to members of the armed services and their dependents to follow the law and allows the commissioner to share information with the federal government to enforce it; and
- makes technical and conforming changes.
Effective Date: Upon passage, except that the provisions on the relocation fee, capital stock bank dividends, and expedited banks are effective October 1, 2009.
Public Act 09-160 - HB 6232
An Act Concerning the Connecticut Business Opportunity Investment Act.
This act makes changes to the Connecticut Business Opportunity Act (CBOA), which regulates the sale and lease of products, equipment, supplies, or services that enable a person to start his or her own business. It consolidates existing registration procedures and requires more business opportunities to be registered by eliminating certain exemptions. It expands the situations under which the banking commissioner can issue a stop order. It also enhances disclosure requirements, including by prohibiting a person, in connection with any procedures under CBOA, from omitting to state a material fact that, in light of the circumstances under which it was made, makes the statement false or misleading.
The act also specifies that a trust account associated with selling a business opportunity can be with a licensed bank or other depository institution. Prior law specified that the trust account be with a bank or a savings institution.
Finally, the act adds definitions and makes minor changes to the Uniform Securities Act, and makes other minor, technical, and conforming changes.
Effective Date: October 1, 2009
Public Act 09-207 - SB 949
An Act Concerning Mortgage Practices.
This act creates the crime of residential mortgage fraud. It provides that a person who commits a single act of residential mortgage fraud is guilty of a class D felony, while a person who commits two or more acts is guilty of a class C felony.
The act also:
- modifies the interest rate that makes a home loan “nonprime”;
- extends, by one year, the banking commissioner's authority to adjust interest rate parameters for nonprime loans;
- allows the commissioner, under certain conditions, to deem mortgage professional license applications abandoned and keep the application fee;
- applies a prohibition against increasing the interest rate after default in certain loans to all, rather than just high cost, residential mortgage loans; and
- makes minor and technical changes.
Effective Date: October 1, 2009, except for a technical change and the provisions on abandoned licenses and high cost loans, which are effective on passage.
Public Act 09-208 - SB 950
An Act Concerning Consumer Credit Licensees.
This act makes a number of changes regarding consumer credit licensees. It specifies how licenses must be surrendered, allows the banking commissioner to deny an application for a specified period after a prior application has been withdrawn, and requires license applicants to provide a history of criminal convictions and allows the commissioner to deny the application on that basis.
The act broadens those who can be a licensed debt adjuster to include for-profit entities and sets additional consumer-protection requirements for all debt adjusters. It defines debt negotiation, which includes debt settlement, foreclosure rescue, and short sales, and creates a new license for debt negotiators that tracks the same licensing requirements as for debt adjusters with regard to application procedures, requirements, and enforcement. The act also:
- requires money transmitter licensees to notify the commissioner of certain events, requires contracts between them and their agents, and clarifies the commissioner's enforcement authority;
- expands the applicability of the small loan lender laws;
- provides for automatic suspension of certain licenses when the required surety bond is cancelled; and
- makes minor, technical, and conforming changes.
Effective Date: October 1, 2009, except for the provisions on the following subjects, which are effective on passage:
- mortgage originators, mortgage servicing, notice of intent to withdraw and surrendering of mortgage licenses;
- most of the criminal history requirements; and
- money transmitter definition and contracts, debt adjuster surety bonds, and consumer collection agency license requirements.
Public Act 09-209 - SB 948
An Act Concerning Implementation of the S. A. F. E. Mortgage Licensing Act, the Emergency Mortgage Assistance Program, Foreclosure Procedures and Technical Revisions to the Banking Statutes.
This act implements the 2008 federal Secure and Fair Enforcement for Mortgage Licensing (S. A. F. E. ) Act by imposing additional conditions on licensing for mortgage professionals, including education and testing. It (1) changes definitions and confidentiality and surety bond requirements, (2) expands the banking commissioner's enforcement and investigative authority, and (3) prohibits a number of actions by persons subject to the mortgage licensing laws. The act also expands the prohibition on influencing residential real estate appraisals to everyone, rather than just mortgage brokers. It also eliminates the requirement that lenders making secondary mortgage loans of up to $15,000 with an interest rate, charge, or other consideration higher than 12% be licensed as small loan lenders. Lenders making similar first mortgage loans are already exempt from the law.
