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2001 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.

Insurance expiration dates available to financial institutions

PA 92-0005 (SB 333) amends the Illinois Insurance Code to provide that policyholders and the registered firms who sold the policy have exclusive rights to confidential information of an insured relating to the insured and the insured’s insurance policy.  It provides, however, that financial institutions may obtain expiration dates from insurers and others with respect to insurance on collateral used as security for a loan made by the financial institution.  Effective June 1, 2001.

Retained investment earnings for Bank and Trust Company Fund

PA 92-0020 (HB 2376) amends the Illinois Banking Act to provide that all earnings received from the investment of funds in the Bank and Trust Company Fund (administered by OBRE) shall be deposited in that Fund and used for the same purposes as fees deposited in that Fund.  Effective July 1, 2001.

Probate sales of real estate over Internet

PA 92-0097 (SB 1048) amends the Probate Act of 1975 to provide that the sale of a deceased person's real estate from his or her estate may be conducted by means of the Internet or any other electronic medium as approved by the court.  Effective July 18, 2001. 

Credit card payments to local governments

PA 92-0114 (HB 3576) amends the Local Government Acceptance of Credit Cards Act.  It provides that local government entities authorizing acceptance of payments by credit card may impose a fee that exceeds the statutorily limited fees set in the Act if (1) the fee does not exceed the amount charged by a financial institution or service provider processing the credit card payments for the local government entity, (2) the financial institution or service provider was chosen by competitive bid, and (3) the fee was disclosed to the person making the payment by credit card.  PA 92-0114 is in response to industry concerns over current statutory fee limits. Effective January 1, 2002.

 Rewrite of OBRE’s Real Estate Appraiser Licensing Act

 PA 92-0180 (HB 2540) is an OBRE initiative creating the Real Estate Appraiser Licensing Act of 2002.  It replaces the current Act and modifies licensing requirements with respect to experience requirements, temporary practice permits, complaint investigation and resolution, and other areas to bring Illinois law into compliance with federal appraisal licensing standards under provisions of Title XI of the federal Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA).  A new associate real estate appraiser classification is created for entry-level appraisers and the current state licensed real estate appraiser license is phased out between July 1, 2002 and September 30, 2003.  Effective July 1, 2002. 

Electronic mail under Trusts and Trustees Act

PA 92-0222 (SB 250) amends the Trusts and Trustees Act to provide that the presumption of receipt of a current account applies to the mailing or delivery of an account by electronic means or the provision of access to an account by electronic means if the beneficiary has agreed to receive electronic delivery or access.  Effective August 2, 2001.

Revision to Uniform Commercial Code relating to assignments of beneficial interests

PA 92-0234 (SB 978) amends the Secured Transactions Article of the Uniform Commercial Code (UCC) to add provisions relating to perfecting assignments of beneficial interests in Illinois land trusts.  PA 92-0234 is intended to ensure that current practices may continue as they did prior to enactment of the new UCC Article 9 and that UCC filings are not required to perfect assignments of beneficial interests.  Effective January 1, 2002.

Payable on death accounts

PA 92-0285 (HB1051) amends the Illinois Trust and Payable on Death Accounts Act to provide that payable on death accounts may have multiple owners.  It is intended to clarify that a payable on death account may be opened or maintained as a joint account by two or more account holders.  Effective January 1, 2002.

Airport and Correctional Facility Land Disclosure Act

PA 92-0294 (HB 3024) creates the Airport and Correctional Facility Land Disclosure Act.  It provides that neither the State nor any unit of local government may enter into any agreement or understanding for the use or acquisition of land that is intended to be used or acquired for airport purposes or for a correctional facility unless full disclosure of all individuals and entities holding any beneficial interest in the land is made.  Effective August 9, 2001.

Repeal of Responsible Property Transfer Act

PA 92-0299 (HB 3217) repeals a statutory disclosure process applicable to financial institutions and others involved in reporting existing environmental liabilities during a real estate transaction.   Other federal and state environmental laws, however, cover the subject matter of the repealed Act.  Effective August 9, 2001.

Bank basic lending limit

  PA 92-0336 (HB 1089) amends Section 32 of the Illinois Banking Act to increase the basic lending limit from 20% to 25% of the unimpaired capital and unimpaired surplus of a bank.  PA 92-0336 does not change the guaranty limit in Section 32 (5).  Effective August 10, 2001.

Corporate Fiduciary Act & Receivership Account amendments

PA 92-0485 (SB 48) is an OBRE initiative to increase the maximum amount from $350,000 to $4,000,000 to be held in the Corporate Fiduciary Receivership Account in the Bank and Trust Company Fund.  This amount will be raised over a ten-year period through OBRE rulemaking to increase the Account formula assessed to trust departments of financial institutions and trust companies.  The Commissioner may also require a trust company to pledge to the Commissioner securities or a surety bond, in an amount up to $1,000,000, solely for the purpose of covering costs associated with any receivership of that trust company.

