Delaware General Assembly

Signed 4/9/99

The General Assembly has ended, the current status is the final status.

3/18/99

Adams

Sen. Sharp, Sokola, Sorenson
Reps. D. Ennis, Stone, Hudson, Fallon, Carey, Brady, Houghton, Keeley, Scott

AN ACT TO AMEND TITLE 5 OF THE DELAWARE CODE RELATING TO BANKS AND OTHER FINANCIAL INSTITUTIONS

This Act continues the practice of annually amending the State's laws on banking and financial services to keep them current and in conformance with other laws and industry developments. Section 1. Provides a title for the Act. Section 2. Amends §101(9) of Title 5 of the Delaware Code to clarify that the term "financial institution" includes any person licensed under Title 5 or subject to the supervision and regulation of the State Bank Commissioner. Section 3. Amends §121 of Title 5 of the Delaware Code to clarify the State Bank Commissioner's authority to administer and enforce all the provisions of Title 5, and to supervise all persons issued a license under Title 5. Section 4. Amends §127(b) of Title 5 of the Delaware Code by deleting an outdated provision for a supervisory assessment on out-of-state bank holding companies that formed banks in Delaware pursuant to the Financial Center Development Act of 1981. Federal law no longer permits such assessments on out-of-state bank holding companies that form new banks in Delaware. Section 5. Amends §137 of Title 5 of the Delaware Code to clarify that the State Bank Commissioner has the power, under appropriate circumstances, to remove any officer or director from any state-chartered bank, trust company, building and loan association, or building and industrial development company subject to supervision by the Commissioner. Section 6. Amends the titles of Subchapters III and IV of Chapter 8 of Title 5 of the Delaware Code to clarify that those subchapters apply to all Delaware savings banks, banks and bank holding companies, not just to those that are defined as "existing", or in existence for at least five years. Section 7. Amends §909(b)(3) of Title 5 of the Delaware Code to exempt from the general loan limitations of §909 any loan to a subsidiary or affiliate of a bank. Federal law already provides such an exemption for national banks. This amendment also establishes parity between the making of loan to a subsidiary and the making of an investment in a subsidiary by a Delaware bank under §910 of Title 5. Section 8. Amends §924 of Title 5 of the Delaware Code to authorize Delaware banks to offer payable-on-death accounts, pursuant to which the bank, under the terms of its contract with the depositor, agrees to pay the proceeds remaining in the account to a named beneficiary upon the depositor's death. Delaware law already authorizes Totten Trusts, which are the functional equivalent of payable-on-death accounts, in this section of the Code. Section 9. Amends §936 of Title 5 of the Delaware Code to correct cross-references in that section to the terms "deposit", "borrowing" and "extension of credit" as defined in §101 of Title 5. Sections 10 and 32. Amend §941(4)c. and §2214(1)c. of Title 5 of the Delaware Code to clarify that a bank or licensed lender, as provided under the terms of the agreement with the borrower, may require repayment in full or otherwise in accordance with the terms of the agreement governing the plan. Sections 11, 14, 33 and 36. Amend §951, §971, §2223 and §2236 of Title 5 of the Delaware Code to clarify and confirm existing law about the collection of fees paid to a third party. Specifically, these amendments clarify and confirm that banks and licensed lenders do not have to first refer an account to an attorney rather than a third party collector to recover collection fees. To encourage banks and licensed lenders to use attorneys so that they might recoup the fees incurred would be inefficient and, in many cases, result in higher costs to consumers. In addition, these amendments clarify that alternative dispute resolution costs are recoverable. Sections 12 and 34. Amend §952(a) and §2224(a) of Title 5 of the Delaware Code to clarify certain provisions of the state's open-end credit banking provisions in order to accommodate developments in banking and lending practices and to maintain the competitive advantages of operating credit card and other open-end credit programs out of banks located in Delaware or lenders licensed to conduct business in Delaware. These amendments to the changes-in-terms section of the open-end credit provisions clarify that, except as expressly limited by agreement, a bank or licensed lender may amend the agreement governing a revolving credit plan in any respect, whether by adding, deleting or modifying terms, and such a change in terms may affect any aspect of the plan regardless of whether the subject of the amendment was contemplated or addressed in the original agreement. In addition, the bank or licensed lender's notice of the amendment, if any, may be inserted in the same envelope as a periodic statement or other materials. Sections 13 and 35. Amend §952(c) and §2224(c) of Title 5 of the Delaware Code to further update, clarify and streamline the methods by which amendments may be made to open-end credit plans by specifying certain types of amendments that are not deemed to increase the interest rates charged by a bank or licensed lender. Section 15. Amends §1101(h) of Title 5 of the Delaware Code to correct a cross-reference within that subsection to the definition of an Edge