AB504: Bill Text

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2019 - 2020 LEGISLATURE

2019 Assembly BILL 504

October 7, 2019 - Introduced by Representatives Katsma, Duchow, Dittrich, Doyle, Felzkowski, Horlacher, Kitchens, Quinn, Skowronski, Tusler, Zimmerman and Born, cosponsored by Senators Marklein, Feyen, Olsen, Ringhand and Kapenga. Referred to Committee on Financial Institutions.

AB504,2,5 An Act to repeal 15.07 (1) (b) 5., 15.07 (5) (g), 15.185 (3) and 227.53 (1) (b) 2.; to amend 15.07 (1) (b) 1., 15.07 (5) (b), 15.185 (1), 71.91 (6) (c) 1., 71.91 (6) (d) 1., 214.01 (1) (sr), 215.01 (22), 220.02 (5), 220.035 (title), 220.035 (1) (a), 220.035 (2), 220.035 (3), 220.035 (6), 220.04 (1) (a), 220.04 (4), 220.04 (6), 220.04 (7) (b) (intro.), 220.04 (8), 220.04 (9) (f) 2., 220.04 (12), 220.05 (2), 220.06 (1m), 220.06 (2), 220.07 (2), 220.08 (1), 220.08 (3a), 220.08 (9), 220.085, 221.0202 (5), 221.0205, 221.0324 (9), 221.0702 (3), 221.1006, 223.01, 224.725 (1), 227.52 (3), 227.53 (1) (a) 1., 227.53 (1) (b) 4., 227.53 (1) (d), 403.312 (2) (c) 1., 705.04 (2) (intro.), 705.04 (2g), 705.06 (3) and 812.18 (1); and to create 71.91 (6) (a) 1r., 71.91 (6) (d) 4., 224.46, 224.725 (1r), 705.06 (2m) and 812.19 (4) of the statutes; relating to: P.O.D. accounts and loan obligations to financial institutions; the duty of a bank to make payment on a lost, destroyed, or stolen cashier's check, teller's check, or certified check; providing temporary authority to act as a mortgage loan originator while a license application is pending; property subject to garnishment or tax levy in possession of a financial institution; entities that provide to financial institutions electronic data processing services; loans to state banks by a Federal Home Loan Bank; and consolidating the Banking Review Board and Savings Institutions Review Board in the Department of Financial Institutions.

Analysis by the Legislative Reference Bureau

P.O.D. accounts

This bill allows a financial institution that has established a payable-on-death (P.O.D.) account and made a loan to the P.O.D. account owner to, upon the death of the account owner, withhold distribution to the P.O.D. account beneficiary of an amount necessary to satisfy the account owner's loan obligation to the financial institution.

Current law allows a depositor of a financial institution to establish a P.O.D. account under which the sums on deposit at the time of the depositor's death are transferred to a designated P.O.D. beneficiary and are not subject to distribution by will or otherwise as part of the deceased depositor's estate.

Under this bill, if the financial institution has made a loan to the depositor and has any lien right, right to setoff, or security interest in the P.O.D. account resulting from the loan, then upon the depositor's death, the financial institution may retain control of all sums on deposit in the P.O.D. account to the extent necessary to exercise its lien right or right to setoff or to protect its security interest. The financial institution must then pay the remaining balance of the account to the P.O.D. beneficiary.

Bank's payment duty on lost, destroyed, or stolen instrument

This bill reduces the period, from 90 days to 14 days, after certain checks are issued or guaranteed before the issuing or guaranteeing bank is obligated to pay the amount of the check to a person who meets specified requirements and claims that the check has been lost, destroyed, or stolen.

Under current law, if certain requirements are satisfied, a person may claim the right to receive the amount of a cashier's check, teller's check, or certified check that was lost, destroyed, or stolen by communicating the claim to the obligated bank (the issuer or guarantor of the check), describing the check with reasonable certainty, and requesting payment of the amount of the check. If various requirements are satisfied, the obligated bank must pay the amount of the check to the claimant on the later of the time that the claim is asserted or the 90th day after the date of the cashier's check or teller's check or, for a certified check, the 90th day after the date of the obligated bank's guarantee to honor the check. Payment to the claimant discharges all liability of the obligated bank with respect to the check. However, under certain circumstances, the claimant must refund the payment to the obligated bank if the check is subsequently presented for payment by a person with certain superior rights.

Under this bill, if all applicable requirements are satisfied, the obligated bank must pay the claimant the amount of the lost, destroyed, or stolen check on the later of the time that the claim is asserted or the 14th day after the date of the cashier's check or teller's check or, for a certified check, the 14th day after the date of the obligated bank's guarantee to honor the check.

