DFI-Bkg 3.05(3)(b)(b) Any unguaranteed portion of the estimated residual value relied upon by the bank to yield a full return on a net, full-payout lease may not exceed 25% of the original cost of the property to the lessor. The amount of any estimated value guaranteed by a manufacturer, lessee or a third party which is not an affiliate of the bank may exceed 25% of the original cost of the property where the bank has determined, and can provide, full supporting documentation that the guarantor has the resources to meet the guarantee. DFI-Bkg 3.05(3)(c)(c) Calculations of estimated residual value of net, full-payout leases of personal property to federal, state or local government entities may be based on reasonably anticipated future transactions or renewals. DFI-Bkg 3.05(3)(d)(d) In all net, full-payout leases, both the estimated residual value of the property and that portion of the estimated residual value relied upon by the lessor to satisfy the requirements of a full-payout lease must be reasonable in light of the nature of the leased property and all relevant circumstances so that realization of the lessor’s full investment plus the cost of financing the property primarily depends on the creditworthiness of the lessee and any guarantor of the residual value, and not on the residual market value of the leased item. DFI-Bkg 3.05 NoteNote: In operating under this rule it is anticipated that banks will estimate the total cost of financing the property over the term of the lease to reflect, among other factors, the term of the lease, the modes of financing available to the lessor, the credit rating of each lessor and lessee involved in the transaction and prevailing rates in the money and capital markets. Where the calculation of the cost of financing according to this formula is not reasonably determinable, a lease may be considered to have met the test for recovering the cost financing if the bank’s yield from the lease is equivalent to what the yield would be on a similar loan. In all cases, both the estimated residual value of the property and that portion of the estimated residual value relied upon by the lessor to satisfy the requirements of a full-payout lease must be reasonable in light of the nature of the leased property and all relevant circumstances so that realization of the lessor’s full investment plus the cost of financing the property primarily depends on the creditworthiness of the lessee and any guarantor of the residual value, and not on the residual market value of the leased item.
DFI-Bkg 3.05 HistoryHistory: Cr. Register, July, 1983, No. 331, eff. 8-1-83; r. and recr. (1), (2) and (3), r. (4) and (5), Register, March, 1996, No. 483, eff. 4-1-96; correction in (1) (k) made under s. 13.93 (2m) (b) 7., Stats., Register October 2001 No. 550; CR 23-039: am. (1) (b) (intro.), 1., 2., (c) (intro.), 1. to 4., (d) (intro.), 1., (e) (intro.), 1., (f) (intro.), 1., (g), (2) (a) (intro.), 1., (3) (a) (intro.), 1., 2., (b) Register March 2024 No. 819, eff. 4-1-24. DFI-Bkg 3.06DFI-Bkg 3.06 Purchase of shares of investment companies. DFI-Bkg 3.06(1)(1) Authority. A bank may purchase for its own account shares of investment companies registered with the securities and exchange commission or a privately offered fund sponsored by an affiliated commercial bank if the investment company shares meet all of the following requirements: DFI-Bkg 3.06(1)(a)(a) The bank has an equitable and equal proportionate undivided interest in the underlying assets of the investment company. DFI-Bkg 3.06(1)(b)(b) The bank is shielded from personal liability for acts or obligations of the investment company. DFI-Bkg 3.06(2)(2) Government securities. Banks may purchase and hold investment company shares without limitation if the portfolio of the fund consists entirely of investments in government securities in which a bank could invest directly without limitation. DFI-Bkg 3.06(3)(3) Municipal securities. Shares of investment companies whose portfolios contain investments which are subject to limitation under s. 221.0320 (3), Stats., may be held in an amount not to exceed 25% of the capital and surplus of the bank. In addition, a bank’s pro rata share of any security held in the portfolio of one or more investment companies whose shares are held by the bank may not, in aggregate or in combination with the bank’s direct holdings of the security, exceed the limitations of s. 221.0320 (3), Stats. DFI-Bkg 3.06(4)(4) Other securities. Shares of investment companies whose portfolios contain investments other than government securities or municipal securities, may be held in an amount not to exceed 20% of the capital stock and surplus of the bank. In addition, a bank’s pro rata share of any security held in the portfolio of one or more investment company whose shares are held by the bank may not, in aggregate or in combination with the bank’s direct holdings of the security, exceed the investment limitations for the security as provided for in s. 221.0320 (4) to (6), Stats., and other relevant statutes and regulations. DFI-Bkg 3.06(5)(5) Futures, forwards, options, repurchase agreements and securities lending. Certain investment companies use futures, forward placement and options contracts as well as repurchase agreements and securities lending arrangements as part of their portfolio management strategy. A bank may purchase and hold the shares of such investment companies if these instruments are used in a manner that would be considered acceptable for use in a bank’s own investment portfolio. DFI-Bkg 3.06(6)(6) Review of investment portfolios. The bank shall review the investment portfolio of each investment company in which it holds shares on a quarterly basis to make certain that the composition of each portfolio meets the requirements of this section. DFI-Bkg 3.06(7)(7) Accounting. The bank shall follow the instructions approved by the administrator of the division of banking for use by the banks for the preparation of reports of condition and income to account for investments made in shares of investment companies. DFI-Bkg 3.06(8)(8) Approval of board of directors. The bank’s investment policy, as formally approved by its board of directors, shall specifically provide for investments made under this section. Prior approval of the board must be obtained for initial investments in specific investment companies and recorded in the board’s minutes. Procedures, standards and controls for implementation of such investments must be established. DFI-Bkg 3.06 HistoryHistory: Cr. Register, March, 1985, No. 351, eff. 4-1-85; r. and recr. Register, January, 1988, No. 385, eff. 2-1-88; corrections in (1) (c), (3) and (4) made under s. 13.93 (2m) (b) 7., Stats., Register October 2001 No. 550; CR 23-039: am. (1) (intro.), (a), (b) Register March 2024 No. 819, eff. 4-1-24. DFI-Bkg 3.07DFI-Bkg 3.07 Procedure for chartering a savings and loan as a bank. DFI-Bkg 3.07(1)(1) A savings and loan association may be converted into a state chartered bank with the approval of the administrator of the division of banking. DFI-Bkg 3.07(2)(2) A savings and loan association seeking to convert into a state chartered bank shall pay the administrator of the division of banking a fee of $2,000 plus the actual costs incurred by the administrator of the division of banking in investigating the proposed reorganization. DFI-Bkg 3.07(3)(3) The stockholders or members of the savings and loan association shall make, execute and acknowledge articles of organization as required by ch. 221, Stats., and set forth the written consent of the stockholders or members. DFI-Bkg 3.07(4)(4) Upon the filing of the articles as provided by ch. 221, Stats., and upon the approval of the administrator of the division of banking, the savings and loan association shall be deemed to be converted and thereupon all assets, real and personal, of the converted savings and loan association shall be vested in and become the property of the new bank, subject to all the liabilities of the savings and loan association not converted. DFI-Bkg 3.07 HistoryHistory: Cr. Register, July, 1990, No. 415, eff. 8-1-90; CR 23-039: am. (1) Register March 2024 No. 819, eff. 4-1-24. DFI-Bkg 3.08DFI-Bkg 3.08 Debt cancellation contracts and debt suspension agreements. DFI-Bkg 3.08(1)(a)(a) “Actuarial method” means the method of allocating payments made on a debt between the amount financed and the finance charge pursuant to which a payment is applied first to the accumulated finance charge and any remainder is subtracted from, or any deficiency is added to, the unpaid balance of the amount financed. DFI-Bkg 3.08(1)(c)(c) “Closed-end credit” means consumer credit other than open-end credit as defined in this section. DFI-Bkg 3.08(1)(d)(d) “Contract” means a debt cancellation contract or a debt suspension agreement. DFI-Bkg 3.08(1)(e)(e) “Customer” means