Illinois Department of Financial & Professional Regulation Illinois Department of Financial & Professional Regulation
Bryan A. Schneider, Secretary  
Bruce Rauner, Governor
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2002 Legislative Update

The following is a summary of significant 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.

Financial Disclosure By Banks Related To Private Label Credit Programs

PA 92-543 (SB 119) amends Section 48.1 of the Illinois Banking Actand authorizes disclosure of certain customer financial records and information to a private label credit program. However, the new law limits the information that may be disclosed to outstanding balance, available credit, payment and performance and account history, product references, purchase information, and information related to the identity of the customer. The effective date was June 12, 2002.

Increases Made To Accommodation Party Lending Limit & Bank Investment In Leased Personal Property

PA 92-573 (HB 4952)amends Section 32 (5) of the Illinois Banking Act to provide that the total liability to a state bank of a person as an accommodation party shall not exceed 25% of the bank's unimpaired capital and unimpaired surplus. In addition, the Act amends Section 35.1 of the Illinois Banking Act to increase the amount that a Bank may invest in personal property that will be leased to a requesting party. Now, the personal property owned, together with all liabilities of the party who will lease the personal property, may not exceed 25% of the Bank's unimpaired capital and unimpaired surplus. The Act became effective on June 26, 2002.

Reverse Mortgage Disclosure

PA 92-577 (HB 5742) adds a new section 6.2 to the Illinois Banking Act and requires that when a lender or broker makes a reverse mortgage loan, the lender or broker must inform the mortgagor that eligibility to obtain a tax deferral under the Senior Citizens Real Estate Tax Deferral Act may be adversely affected. This new addition to the Illinois Banking Act was effective on June 26, 2002.

Non-English Interpreter

PA 92-578 (HB 5822) adds a new provision to Section 5 of the Illinois Banking Act and amends various other financial service provider statutes to allow customer financial transactions to be conducted in a language other than English through an employee or agent acting as interpreter or through an interpreter provided by the customer. The bill is intended to clarify that the forms for non-English "retail transactions" required under the Consumer Fraud and Deceptive Practices Act do not apply to transactions involving the financial services industry. This new provision of the Illinois Banking Act became effective on June 26, 2002.

False Access To Deposit Accounts

PA 92-646 (SB 1713)amends the Criminal Code of 1961 to provide that any person who makes a false statement or misrepresentation or possesses, transfers, negotiates, or presents a check, draft, or other item purported to direct a financial institution to make payment without authorization from the account holder, with intent to obtain access to the account holder's funds and with knowledge that such access is unauthorized, is guilty of a Class A misdemeanor. The amendment deletes an older requirement that the party to obtain access act with intent to defraud and is now broad enough to cover the fraudulent use of electronic and ACH transfers. In addition, the amendment now provides that a financial institution may require the account holder to provide an affidavit attesting to the fact that the payment was unauthorized before the financial institution is required to credit the customer's account. The amendment to the Criminal Code was effective on July 11, 2002.

Trust Company Audits

PA 92-685 (HB 5860) amends the Corporate Fiduciary Act to retain the applicability of audits by independent licensed public accountants for independent trust companies. The bill deletes the requirement for banks with trust departments to obtain the independent audit. A trust company that is directly or indirectly owned by a bank holding company, a financial holding company or a savings and loan holding company may comply with the audit requirement if the holding company obtains a consolidated audit by an independent licensed public accountant that includes the trust company; meets the OBRE Commissioner's prescribed scope of audit, and if within 45 days after receipt of the audit report the holding company causes the independent licensed public accountant to directly file with the Commissioner the portion of the audit report relating to the trust company. The audit amendment became effective on July 16, 2002.

OBRE Authorized To Accept Payment By Credit Card

PA 92-741 (SB 2188) amends the Office of Banks and Real Estate Act and authorizes OBRE to accept payment by credit card for any fee, fine, or other charge that it is authorized by law to collect. PA 92-741 further authorizes OBRE to adopt rules and procedures, and enter into agreements, governing the acceptance of payment by credit card. OBRE is specifically authorized to enter into agreements with one or more financial institutions, Internet companies, or other business entities to act as third-party payment agents for the payment of fees, fines, or other charges to OBRE. These agreements may authorize the third-party payment agent to retain a service fee out of the payments collected. The bill became effective on July 25, 2002.