Mortgage loan originators

This bill provides an applicant for a mortgage loan originator license, under limited circumstances, with temporary authority to act as a mortgage loan originator while the application is pending with the Department of Financial Institutions.

Under current law, with certain exceptions, a person may not engage in business as a mortgage banker, mortgage broker, or mortgage loan originator unless the person is licensed as such by DFI. A mortgage banker is a person that originates residential mortgage loans (loans) for itself or for another person; sells loans or interests in loans to another person; or services loans or provides escrow services. A mortgage broker is a person that, among other activities, assists others, for compensation, in obtaining or applying for loans, but does not make underwriting decisions or close loans. A mortgage loan originator is an individual who, for compensation, takes loan applications or offers or negotiates terms of a loan. Certain of DFI's licensing and registration functions are administered through the Nationwide Mortgage Licensing System and Registry (NMLSR), as required under the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008.

Under current law, state and federally chartered financial institutions (depository institutions) are not required to be licensed as mortgage bankers or mortgage brokers. A depository institution may register with DFI (registered entity) for the purpose of sponsoring licensed mortgage loan originators that are under the depository institution's direct control. An individual who is registered with the NMLSR and employed by the depository institution as a mortgage loan originator (registered mortgage loan originator) is not required to hold a mortgage loan originator license issued by DFI.

Also under current law, a mortgage loan originator may act on behalf of only the mortgage banker, mortgage broker, or registered entity with which that mortgage loan originator's license is associated in DFI's records. A mortgage loan originator's license may only be associated with one mortgage banker, mortgage broker, or registered entity at a time. The mortgage banker, mortgage broker, or registered entity is responsible for, and must supervise the acts of, the mortgage loan originator with whom it is associated.

Under this bill, an individual who applies to DFI for a mortgage loan originator license is considered to have temporary authority to act as a mortgage loan originator if the individual is employed by a licensed mortgage banker or mortgage broker, was a registered mortgage loan originator or licensed as a mortgage loan originator in another state, and meets certain other requirements, including that the individual was not previously denied a license and has not been convicted of a disqualifying crime. The period for which the individual has temporary authority begins when the individual furnishes certain required application information to the NMLSR and ends upon the earliest of certain events, including DFI's granting or denial of the license. During this period, the individual is associated with the mortgage banker or mortgage broker employing the individual and is considered to have mortgage loan originator authority subject to all applicable requirements, including duties imposed on the associated mortgage banker or mortgage broker.

Financial institution's possession of property subject to garnishment

This bill specifies that a financial institution in possession of a debtor's property subject to garnishment or tax levy is liable for the surrender of this property only upon expiration of a reasonable time to comply with the garnishment directive or demand by the Department of Revenue.

Under current law, a creditor who has obtained judgment against a debtor may proceed against any third party in possession of the debtor's property by commencing a garnishment action. From the time of service on the third party (referred to in a garnishment action as a garnishee) of the summons and complaint, the garnishee is liable to the creditor for the debtor's property then in the garnishee's possession or under the garnishee's control, up to the amount of the creditor's claim.

Also under current law, DOR has certain procedures available to collect unpaid taxes. Among these, DOR may levy upon property belonging to the person responsible for the unpaid taxes. Upon demand by DOR, a third party in possession of property subject to the levy must surrender the property, and the third party is liable to DOR for the value of the property if it is not surrendered.

Under this bill, if the third-party garnishee in a garnishment action, or the third party to whom a demand is made by DOR to surrender property subject to a tax levy, is a financial institution, the financial institution is liable for the surrender of the subject property only upon expiration of a reasonable time to comply with the garnishment summons or demand by DOR.

Data processing services provided to financial institutions

This bill creates certain provisions applicable to entities that provide to financial institutions electronic data processing services (independent data processing servicers). Under the bill, if a financial institution transfers or otherwise makes available to an independent data processing servicer any data from the financial institution's records, this data remains the property of the financial institution, and the independent data processing servicer has no right, title, or interest in, or claim to legal ownership of, the data. Also under the bill, an independent data processing servicer may not enter into a contract with a financial institution unless the contract discloses in separate contract provisions 1) all fees or charges that the independent data processing servicer may impose on the financial institution; and 2) any formula or other grounds that the independent data processing servicer may apply or rely upon to terminate the contract.

Federal Home Loan Bank loans

This bill eliminates certain limitations on loans to state banks made by a Federal Home Loan Bank.

Under current law, a state bank may become a member of a Federal Home Loan Bank and borrow money from the Federal Home Loan Bank for a term not to exceed 20 years. The state bank may pledge bank assets having a value that does not exceed two times the amount of the loan as collateral to secure the loan, but the total assets pledged may not exceed four times the amount of the bank's capital.