This act changes the process for determining eligibility for the Emergency Mortgage Assistance Program (EMAP) by (1) allowing the Connecticut Housing Finance Authority (CHFA) to determine what constitutes a significant reduction in a borrower's income and (2) expanding the circumstances that constitute a financial hardship beyond a borrower's control and changing some of the conditions for repayment. It allows borrowers to apply for the program before they receive notice of intent to foreclose under certain circumstances. It specifies the circumstances under which the lender may proceed with the foreclosure. The act expands eligibility for the CT FAMILIES refinancing program from homeowners with adjustable rate mortgages to include those with fixed-rate mortgages.
This act makes the foreclosure mediation program established under PA 08-176 mandatory, rather than optional, for actions with return dates on and after July 1, 2009. To that end, the act changes the mechanism by which borrowers are notified and mediation sessions scheduled and makes other conforming changes. The act also sets requirements for disclosures made during the mediation.
The act specifies that no judgment of strict foreclosure or foreclosure by sale can be entered before July 1, 2010 unless the mediation period has expired or otherwise terminated, whichever is earlier, or the mediation program is not otherwise required or available (see COMMENT).
Under existing law, lenders must appear in person at the first mediation session and be authorized to agree to a proposed settlement. If the lender's attorney appears instead, he or she must have such authority, and the lender must be available by phone or electronic means. The act specifies that the court cannot award attorney's fees to any lender for time spent in the first mediation session if it does not comply with this requirement, unless the court finds reasonable cause for it.
The act also allows judgments of strict foreclosure to be opened after title has become absolute under certain circumstances.
Finally, the act makes minor, technical, and conforming changes.
Effective Date: July 1, 2009, except (1) certain technical changes and the CT FAMILIES provision are effective on passage, and (2) the provision on opening strict foreclosure judgments and certain technical and conforming changes are effective October 1, 2009. (See “Related Acts” for changes to effective dates.)
Related Act - Public Act 09-219 makes effective upon passage provisions in this act related to the emergency mortgage assistance program. Most of the provisions were effective July 1, 2009, except for the repayment and conforming provisions, which were effective October 1, 2009.
Other Legislation
Public Act 09-174 - HB 6231
An Act Concerning the Use of a Certificate, Professional Designation or Advertising in Advising Senior Citizens.
This act prohibits anyone directly or indirectly involved in securities sales from falsely expressing or implying that they have special training, education, or experience in providing financial advice or services to seniors. The act exempts from this prohibition a person who meets certain education requirements and allows the banking commissioner to adopt implementing regulations. A person who willfully violates this prohibition is subject to a fine of up to $2,000, two years imprisonment, or both.
The act also requires the insurance commissioner to adopt regulations pertaining to the sale of life insurance or annuities to seniors and requires him to take certain enforcement actions against anyone who violates these regulations.
Effective Date: July 1, 2009
An Act Concerning the Forfeiture of Property Obtained by Securities Fraud.
This act extends the definition of racketeering activity under the Corrupt Organizations and Racketeering Activity Act (CORA) to include violations of the federal Currency and Foreign Transactions Reporting Act by broker-dealers and specifies that CORA applies to securities fraud and related offenses under the Uniform Securities Act. CORA provides for criminal penalties and property forfeiture (see BACKGROUND).
The act requires the chief state's attorney, in consultation with the attorney general, chief court administrator, and banking commissioner, to study the (1) establishment of a fund to hold money and proceeds of property forfeited under CORA for securities fraud and related offenses and (2) most appropriate way to administer the fund to provide restitution to victims. The chief state's attorney must report findings and recommendations to the Judiciary Committee by March 31, 2010.
Effective Date: October 1, 2009, except the provision on the study, which is effective upon passage.
BACKGROUND
CORA
CORA punishes racketeering activity. It subjects violators to (1) one to 20 years in prison, a fine of up to $25,000, or both; (2) forfeiture of property acquired, maintained, or used in violation of CORA including profits, appreciated value, and sale proceeds; and (3) forfeiture of any interest, claim against property, or contractual right affording a source of influence over any enterprise the violator established, operated, controlled, conducted, or participated in.
