2000 Legislative Update

The following is a summary of banking related legislation enacted by the Illinois General Assembly and subsequently approved by Governor Ryan. This summary is provided for your general reference. For specific guidance concerning the applicability or effect of legislation on your institution, you should seek the advice of your legal counsel.

Public Act 91-0698 (Senate Bill 355) Amends the Consumer Installment Loan Act and the Sales Finance Agency Act to provide DFI with rulemaking authority concerning predatory lending.

Public Act 91-0698 amends the Consumer Installment Loan Act and the Sales Finance Agency Act to provide the Department of Financial Institutions (DFI) authority to promulgate rules necessary and appropriate for the protection of consumers. This bill was advanced to provide DFI with the same rulemaking authority for Acts under its regulatory jurisdiction as the Office of Banks and Real Estate (OBRE) has under its Acts. The bill was proposed as part of an effort to address predatory lending practices in Illinois. (Additionally, the General Assembly increased spending authorizations by $400,000, to be distributed between OBRE and DFI, for the purpose of addressing predatory lending practices.) The effective date is May 6, 2000.

Public Act 91-0706 (House Bill 4437) Contains the OBRE Fiscal Year 2001 Budget.

Public Act 91-0706 contains the agency's fiscal year 2001 budget appropriation of $29.3 million and becomes effective July 1, 2000.

Public Act 91-0742 (Senate Bill 1421) Provides for data processing services for financial institutions.

Public Act 91-0742 creates the Data Processing Services for Financial Institutions Act. It provides that when a financial institution contracts with an independent data processing server for any product or service that requires an interface of communications with a second independent data processing server who also has a contract with the financial institution, the second data processing server must permit the necessary interface to occur pursuant to a commercially reasonable interface agreement. Provides for arbitration of disputes in accordance with the Uniform Arbitration Act. The intent of the bill is to allow community-based financial institutions to choose among competitive companies for products and services which require an interface with their core data processor without unreasonable interference from the core processor. The effective date is June 2, 2000.

Public Act 91-0761 (Senate Bill 1875) Amends the Telephone Solicitations Act concerning solicitation restrictions.

Public Act  91-0761 amends the Telephone Solicitations Act. It provides that a person engaged in telephone solicitations who obtains or submits for payment a check, draft, or other form of negotiable paper drawn on a checking, savings, or other account or on a bond without the accountholder's or bondholder's express written consent is in violation of the Act. The intent of the bill is to provide consumer protection against financial exploitation. The effective date is January 1, 2001.

Public Act 91-0798 (Senate Bill 1860) Amends numerous laws relating to state boards, commissions and committees and increases membership capacity of the State Banking Board.

Public Act 91-0798 amends numerous laws relating to state boards, commissions and committees. Among many other changes, it increases the size of the State Banking Board from 15 to 17 members. The effective date is July 9, 2000.

Public Act 91-0849 (House Bill 3286) Amends the Illinois Banking Act concerning transactions at bank affiliates.

Public Act 91-0849 amends the Illinois Banking Act to provide that any transaction that may be conducted by a bank may be conducted at any of the bank's affiliate institutions on the bank's behalf. Previously, the transactions that could be conducted at an affiliate institution on a bank's behalf were limited to receiving deposits, cashing and issuing checks, drafts and money orders, changing money, and receiving payments on existing indebtedness. The effective date is June 22, 2000.

Public Act 91-0862 (Senate Bill 1338) Amends the State Officers and Money Disposition Act regarding unclaimed property examination fees.

Public Act 91-0862 amends the State Officers and Money Disposition Act. It authorizes the State Treasurer to permit deduction from moneys received by state entities a fee for a third-party unclaimed property examiner who recovered the money for the State through examination of out-of-state property holders. The effective date is January 1, 2001.

Public Act 91-0893 (Senate Bill 1231) Revises Article 9 of the Uniform Commercial Code concerning various issues, including electronic transactions.