an individual who obtains an extension of credit from a bank primarily for personal, family or household purposes. DFI-Bkg 3.08(1)(f)(f) “Debt cancellation contract” means a loan term or contractual arrangement modifying loan terms under which a bank agrees to cancel all or part of a customer’s obligation to repay an extension of credit from that bank upon the occurrence of a specified event. The agreement may be separate from or a part of other loan documents. DFI-Bkg 3.08(1)(g)(g) “Debt suspension agreement” means a loan term or contractual arrangement modifying loan terms under which a bank agrees to suspend all or part of a customer’s obligation to repay an extension of credit from that bank upon the occurrence of a specified event. The agreement may be separate from or a part of other loan documents. “Debt suspension agreement” does not include loan payment deferral arrangements in which the triggering event is the borrower’s unilateral election to defer repayment or the bank’s unilateral decision to allow a deferral of repayment. DFI-Bkg 3.08(1)(h)(h) “Open-end credit” means consumer credit extended by a bank under a plan in which all of the following apply: DFI-Bkg 3.08(1)(h)2.2. The bank may impose a finance charge from time to time on an outstanding unpaid balance. DFI-Bkg 3.08(1)(h)3.3. The amount of credit that may be extended to the customer during the term of the plan, up to any limit set by the bank, is generally made available to the extent that any outstanding balance is repaid. DFI-Bkg 3.08(1)(i)(i) “Residential mortgage loan” means a loan secured by 1-4 family, residential real property. DFI-Bkg 3.08(2)(2) Prohibited practices. A bank may not do any of the following: DFI-Bkg 3.08(2)(a)(a) Anti-tying. Extend credit or alter the terms or conditions of an extension of credit conditioned upon the customer entering into a debt cancellation contract or debt suspension agreement with the bank. DFI-Bkg 3.08(2)(b)(b) Misrepresentations generally. Engage in any practice or use any advertisement that is false, misleading or deceptive, or which omits to state material information, or otherwise would cause a reasonable person to reach an erroneous belief with respect to information that may be disclosed under this section. DFI-Bkg 3.08(2)(c)(c) Prohibited contract terms. (intro.) Offer debt cancellation contracts or debt suspension agreements that contain any of the following: DFI-Bkg 3.08(2)(c)1.1. Terms giving the bank the right unilaterally to modify the contract unless the modification is favorable to the customer and is made without additional charge to the customer, or the customer is notified of any proposed change and is provided a reasonable opportunity to cancel the contract without penalty before the change goes into effect. DFI-Bkg 3.08(2)(c)2.2. Terms requiring a lump sum, single payment for the contract payable at the outset of the contract, where the debt subject to the contract is a residential mortgage loan. DFI-Bkg 3.08(3)(3) Refunds of fees in the event of termination or prepayment of the covered loan. DFI-Bkg 3.08(3)(a)(a) Refunds. If a debt cancellation contract or debt suspension agreement is terminated, including when the customer prepays the covered loan, the bank shall refund to the customer any unearned fees paid for the contract unless the contract provides otherwise. A bank may offer a customer a contract that does not provide for a refund only if the bank also offers that customer a bona fide option to purchase a comparable contract that provides for a refund. DFI-Bkg 3.08(3)(b)(b) Method of calculating refund. The bank shall calculate the amount of a refund using a method at least as favorable to the customer as the actuarial method. DFI-Bkg 3.08(4)(4) Method of payment of fees. Except as provided in sub. (2) (c) 2., a bank may offer a customer the option of paying the fee for a contract in a single payment, provided the bank also offers the customer a bona fide option of paying the fee for that contract in monthly or other periodic payments. If the bank offers the customer the option to finance the single payment by adding it to the amount the customer is borrowing, the bank shall also disclose to the customer, in accordance with sub. (5), whether and, if so, the time period during which, the customer may cancel the agreement and receive a refund. DFI-Bkg 3.08(5)(a)(a) Content of short form of disclosures. The short form of