On conviction, the court or jury determines whether property is subject to forfeiture. After hearing evidence, the court can authorize the chief state's attorney to seize property in the name of the state. If property the defendant owned before judgment of forfeiture was transferred to avoid forfeiture, the court can set aside the transfer. The court can make appropriate orders to protect the rights of innocent parties.
The court can order property to be converted to cash. The court can provide for the rights of an innocent party, government, or business that is superior to the state if they are known to the court or prosecutors. The court can order property to be given to a state agency that can use it, order it sold or transferred to an innocent party, or order equitable relief.
The court can appoint a receiver to facilitate property disposition and act as a fiduciary of the state. The receiver must post a bond as ordered by the court, comply with court orders, file a final report on disposition of the property, and deposit net proceeds with the court. The court compensates the receiver from the proceeds.
Money forfeited to the state or the proceeds of forfeited property is deposited in the General Fund.
The chief state's attorney can compromise, remit, or mitigate a claim or potential claim.
At any time in a CORA prosecution when there is probable cause to believe a defendant has property that is subject to forfeiture, the court can (1) prohibit a defendant from transferring, depleting, or diminishing the property; (2) appoint a receiver for the property; or (3) permit the defendant to transfer the property on posting security. The court can also issue orders to protect innocent parties.
The state can file a CORA lien notice with town clerks and other officials of this or other states and the law specifies procedures regarding these liens (CGS § 53-393 et seq. ).
Federal Currency and Foreign Transactions Reporting Act
This federal law requires financial institutions to keep records of cash purchases of negotiable instruments; file reports of cash transactions exceeding $10,000; and report suspicious activity that might be money laundering, tax evasion, or other criminal activities (31 USC 5311 et seq.).
Public Act 09-239 - SB-838
An Act Concerning Consumer Privacy and Identity Theft.
This act makes numerous changes in laws relating to identity theft, Social Security numbers, and the dissemination of personal identifying information.
It makes the definition of “identity theft” broader, increases the penalty for criminal impersonation, and creates the crime of unlawful possession of personal access devices. The law makes it a crime to possess skimmers and reencoders under certain circumstances. The act also increases the penalties for identity theft when the victim is age 60 or older.
The act allows a victim of identity theft to sue for damages if the perpetrator was found guilty of trafficking in personal identifying information. Victims can already sue for damages if the perpetrator was found guilty of identity theft. The act extends the statute of limitations from two to three years and specifies that damages include documented lost wages and any financial loss suffered by the plaintiff as a result of the identity theft. It allows the court to award remedies that may be provided by law. It requires, rather than allows, courts to issue orders to correct public records when a person is convicted of identity theft.
The act voids a credential issued by the state or political subdivision of the state (1) obtained by making a material false statement or (2) physically altered to misrepresent a material fact. It requires the credential to be returned to the issuing authority provided the authority complies with notice provisions.
The act (1) allows perpetrators to be prosecuted in the geographical area or judicial district where the victim lives rather than where the alleged crime was committed; (2) penalizes employers for failing to (a) obtain and retain employment applications securely and (b) take reasonable measures to destroy or make them unreadable when disposing of them; (3) subjects property gained from committing identity theft to forfeiture and requires proceeds from its disposition to be deposited into the Department of Consumer Protection's (DCP) Privacy Protection Guaranty and Enforcement Account, which this act creates, to pay for enforcing certain privacy protection laws; (4) authorizes the DCP commissioner to investigate violations of these laws; and (5) allows the attorney general, upon request of the commissioner or another state agency required to enforce its provisions, to apply to the court to restrain or enjoin a violator.
The act creates the Privacy Protection Guaranty and Enforcement Account to enforce the law and reimburse individuals hurt by violations of the act's provisions on disseminating personal identifying information. The account is funded with fines imposed on violators and property forfeited under the act's provisions.
The act establishes a fine of between $500 and $5,000, to be deposited into the privacy protection account, for (1) filing a notice, statement, or document required by the act that includes false information or (2) willfully violating the provisions of this act or identity theft laws. It also establishes an appeals process for anyone aggrieved by a decision or order made by the commissioner under the act.
Effective Date: October 1, 2009, except for the provisions relating to the penalties for violating the duty to safeguard personal data investigations, the privacy protection account, appeals, and regulations, which are effective upon passage.