2010 Virginia Legislation on Banking Law
For a budget year, the 2010 session of the Virginia General Assembly was more cautious than years past with 2,964 bills introduced. Compare that to 2008 with 3,588 bills introduced and 2006 with 3,678 bills introduced. Of those in 2010, 871 bills were eventually approved by the General Assembly and signed into law by the Governor.
Below is a summary of the top 20 new laws we believe to be of interest to community bankers, grouped under four categories: Operations, Lending, Fiduciary, and Organizational.1 Most of these laws go into effect on July 1, however two of the more complex are postponed until October. Most notably, the Code of Virginia (1950), as amended, Title 6.1 "Banking and Finance" will be recodified to Title 6.2 and renamed "Financial Institutions and Services" as of October 1, 2010.
Operations
SB 295 Sen. Ryan McDougle (R-Hanover)
Revision of Title 6.1. Creates proposed Title 6.2 (Financial Institutions and Services) as a revision of existing Title 6.1 (Banking and Finance). Proposed Title 6.2 consists of 22 chapters divided into four subtitles: Subtitle I (General Provisions); Subtitle II (Depository Institutions and Trust Organizations); Subtitle III (Other Regulated Providers of Financial Services); and Subtitle IV (Other Financial Activities).
Subtitle I includes title-wide definitions and chapters addressing money and currency, interest and usury, lending practices generally including credit card laws currently in Title 11, and equal credit opportunity laws that are currently in Title 59.1.
Subtitle II addresses deposits and accounts at financial institutions, as well as provisions applicable to specific types of depository institutions, including financial institution holding companies, banks, savings institutions, credit unions, and entities conducting trust business.
Subtitle III sets out provisions relating to providers of financial services that are subject to licensure or registration with the State Corporation Commission, including industrial loan associations, consumer finance companies, mortgage lenders and brokers, mortgage loan originators, payday lenders, money order sellers and money transmitters, agencies providing debt management plans, and check cashers.
Subtitle IV includes provisions regulating the conduct of other financial activities, including refund anticipation loans, safe deposit boxes, and securitization transactions.
The Wet Settlement Act and provisions regarding real estate settlement agents are relocated to Title 55.
Effective October 1, 2010
HB 386 Del. Bill Janis (R-Goochland)
Deposits; limitations period. Removes the stated maturity date of a deposit as an event that triggers the start of the limitations period on actions to enforce the obligations of a financial institution to pay a deposit account or certificate of deposit. Under existing law, such an action is time barred if not brought within six years after the earliest of such maturity date or the due date of the deposit as set forth in the bank's last written notice of renewal, the date of the last written communication from the bank recognizing the bank's obligation with respect to the deposit, or the last day of the taxable year for which the owner of the deposit last reported interest income earned on the deposit on a federal or state income tax return. This measure also provides that the limitations period trigger relating to the reporting of interest income for federal or state income tax purposes relates to a report made by either the depositor or the bank. Currently, it is triggered only by the depositor's report of interest income on the deposit.
HB 284 Del. Don Merricks (R-Pittsylvania)
Investment of public funds; deposits. Removes the requirement that public funds must be invested in certificates of deposit. The funds must still be deposited with a federally insured bank or savings institution qualified by the Virginia Treasury Board and the full amount of principal and interest must be covered by federal deposit insurance.
HB 872 Del. Ben Cline (R-Amherst)
Virginia Credit Services Businesses Act. Authorizes a credit services business to receive payments from a consumer in advance of complete and full performance of the services that the business agreed to perform for or on behalf of the consumer if the consumer has agreed to pay for services during the term of a subscription agreement, if the consumer is authorized to cancel the subscription agreement at any time. A credit service business generally undertakes to improve a consumer's credit record, history, or report or obtain an extension of credit for a consumer.
HB 946 Del. Steve Landes (R-Augusta)
Obtaining records from financial entities. Provides that electronic data and electronic communications are included in the information that certain financial entities must provide pursuant to a subpoena duces tecum.
HB 434 Del. Morgan Griffith (R-Salem)
Freedom of Information Act; exemption for credit card and bank account data. Exempts from the mandatory disclosure provisions of the Freedom of Information Act those portions of records that contain account numbers or routing information for any credit card, debit card, or other account with a financial institution of any person or public body. The bill provides, however, that access shall not be denied to the person who is the subject of the record. The bill defines "financial institution" and contains an emergency clause. (The bill is a recommendation of the Freedom of Information Advisory Council.)
HB 77 Del. Lee Ware (R-Powhatan)
Credit life insurance disclosures. Requires that a debtor, when buying a credit life insurance policy paid in advance or by a single premium, shall be provided with a notice of his right to a refund if the insurance is terminated prior to its scheduled maturity or the insured indebtedness is terminated or paid off early. The same disclosure requirement currently exists for insurance contracts on a debtor paid by a single premium.