This bill eliminates, with respect to a loan to a bank from a Federal Home Loan Bank, the 20-year term limitation and the limitation on the value of bank assets that may be pledged as collateral to secure the loan.

Banking Review Board and Savings Institutions Review Board

This bill renames the Banking Review Board as the Banking Institutions Review Board and consolidates it with the Savings Institutions Review Board.

Current law creates in DFI a five-member Banking Review Board and a five-member Savings Institutions Review Board. The Banking Review Board advises the Division of Banking (division) in DFI on matters related to banks and banking and reviews the division's administrative actions related to banks and banking. The Savings Institutions Review Board advises the division on matters related to savings banks and savings and loan associations and reviews the division's administrative actions related to savings banks and savings and loans.

Under the bill, the renamed and consolidated Banking Institutions Review Board has ten members until May 1, 2020, six members after May 1, 2020, and until May 1, 2021, and five members after May 1, 2021. The functions of the Banking Institutions Review Board are the same as the current functions, merged, of the Banking Review Board and Savings Institutions Review Board

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB504,1 Section 1. 15.07 (1) (b) 1. of the statutes is amended to read:

AB504,5,2 15.07 (1) (b) 1. Banking institutions review board.

AB504,2 Section 2. 15.07 (1) (b) 5. of the statutes is repealed.

AB504,3 Section 3. 15.07 (5) (b) of the statutes is amended to read:

AB504,5,6 15.07 (5) (b) Members of the banking institutions review board, $25 per day but not to exceed $1,500 per year.

AB504,4 Section 4. 15.07 (5) (g) of the statutes is repealed.

AB504,5 Section 5. 15.185 (1) of the statutes is amended to read:

AB504,6,8 15.185 (1) Banking institutions review board. There is created in the department of financial institutions a banking institutions review board consisting of 5 10 persons, until May 1, 2020, and consisting of 6 persons after May 1, 2020. The members of the board shall be appointed for staggered 5-year terms. At least 3 members shall be experienced bankers or savings institution employees having at least 5 years' experience in the banking or savings institution business. No member is qualified to act in any matter involving a bank or savings institution in which the member is an officer, director, or stockholder, or to which the member is indebted.

AB504,6 Section 6 . 15.185 (1) of the statutes, as affected by 2019 Wisconsin Act .... (this act), is amended to read:

AB504,6,18 15.185 (1) Banking institutions review board. There is created in the department of financial institutions a banking institutions review board consisting of 10 5 persons until May 1, 2020, and consisting of 6 persons after May 1, 2020. The members of the board shall be, appointed for staggered 5-year terms. At least 3 members shall be experienced bankers or savings institution employees having at least 5 years' experience in the banking or savings institution business. No member is qualified to act in any matter involving a bank or savings institution in which the member is an officer, director, or stockholder, or to which the member is indebted.

AB504,7 Section 7. 15.185 (3) of the statutes is repealed.

AB504,8 Section 8. 71.91 (6) (a) 1r. of the statutes is created to read:

AB504,6,22 71.91 (6) (a) 1r. “Financial institution" has the meaning given in s. 214.01 (1) (jn).

AB504,9 Section 9. 71.91 (6) (c) 1. of the statutes is amended to read:

AB504,7,3 71.91 (6) (c) 1. Except as provided in subd. 2. and par. (d) 4., any person in possession of, or obligated with respect to, property subject to levy upon which a levy has been made shall, upon demand of the department, surrender that property unless it is subject to attachment or execution under judicial process, or discharge that obligation, to the department.

AB504,10 Section 10. 71.91 (6) (d) 1. of the statutes is amended to read:

AB504,7,14 71.91 (6) (d) 1. Any Except as provided in subd. 4., any person, including an officer or employee, who fails to surrender property that is subject to levy upon demand of the department is liable to the department for a sum equal to the value of the property not surrendered, but not exceeding the amount of taxes for the collection of which that levy was made, together with costs and interest at the rate of 18 percent per year from the date of that levy. Any amount, other than costs, recovered under this paragraph shall be credited against the tax liability for the collection of which that levy was made. The liability under this paragraph may be assessed, levied and collected as are additional income or franchise taxes or may be recovered by the department in a civil action.

AB504,11 Section 11. 71.91 (6) (d) 4. of the statutes is created to read:

AB504,7,20 71.91 (6) (d) 4. If a financial institution is in possession of, or obligated with respect to, property subject to levy upon which a levy has been made, the financial institution is liable under this paragraph for failure to surrender that property or discharge that obligation only upon expiration of a reasonable time to comply with the department's demand for the property.

AB504,12 Section 12. 214.01 (1) (sr) of the statutes is amended to read:

AB504,7,23 214.01 (1) (sr) “Review board" means the savings banking institutions review board.