Public Act 91-0893 sets forth a revised Article 9, Secured Transactions, of the Uniform Commercial Code. The bill also amends the Local Records Act, the Counties Code, the Public Utilities Act, the Illinois Vehicle Code, the Uniform Federal Lien Registration Act and the Toxic Substances Disclosure to Employees Act to make related changes. The revised Article 9, developed under the auspices of the National Conference of Commissioners on Uniform State Laws, addresses issues that over time have become important, including electronic transactions, that were not addressed in the current Article 9. This bill is generally effective on July 1, 2001; some parts effective July 6, 2000.

Public Act 91-0923 (Senate Bill 1690) Amends the Principal and Income Act concerning expenses incurred from management of a decedent's estate.

Public Act 91-0923 amends the Principal and Income Act. It provides that expenses incurred in connection with the management of a decedent's estate may be charged against the principal or income of the estate or partly against each. It permits, rather than requires, a reasonable allowance for depreciation to be charged against the income of the estate. It provides that one-half of the interest on all estate, inheritance, and generation-skipping transfer taxes apportioned to the trust and one-half of the interest of any penalties on those taxes shall be charged against income, with the other half to be charged against principal. It provides that charges related to environmental matters shall be charged to principal. The effective date is July 7, 2000.

Public Act 91-0929 (House Bill 3838) Amends the Illinois Banking Act, the Illinois Savings and Loan Act of 1985, the Savings Bank Act and the Illinois Credit Union Act concerning the provision of confidential customer financial information to various agencies.

Public Act 91-0929 amends the Illinois Banking Act, the Illinois Savings and Loan Act of 1985, the Savings Bank Act and the Illinois Credit Union Act. The bill amends the Banking Act to authorize a financial institution to furnish confidential customer financial information to law enforcement authorities, the Department on Aging and its administrative and provider agencies, the Department of Human Services Office of Inspector General, and public guardians if the bank suspects that an elderly or disabled customer has been or may become the victim of financial exploitation or another crime. The legislation provides a person furnishing information to the above parties the same rights and protections as a person furnishing information under the Elder Abuse and Neglect Act and the Illinois Domestic Violence Act of 1986. The Banking Act is further amended to permit the Commissioner to prescribe record retention rules. In the Illinois Savings and Loan Act of 1985 and the Savings Bank Act, the bill provides that for purposes of those Acts "person" includes a limited liability company. Permits a service corporation to be organized as a limited liability company. In the Illinois Credit Union Act, the bill allows a credit union to expel a member who has engaged in repeated verbal or physical abuse toward credit union officials, staff, agents or employees or who fails to maintain one or more shares at the credit union. Allows a credit union to deny services to a member who has caused a loss to the credit union or engaged in repeated verbal and physical abuse of credit union officials, staff, agents, or employees. Despite the denial of services, the member shall be allowed to maintain a share account and vote on all issues put to the members. Provides that the appointment of a credit committee consisting of members of the credit union is permissive rather than mandatory. Permits a credit manager to act in place of a credit committee. The bill was an omnibus bill advanced by the House Financial Services Committee. This bill takes effect upon the Governor's signing. HB 3838 was amendatorily vetoed by Governor George H. Ryan on June 30, 2000 with respect to provisions pertaining to the Credit Union Act. The bill has been placed on the House Calendar Order of Amendatory Veto for consideration during the Veto Session of the General Assembly in November 2000.

Public Act 91-0772 (House Bill 3420) Amends the Vehicle Code concerning the Electronic Lien and Title System.

Public Act 91-0772 amends the Vehicle Code to authorize the Secretary of State (SoS) to process and issue motor vehicle title and lien documents electronically, to receive electronic documents, to accept electronic signatures and to use an electronic payment system to receive any required fees and taxes. ELT will provide for electronic notification of liens on vehicles without the use of paper titles or other documents, ultimately reducing the time and labor costs that lien holders presently incur when perfecting, changing, and verifying lien holder information with the SoS.