SB 154 Sen. John Edwards (D-Roanoke)
Increasing various costs, bad checks, fees, penalties, etc. Increases the amounts of various costs, potential attorney fee awards, potential damages, jurisdictional amounts, and other dollar-based provisions in the Virginia Code to account for the effect of inflation. (As introduced, this bill was a recommendation of the Boyd-Graves Conference.)
HB 367 Del. Onzlee Ware (D-Roanoke)
Bad checks; recovery if stop-payment order placed in bad faith. Provides that a locality may charge up to $35 if payment for revenue collection was refused because the drawer placed a stop-payment order on the check in bad faith. Currently, the law only allows for a fee if the payment for revenue collection was refused because of the uttering, publishing, or passing of any check or draft, that is subsequently returned for insufficient funds or because there is no account or the account has been closed.
Lending
SB 445 Sen. Fred Quayle (R-Chesapeake)
Notice of lien on financial institutions. Provides that any judgment creditor serving a notice of lien on a financial institution shall, within five business days of such service, mail to the judgment debtor at his last known address a copy of the notice of lien along with a notice of exemptions and claim for exemption form. The judgment creditor or attorney for the judgment creditor shall file a certification with the court affirming that he has mailed the judgment debtor these notices. In the event that the judgment creditor fails to comply, he shall be liable to the judgment debtor for no more than $100 in damages, unless he proves by a preponderance of the evidence that the failure was not willful.
SB 105 Sen. Ryan McDougle (R-Hanover)
Mechanics' and materialmen's liens. Removes the definitional requirement that one must give consent in writing in order to be a "mechanics' lien agent." The bill also authorizes any person entitled to claim a lien to notify the mechanics' lien agent that he seeks payment for labor performed or material furnished if the building permit contains the name, mailing address, and telephone number of the mechanics' lien agent. Current law provides that any person entitled to claim a lien may notify the mechanics' lien agent that he seeks payment for labor performed or material furnished only if, at the time of issuance, the building permit contains the name, mailing address, and telephone number of the mechanics' lien agent.
HB 715 Del. Chris Peace (R-Hanover)
Deed of trust; allows title insurance companies authority settlement agents have to release lien. Releases of deed of trust. Allows certain title insurance companies to exercise the authority that settlement agents currently possess to release the lien of a deed of trust. References to "mortgage" are replaced with "deed of trust." The measure also authorizes a settlement agent to release a deed of trust lien upon written confirmation from the lien creditor that such obligation has a zero balance. The procedure for lien releases by settlement agent and title insurance companies is limited to transactions involving real estate that is either unimproved with a lien amount not exceeding $1 million or containing one to four residential dwelling units. The measure also eliminates a duplicative provision addressing a settlement agent's ability to obtain an assignment of the $500 penalty imposed for a lender's failure to release a lien within the prescribed period.
Fiduciary
HB 719 Del. Chris Peace (R-Hanover) and
SB 159 Sen. John Edwards (D-Roanoke)
Uniform Power of Attorney Act (UPOAA). Establishes in the Code of Virginia the Uniform Act that was adopted by the National Conference of Commissioners on Uniform State Laws in 2006. The UPOAA consists of default rules that can be modified if the principal desires. Powers of attorney will be durable unless drafted to expire upon a specified date or event. The UPOAA addresses creation and use, good faith reliance, limitations of agent's powers, refusal to recognize, judicial review, notification of resignation, and other matters. The UPOAA contains an optional statutory form that may be used by an agent to certify facts concerning a power of attorney.
HB 346 Del. Vivian Watts (D-Fairfax)
Small Estate Act; revision. Revises the Small Estate Act by repealing related provisions in the Title 6.1 (Banking and Finance), Title 51.1 (Pensions, Benefits, and Retirement), and Title 64.1 (Wills and Decedents' Estates) and consolidating them in the Act. The bill also allows that a person holding a small asset belonging to a decedent may pay or deliver the asset to a designated successor if he presents an affidavit on behalf of the other known successors if the value of the asset does not exceed $50,000 and other conditions are met. The person holding the asset may pay or deliver it without being presented with an affidavit if the value of the asset does not exceed $15,000. A designated successor who received an asset has a fiduciary duty to other successors to safeguard the asset and pay or deliver it to other successors as required by law. The bill also provides that a person holding a small asset may pay or deliver up to $3,500 of the asset for the handling of the funeral of the decedent.
HB 714 Del. Chris Peace (R-Hanover)
Foreclosure sales; trustee to pay taxes. Clarifies that, in the event of a foreclosure sale, the trustee shall cause the proceeds of the sale to be applied to the payment of taxes on the property. The bill also eliminates a redundancy in the Code pertaining to the duties of a trustee in a foreclosure sale.