AB504,13 Section 13. 215.01 (22) of the statutes is amended to read:

AB504,8,2 215.01 (22) “Review board" means the savings banking institutions review board.

AB504,14 Section 14. 220.02 (5) of the statutes is amended to read:

AB504,8,10 220.02 (5) Except for acts and decisions of the division under chs. 138, 217, and 218, any interested person or any bank or banking corporation aggrieved by an act, order, or determination of the division may, within 10 days from the date thereof, apply to the banking institutions review board to review the same. All such applications for review shall be considered and disposed of as speedily as possible. The banking institutions review board may require the division to submit any of the division's actions subject to such review to said board for its approval.

AB504,15 Section 15. 220.035 (title) of the statutes is amended to read:

AB504,8,12 220.035 (title) Banking institutions review board.

AB504,16 Section 16. 220.035 (1) (a) of the statutes is amended to read:

AB504,8,21 220.035 (1) (a) The banking institutions review board shall advise the division and others in respect to improvement in the condition and service of banks and banking business in this state and shall review the acts and decisions of the division with respect to banks, except for such acts and decisions of the division under chs. 138, 217, and 218, and shall perform such other review functions in relation to banking as are provided by law. The banking institutions review board may require the division to submit any of the division's actions to it for its approval. The board may make rules of procedure as provided in ch. 227.

AB504,17 Section 17. 220.035 (2) of the statutes is amended to read:

AB504,8,25 220.035 (2) The banking institutions review board may make rules and regulations to safeguard the interest of depositors and stockholders generally in emergencies.

AB504,18 Section 18. 220.035 (3) of the statutes is amended to read:

AB504,9,3 220.035 (3) Any final order or determination of the banking institutions review board shall be subject to review in the manner provided in ch. 227.

AB504,19 Section 19. 220.035 (6) of the statutes is amended to read:

AB504,9,9 220.035 (6) Any bank whose assets, upon the basis of a fair valuation, are equal to or in excess of its liabilities exclusive of capital stock, preferred stock, capital notes, and debentures, shall be deemed to be safe and solvent. The banking institutions review board may prescribe schedules, rules, and regulations for arriving at a fair valuation of various classes of assets of banks.

AB504,20 Section 20. 220.04 (1) (a) of the statutes is amended to read:

AB504,9,22 220.04 (1) (a) The division shall examine at least once every 18 months the cash, bills, collaterals, securities, assets, books of account, condition, and affairs of each bank and trust company bank doing business in this state, except national banks. For that purpose the division may examine on oath any of the officers, agents, directors, clerks, stockholders, customers, or depositors thereof, touching the affairs and business of such institution. In conducting examinations under this paragraph, the division may accept and rely on information collected by other agencies or independent 3rd parties in determining whether a bank or trust company bank has satisfied any requirement that is part of the examination. In making such examinations of banks, the division shall determine the fair valuation of all assets in accordance with the schedules, rules, and regulations prescribed by the banking institutions review board.

AB504,21 Section 21. 220.04 (4) of the statutes is amended to read:

AB504,9,25 220.04 (4) Whenever the division is of the opinion that the loaning, investing, or other banking policies or practices of any officer or director of any bank have been prejudicial to the best interests of such bank or its depositors, or that such policies or practices, if put into operation or continued, will endanger the safety or solvency of said bank or impair the interests of its depositors, the division may, with the approval of the banking institutions review board, request the removal of such officer or director. Such request shall be served on the bank and on such officer or director in the manner provided by law for serving a summons in a court of record or shall be transmitted to said bank and officer or director by registered mail with return receipt requested. If such request for removal is not complied with within a reasonable time fixed by the division, the division may by order, with like approval of the banking institutions review board, remove such officer or director, but no order of removal shall be entered until after an opportunity for hearing before the banking institutions review board is given to such officer or director upon not less than 10 days' notice. An order of removal shall take effect as of the date issued. A copy of such order shall be served upon the bank and upon such officer or director in the manner provided by law for service of a summons in a court of record or by mailing such copy to the bank or officer or director at the bank's or officer's or director's last-known post-office address. Any removal under this subsection shall be effective in all respects the same as if made by the board of directors or stockholders of said bank. Any officer or director removed from office under the provisions of this subsection shall not be reelected as an officer or director of any bank without the approval of the division and the banking institutions review board. An order of removal under this subsection shall be deemed a final order or determination of the banking institutions review board within the meaning and contemplation of s. 220.035 (3).

AB504,22 Section 22. 220.04 (6) of the statutes is amended to read:

AB504,11,4 220.04 (6) (a) The division, with the approval of the banking institutions review board, may establish uniform savings rules which shall be adopted by every bank and trust company bank. Such rules may provide the conditions under which banks or trust company banks may accept deposits.