2012 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 banking-related legislation for 2012.
Please note that the hyperlinks for the bill lead to the Connecticut General Assembly website. These links provide you with a copy of the Public Act and more detailed legislative summary of each bill.
Department of Banking Proposals
Public Act 12-96 - SB 67, An Act Concerning Revisions to the Banking Statutes
This act broadens the banking commissioner's investigatory powers, and enables him to order restitution and disgorgement for banking law violations without seeking a court order. The act also makes several changes to mortgage licensing provisions.
The act (1) requires qualified individuals and branch managers working for lenders or brokers to be licensed as mortgage loan originators and to complete any applicable continuing education requirements by November 1, 2012, (2) changes loan processor or underwriter licensing requirements, and (3) prohibits the commissioner from denying a mortgage licensing application on the basis of an expunged criminal conviction.
It requires each bank to (1) review a mortgage loan before excusing the borrower from amortization of the loan principal and (2) consider an obligor's credit exposure arising from a derivative transaction when determining the obligor's liability limitations.
The act removes a loan production office from the definition of “limited branch,” thereby exempting it from certain requirements.
The act prohibits non-bank entities, not just corporations, from acting as trustees without a license. It also eliminates the reciprocity requirement for an out-of-state bank, other than a foreign bank, to establish a de novo branch in Connecticut.
The act eliminates the requirement that public depositories provide collateral for deposits that are insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA). It also makes changes to required collateral amounts, including the amount required for an institution that has received a memorandum of understanding, a cease and desist order, or other similar letter or order from a supervisory agency.
The act allows state chartered banks to satisfy certain notice requirements by providing the banking commissioner with a copy of the same notice the bank must provide to the FDIC under federal law. It also enables banks to use regional federal home loan banks other than the Federal Home Loan Bank of Boston to issue letters of credit.
Lastly, the act redefines the meaning of “influencing real estate appraisals” for residential property; makes a clarifying change regarding interest on residential security deposits; and adds and modifies several definitions and makes minor, technical, and conforming changes.
This act was originally three separate pieces of legislation proposed by the agency. The Banks Committee combined the three bills into one omnibus act.
Effective Date: October 1, 2012, unless otherwise noted in the act.
Other Banking Related Legislation
Public Act 12-23 - HB 5182, An Act Concerning a Change Regarding the Financial Security of Lottery Sales Agents
This act expands the types of security the Connecticut Lottery Corporation (CLC) president may require lottery sales agents to provide in order to ensure that the agents perform their duties to the corporation. Under prior law, the CLC president could only require them to provide surety bonds as proof of financial security. The act authorizes the CLC president to require surety bonds, letters of credit, or other forms of security she deems acceptable.
The agents' duties include selling lottery tickets and depositing the revenue, minus their compensation and the prize money, in a special account for lottery proceeds.
Effective Date: July 1, 2012
Public Act 12-32 - HB 5073, An Act Concerning Revisions to Connecticut's Model Entity Transactions Act and The Connecticut Business Corporation Act
This act broadens the list of transactions exempted from Connecticut's Model Entity Transaction Act (META) (PA 11-241). It reinstates exemptions to the Transfer Act that were removed by PA 11-241 and makes minor, technical, and conforming changes. PA 11-241 is scheduled to take effect on January 1, 2014.
The act also makes changes to the business corporation statutes pertaining to allowable bylaw provisions, indemnification rules, voting group requirements, and appraisal rights.
Effective Date: January 1, 2014, except for the changes to the corporation statutes, which are effective October 1, 2012.
Public Act 12-106 - HB 5414, An Act Concerning the Elimination of the Interest Rate Floor for Tax and Insurance Escrow Accounts
Prior law required the interest rate on tax and insurance escrow accounts to be at least the average savings deposit interest rate paid by insured commercial banks published in the Federal Reserve Board Bulletin in November of the previous year (i.e., deposit index) but not less than 1.5%. This act retains the deposit index method for calculating the interest rate but eliminates the minimum 1.5% interest rate. (The 2012 deposit index is 0.16%.)
By law, state banks and trust companies, national banking associations, state or federally chartered savings and loan associations, savings banks, insurance companies, and other mortgagee or mortgage servicing companies must pay interest on these accounts.
Effective Date: October 1, 2012