ELT systems already have been implemented in several states. In most of these states, the ELT system is operated by or in conjunction with the Secretary of State or Department of Motor Vehicles. Individual lien holders/auto dealers usually pay a subscription fee to utilize the ELT system and/or may pay a flat rate or a per transaction charge to transmit or electronically view records. Under the typical ELT system a lien holder receives an electronic message, rather than a paper title, to document lien recording and perfection. When the vehicle loan is paid off, the lien holder sends an electronic message to the SoS to release the lien. The SoS then sends an electronic message to the lien holder and/or prints a paper title and sends it to the vehicle owner, or to a recipient designated by the lien holder, such as an auto dealer, an insurer or another lien holder of record. HB 3420 specifically provides that, when the participating lien holder releases its lien, any paper certificate of title that is mailed to the owner or lien holder must be sent at no cost to the owner or lien holder.

HB 3420 is consistent with recently enacted Illinois law that authorizes vehicle title applications to be filed electronically, and with Illinois' new Electronic Commerce Security Act (5 ILCS 175 et seq.), which, among other things, safeguards the accuracy and validity of electronically transmitted documents and signatures presented in electronic commerce. HB 3420 tracks these laws by allowing the SoS to issue and receive virtually any title and lien holder record in an electronic format, without the present requirements for paper documents bearing manual signatures.

While ELT authorizes the use of electronic methods for lien and title records, the current paper system will continue to exist. Lien holders and others who do not subscribe to the ELT program will continue to conduct business with the SoS as they do today. The effective date is January 1, 2001.

Public Act 91-0773 (House Bill 3431) Amends the Public Funds Investment Act to include letters of credit from a Federal Home Loan Bank.

Public Act 91-0773 amends the Public Funds Investment Act to expressly include letters of credit issued by a Federal Home Loan Bank among the items that may be accepted by local treasurers and custodians of public funds as collateral for uninsured public deposits. The bill amends the section of the Act that grants public agencies the authority to require banks to collateralize the portion of their deposits in excess of Federal Deposit Insurance Corporation (FDIC) coverage. While many units of local government do not require all public deposits that exceed FDIC coverage to be collateralized, others have such requirements.

The State Treasurer's office includes Federal Home Loan Bank (FHLB) letters of credit on its list of eligible collateral. While many local treasurers follow the State Treasurer's guidelines for determining eligible collateral, other local treasurers have been willing to accept only government securities. When local treasurers request banks to pledge government securities, Illinois banks often must bear the added expense of acquiring acceptable governmental securities that are not already maintained in their portfolio. This also can give rise to both liquidity concerns and added administrative burdens for banks in tracking changes in collateral requirements. The effective date is June 9, 2000.

Public Act 91-0906 (House Bill 2991) Amends the Business Corporation Act, the General Not For Profit Corporations Act, the Limited Liability Company Act, the Uniform Partnership Act, the Revised Uniform Limited Partnership Act and the Assumed Business Name Act concerning corporate names.

Public Act 91-0906 amends the Business Corporation Act, the General Not For Profit Corporation Act, the Merger of Not For Profit Corporations Act, the Limited Liability Company Act, the Uniform Partnership Act, the Revised Uniform Limited Partnership Act and the Assumed Business Name Act. The bill provides that a foreign corporation cannot use an assumed or fictitious name that intentionally misrepresents the corporation's geographic origin or location of the corporation in Illinois.

The bill further provides that a person shall not advertise or list in a telephone directory an assumed or fictitious business name that intentionally misrepresents where the business is actually located or operating or that falsely states that the business is located or operating in the area covered by the telephone directory. This provision exempts foreign corporations doing business in Illinois, the stock of which is traded on a national stock exchange and that has gross annual revenues in excess of $100 million. Any entity that violates these provisions is guilty of a petty offense and must be fined at least $501 up to $1,000 and is guilty of an additional offense for each day in violation of these provisions. The effective date is January 1, 2001.