Act Corporation. Section 16. Amends §1104(c)(4) of Title 5 of the Delaware Code to reintroduce an exemption for all bank franchise taxpayers from the provisions in §1104(c) for additional tax for underpayment of estimated bank franchise tax. This exemption applies when total estimated tax payments equal or exceed the amount of actual bank franchise tax owed for the preceding year. This exemption had applied for many years to all bank franchise taxpayers, but was limited to small taxpayers for 1998. The reintroduction of this exemption for all bank franchise taxpayers is based on the experience of the Office of the State Bank Commissioner in administering the bank franchise provisions of the Code. Sections 17 and 27. Amend Chapters 11 and 18 of Title 5 of the Delaware Code by adding new §1113 and §1807 to clarify that tax returns filed with the State Bank Commissioner are confidential, the same as tax returns filed with the Department of Finance, as provided in §368 of Title 30, and by adding new §1114, §1115, §1808 and §1809 to clarify that the Bank Commissioner has authority, comparable to that of the Director of Revenue under §538 ("Abatements") and §564 ("Closing Agreements") of Title 30, to abate bank franchise tax assessments under limited circumstances and to enter into closing agreements to resolve the bank franchise tax liability of any taxpayer. Sections 18 and 21. Amend §1501 and 1541(a)(4) of Title 5 of the Delaware Code to conform the activities permitted for a state-chartered credit card institution to those specified in the federal Bank Holding Company Act by authorizing the acceptance of collateral for extensions of credit by holding deposits under $100,000, and by other means. Sections 19-20. Amend §1512 and §1513 of Title 5 of the Delaware Code to conform the public notice requirements for applications to form new Delaware state-chartered credit card institutions to the comparable public notice requirements in §724 and §725 of Title 5 for Delaware state-chartered commercial banks. Sections 22-23. Amend §1623 and §1624 of Title 5 of the Delaware Code to conform the public notice requirements for applications to form new Delaware state-chartered savings banks to the comparable public notice requirements in §724 and §725 of Title 5 for Delaware state-chartered commercial banks. Section 24. Amends §1703 of Title 5 of the Delaware Code to reintroduce a limit on the cost of examination for small building and loan associations with assets less than $2,000,000. This limit had existed for many years, but was removed in 1996. The reintroduction of this limit is based on the experience of the Office of the State Bank Commissioner in administering the Banking Code. Section 25. Amends §1726 of Title 5 of the Delaware Code to delete the provision for imprisonment as a penalty for conducting the business of a building and loan association without a license. Section 26. Amends §1727 of Title 5 of the Delaware Code by increasing from $4,000,000 to $5,000,000 the threshold amount of total assets above which a building and loan association is required to obtain federal deposit insurance. Sections 28, 31, 38, 39 and 41. Amend §2106, §2206(a), §2718, §2724 and §2902 of Title 5 of the Delaware Code to update the license requirements for mortgage loan brokers, licensed lenders, check cashers and motor vehicle sales finance companies, respectively, by deleting unnecessary requirements relating to the date and/or place of incorporation or organization, and providing that changes of name or location be reflected in amended licenses issued without charge, rather than requiring endorsements of those changes on existing licenses. Sections 29 and 30. Amend §2201(2) and §2202(b) of Title 5 of the Delaware Code to authorize the State Bank Commissioner to issue regulations relating to persons exempt from some or all of the requirements of licensees under Chapter 22 ("Licensed Lenders") of Title 5. These regulations might include procedures for applications and fees for such exemptions. In addition, these amendments would clarify that the Commissioner may authorize exempt persons to lend money in Delaware pursuant to provisions of Chapter 22, the same as licensed lenders. Section 37. Amends §2308 of Title 5 of the Delaware Code to include provisions for license requirements for check sellers and money transmitters that are comparable to the license requirements for other Title 5 licensees. Section 40. Amends §2744 of Title 5 of the Delaware Code to remove an outdated restriction on persons engaged in certain activities from obtaining licenses as check cashers under Chapter 27 of Title 5. Removing this restriction would permit pawnbrokers, for example, to become licensed check cashers. Section 42. Provides for the severability of the provisions in the Act. Section 43. Provides that Section 16 of the Act, relating to the amendment to §1104(c)(4) of Title 5, shall be effective for tax years beginning after December 31, 1998, and that Section 24 of the Act, relating to the amendment to §1703 of Title 5, shall be effective as of January 1, 1999. The retroactive effectiveness of these sections assists the Office of the State Bank Commissioner in administering these provisions of the Banking Code. The remaining provisions of the Act shall become effective upon its enactment into law.

72:15

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Takes effect upon being signed into law

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