Mortgage Certificate Of Release Act Created

PA 92-765 (HB 2207) creates the Mortgage Certificate of Release Act. The new Act provides that an officer or duly appointed agent of a title insurance company may, on behalf of a mortgagor or person acquiring title to a one-to-four family residential real property with an original principal loan amount of less than $500,000, execute a certificate of release and record the certificate of release with the recorder. The recorded certificate of release operates as a release of the mortgage, but contains penalties and restrictions for wrongful or erroneous filings. The new Act requires that prior to recording the certificate of release, a mortgagee or mortgage servicer must receive notice and have an opportunity to object to the release. A written objection will block the title insurance company or title insurance agent from recording a certificate of release. The new Act provides statutory forms for certificate of release documents. The Act was effective on August 6, 2002, but also contains a "sunset' provision that will repeal the Act on January 1, 2004, unless further legislation is enacted.

OBRE Omnibus Changes To Financial Institutions Laws

PA 92-811 (HB 4409) is primarily an OBRE initiative amending various financial institutions laws. Each of the provisions discussed below became effective on August 21, 2002.

  • "Super Wildcard" Notice

    Section 5(25) of the Illinois Banking Acthas been amended to require that a bank intending to engage in an activity under the authority of Section 5 (25) ("Super Wildcard") provide the Commissioner with 30 days prior notice of the specific federal or state law, rule, regulation, or interpretation the bank intends to use as authority to engage in the activity.

  • Change Of State Bank "Control" Definition

    Section 18 of the Illinois Banking Acthas been amended to establish a percentage test for determining a control of a bank. A person has control of a bank when that person has the power, directly or indirectly, to direct the management or policies of the bank or to vote 25% of the outstanding stock of the bank.

  • "Unauthorized Use Of Bank Name Prohibition

    Section 46(d) of the Illinois Banking Acthas been amended to delete and replace provisions related to the unauthorized use of a bank name by unaffiliated marketing or solicitation companies. Now, unless authorized or expressly permitted by law, no firm, partnership, or corporation may use the name of an existing bank when marketing to or soliciting business from customers or prospective customers. In addition, unless authorized or expressly permitted by law, no firm, partnership, or corporation may use a name similar to an existing bank if the similar name is used in a manner that could cause a reasonable person to believe that the marketing material or solicitation originated from or is endorsed by the existing bank or that the existing bank is in any other way responsible for the marketing material or solicitation.

  • Routing Number Notification
    A new section 3.5 has been added to the Consumer Deposit Account Actthat requires a financial institution to notify a consumer deposit account holder at least 30 days before the routing number applicable to an account holder is changed. Notification must state the date of the routing number change and procedures to follow in order to ensure electronic transactions are not interrupted.

  • Corporate Fiduciary "Control"

    Section 3-2 of the Corporate Fiduciary Act has been amended to establish a percentage test for determining a control of a corporate fiduciary. A person has control when that person has the power, directly or indirectly, to direct the management or policies of the corporate fiduciary or to vote 25% of the outstanding stock.

  • Corporate Fiduciary "Alternate Exams"

    Section 5-2 of the Corporate Fiduciary Act has been amended to allow the Commissioner authority to accept examinations from appropriate federal regulatory agencies.

Total Return Trusts Authorized

PA 92-838 (SB 1697)amends the Trusts and Trustees Act to authorize the conversion of a trust into a "total return trust" by a trustee; by agreement between a trustee and all primary beneficiaries; or through a judicially approved conversion. The new section of the law provides that the conversion to a total return trust means the trustee will invest and manage trust assets seeking a total return, without regard to whether that return is from income or appreciation of principal and make distributions under this amendatory Act. Standards and procedures for conversion and distribution of income are established under which a total return trust must operate. This new section of the law was effective on August 22, 2002.

Copies of the Public Acts indicated in the memorandum are available from the Agency's web site or by contacting our office.

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