HB 417 Del. Glenn Oder (R-Newport News)
Exchange Facilitators Act; established. Establishes requirements for the activities of exchange facilitators, who are persons that for a fee, enter into an agreement with a taxpayer to act as (i) a qualified intermediary in an exchange of like-kind property, (ii) an Exchange Accommodation Titleholder, or (iii) a qualified trustee or escrow holder. Exchange facilitators are required to notify exchange clients of change in control of the exchange facilitator; to maintain exchange funds in separately identified accounts or in a qualified escrow or qualified trust; to maintain errors and omissions insurance or deposit cash or letters of credit; and to account for moneys and property. Persons who engage in the business of an exchange facilitator are prohibited from making misrepresentations, failing to account for moneys or property of others, engaging in fraudulent or dishonest dealings, committing certain crimes, or materially failing to fulfill contractual duties to an exchange client. Violations are subject to a civil penalty of up to $2,500. The Attorney General, attorney for the Commonwealth, or attorney for a locality may recover costs and reasonable expenses, including attorney fees, in any action brought under the Exchange Facilitators Act. This bill is recommended by the Virginia Housing Commission.
Organizational
HB 482 Del. Mark Sickles (D-Fairfax);
SB 440 Sen. Dick Saslaw (D-Fairfax)
Credit unions and banks; mergers and consolidations. Establishes a procedure by which a state credit union may convert to a state mutual savings institution. Conversion requires approval of two-thirds of the eligible and voting members of the credit union, unless the articles of incorporation allow a greater or lesser vote (which shall in no event be less than a majority).
HB 547 Del. Danny Marshall (R-Danville);
SB 240 Sen. John Watkins (R-Chesterfield)
Mortgage lenders and mortgage brokers; Nationwide Mortgage Licensing System and Registry. Requires all mortgage lenders and mortgage brokers whose employees are required to be licensed as mortgage loan originators to register with the Nationwide Mortgage Licensing System and Registry. The Registry has been developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators. The State Corporation Commission may enter into agreements with the Registry setting conditions for the collection of information and fees. (This is a recommendation of the Virginia Housing Commission.)
SB 294 Sen. Ryan McDougle (R-Hanover)
Mortgage Lender and Broker Act; definition of principal. Provides that a principal, for purposes of the Mortgage Lender and Broker Act, means a person who, directly or indirectly, owns or controls a 10 percent or greater interest in a corporation, partnership, association, cooperative, limited liability company, trust, joint venture, or other legal or commercial entity. Currently, a principal is a person who, directly or indirectly, owns or controls a 10 percent or greater interest in a stock corporation, nonstock corporation, or limited liability company.
SB 606 Sen. Dick Saslaw (D-Fairfax)
Motor vehicle title loans; penalties. Establishes requirements for motor vehicle title loans, which are nonpurchase money term loans secured by an interest in a motor vehicle. Under this measure, interest shall not exceed 22 percent per month on the portion of the outstanding balance of the loan that does not exceed $700; 18 percent per month on the portion between $700 and $1,400; and 15 percent per month on the portion that exceeds $1,400. Loans may not be for more than 50 percent of the motor vehicle's value as stated in a recognized pricing guide, if listed in such a guide. Principal and interest are required to be repaid in substantially equal monthly payments over the term of the loan, which shall be between 120 days and one year. Interest does not accrue on a loan after the motor vehicle securing the loan has been repossessed or after 60 days following the failure to make a payment unless the borrower is concealing the vehicle. Lenders are barred from seeking a deficiency judgment against a borrower following repossession or sale of the motor vehicle, absent misconduct by the borrower. A lender that does not give the borrower 10 days written notice before repossessing a motor vehicle is barred from collecting the costs of repossession and sale from the borrower. A lender may not charge the borrower for storage fees after the motor vehicle is repossessed or surrendered. Motor vehicle equity lenders are required to be licensed by the State Corporation Commission and are required to post a bond, or equivalent instrument approved by the Commission, of $50,000 per location and $500,000 in the aggregate. An applicant for a license is not required to produce certain records and documents regarding open-end loans made prior to October 1, 2007, and the matters involving loans secured by motor vehicles will not bar an applicant from licensure if they have been reviewed and resolved. A violation of the measure is a prohibited practice under the Consumer Protection Act. Violations are subject to civil and criminal penalties.
Effective October 1, 2010
This summary was assembled by Spotts Fain Consulting, LC, a government affairs firm located in Richmond, Virginia, wholly owned by the law firm of Spotts Fain, P.C. Meade A. Spotts, R. Lee Stephens, Jr., Cliff Schroeder, and Kristen Spain represent businesses before the Virginia General Assembly, the Executive Branch, and state agencies year-round. Spotts Fain Consulting can help bring into clear focus the complex world of the local, state, and federal regulatory process. Whether it is protecting your business or exploring new profitable opportunities, we can find the creative solutions that others cannot. http://www.spottsfainconsulting.com/, (804) 697-2050.
1. Bills starting with "SB" began as Senate Bills, and bills starting with "HB" began in the House of Delegates. Some bills were introduced in both chambers, thus you will see both numbers, although both are now identical in language. In italics is the name of the patron is who carried the bill. These summaries were prepared when the bill was first introduced. To see the actual legislation, click on the blue hyperlink to the bill number.
Spotts Fain Consulting LC 2010. All rights reserved.