The Corporate Fiduciary Act is further amended by PA 92-0485 to make changes to the management structure and business affairs of a trust company.  It specifically requires the election of at least 5 directors, the holding of regular monthly board meetings, the keeping of suitable books and records of all transactions, and that at least once per calendar year an audit, as prescribed by the Commissioner, be performed by an independent licensed public accountant.  Language is added penalizing persons who make false statements on applications to the Commissioner and contains other provisions.  Effective August 23, 2001.

Use of bank names & bank directors’ reliance

PA 92-0476 (HB 1030) makes two changes to the Illinois Banking Act.  First, it prohibits the use of a name of an existing bank or a name deceptively similar to that of an existing bank when soliciting customers.  Second, it provides that in discharging their duties, bank directors are entitled to rely on advice and information prepared or presented by bank officers, employees, legal counsel, accountants, consultants, or certain board committees.  A director may only rely on such information if the director believes the person is reliable and competent in the matter presented or the matter is within the person’s professional or expert competence and the director’s reliance must placed in good faith, after reasonable inquiry if the need is apparent. 

The Act is intended to eliminate deceptive practices relating to solicitations for mortgage refinancing, and to extend to Illinois bank directors added legal protections.  Effective August 23, 2001.

Amends Deposit of State Moneys Act relating to home loans

PA 92-0482 (HB 2439) amends the Deposit of State Moneys Act to provide that the State Treasurer may accept a proposal from an eligible financial institution that provides for a reduced rate of interest on deposits of State moneys if the institution agrees to a plan, approved by the State Treasurer, to 1) make home loans to Illinois citizens purchasing a home in Illinois in situations where the institution would not offer the borrower a home loan under the institution’s prevailing credit standards without this incentive and 2) refrain from commencing or pursuing foreclosure proceedings with respect to home loans of Illinois citizens who have failed to make payments on the home loan as a result of a temporary layoff or disability, but who have resumed by making at least 2 consecutive payments on the home loan, when the institution’s prevailing policies would direct foreclosure proceedings be commenced without this incentive.  This is an initiative of the State Treasurer’s Office.  Effective August 23, 2001.

OBRE omnibus bill making changes in financial institutions laws

PA 92-0483 (HB 2538) is an OBRE initiative amending various financial institutions laws.  PA 92-0483 makes changes to clarify, update, and enhance the Commissioner’s powers to regulate banks and trust companies and other financial institutions under OBRE authority.  The Office of Banks and Real Estate Act is amended to authorize the Commissioner to issue conditional approvals, to issue subpoenas, compel attendance and require records production in investigating unlicensed activity, and to seek court injunctions through the Attorney General to enforce provisions of the Acts the Commissioner administers. 

The Illinois Banking Act is amended to authorize the Commissioner to issue conditional approvals in carrying out his powers and duties under the Act.  This includes authority for the Commissioner to issue conditional permits for banks to organize, to condition approvals for changes in control, and to condition approvals under Section 48 of the Act.  PA 92-0483 further clarifies the Commissioner’s authority under Section 48 of the Act to issue orders against persons involved in unsafe and unsound practices and to enter into agreements with banks establishing corrective action procedures. The Commissioner’s removal powers are extended to include the officers, employees, agents, and directors of a subsidiary or holding company of a bank and a provision is added, consistent with the Business Corporations Act, that directors may be removed without cause as well as with cause.  A provision is added that in cases when the Commissioner has taken possession and control of a bank or banking office, parties to a “qualified financial contract” that have a perfected security interest in collateral may retain such collateral and upon repudiation or termination of the contract apply the collateral in satisfaction of the claims.  The original legislation was amended during the 2001 Session of the Illinois General Assembly to authorize banks to disclose financial records or information as necessary to protect against fraud, carry out a transaction authorized by a customer, or in connection with servicing a customer’s account.  The sale of customer records or information without the consent of the customer is specifically prohibited. 

The Illinois Banking Act is amended to redefine community as encompassing the area served by the bank and is no longer restricted to geographic boundaries of units of local government.  Limited liability companies are added to the definitions of “company”, “trust company”, and “person”.  The prohibition on a bank owning a travel agency is deleted from the Act.  The board of directors of a bank in organization and applicants for a change in control must now report any material changes in operating plans or circumstances to the Commissioner.  An interim bank may now be organized to be the resulting bank in a merger with an existing national bank or insured savings association.  PA 92-0483 contains numerous other changes to the Illinois Banking Act.

The Corporate Fiduciary Act is amended to remove the prohibition on foreign corporations conducting corporate fiduciary activities, if Illinois corporate fiduciaries are allowed to conduct activities in that foreign corporation’s home state.  The Illinois Bank Holding Company Act of 1957 is amended to authorize the Commissioner to remove any officer, director, employee, or agent of a bank holding company, subsidiary, or affiliate on the same grounds as the removal under the Illinois Banking Act.  The Banking Emergencies Act is amended to include computer failures in the definition of  “emergency” and to clarify that the Commissioner may issue area wide or statewide proclamations.  The Foreign Banking Office Act is amended to strengthen the Commissioner’s powers in cases of liquidation by authorizing the Commissioner to prescribe the pledge of assets, to use assets pledged to cover liquidation costs incurred by OBRE, and to give priority to in-state creditors and secondary priority to other U.S. creditors before returning assets to a foreign bank.  Effective August 23, 2001.

 
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