disclosures required by this section shall include information relating to any of the following that is appropriate to the product offered: DFI-Bkg 3.08(5)(b)(b) Content of long form disclosures. The long form of disclosures required by this section shall include information relating to any of the following that is appropriate to the product offered: DFI-Bkg 3.08 NoteNote: Copies of the short and long form, and instructions for using them may be obtained by writing to the Department of Financial Institutions, Division of Banking, P.O. Box 7876, Madison, WI 53707-7876 or by downloading it from the department’s website, www.wdfi.org. Short form disclosures made in a form that is substantially similar to the disclosures available from the department will satisfy the short form disclosure requirement of this section. Long form disclosures made in a form that is substantially similar to the disclosures available from the department will satisfy the long form disclosure requirements of this section. DFI-Bkg 3.08(5)(c)1.1. The bank shall make the short form disclosures orally at the time the bank first solicits the purchase of a contract. DFI-Bkg 3.08(5)(c)2.2. The bank shall make the long form disclosures in writing before the customer completes the purchase of the contract. If the initial solicitation occurs in person, the bank shall provide the long form disclosures in writing at that time. DFI-Bkg 3.08(5)(d)1.1. The disclosures required by this section shall be conspicuous, simple, direct, readily understandable, and designed to call attention to the nature and significance of the information provided. DFI-Bkg 3.08 NoteNote: The following are examples of means that call attention to the nature and significance of the information provided in the disclosure: a plain language heading to call attention to the disclosures; typeface and type size that are easy to read; wide margins and ample line spacing; boldface or italics for key words; and distinctive type style, and graphic devices, such as shading or sidebars, when the disclosures are combined with other information.
DFI-Bkg 3.08(5)(e)(e) Advertisements and other promotional material for debt cancellation contracts and debt suspension agreements. The short form disclosures are required in advertisements and promotional material for contracts unless the advertisements and promotional materials are of a general nature describing or listing the services or products offered by the bank. DFI-Bkg 3.08(6)(6) Affirmative election to purchase and acknowledgement of receipt of disclosures required. DFI-Bkg 3.08(6)(a)(a) Affirmative election and acknowledgement of receipt of disclosures. Before entering into a contract the bank shall obtain a customer’s written affirmative election to purchase a contract and written acknowledgement of receipt of the disclosures required by sub. (5) (b). The election and acknowledgement information shall be conspicuous, simple, direct, readily understandable, and designed to call attention to their significance. The election and acknowledgement satisfy these standards if they conform with the requirements in sub. (5) (d). DFI-Bkg 3.08(6)(b)(b) Telephone solicitations. If the sale of a contract occurs by telephone, the customer’s affirmative election to purchase may be made orally, provided the bank does all of the following: DFI-Bkg 3.08(6)(b)1.1. Maintains sufficient documentation to show that the customer received the short form disclosures and then affirmatively elected to purchase the contract. DFI-Bkg 3.08(6)(b)2.2. Mails the affirmative written election and written acknowledgement, together with the long form disclosures required by sub. (5), to the customer within 3 business days after the telephone solicitation, and maintains sufficient documentation to show it made reasonable efforts to obtain the documents from the customer. DFI-Bkg 3.08(6)(b)3.3. Permits the customer to cancel the purchase of the contract without penalty within 30 days after the bank has mailed the loan form disclosures to the customer. DFI-Bkg 3.08(6)(c)(c) Solicitations using written mail inserts or “take one” applications. If the contract is solicited through written materials such as mail inserts or “take one” solicitations and the bank provides only the short form discourses in the written materials, then the bank shall mail the acknowledgment of receipt of disclosures, together with the long form disclosures required by sub. (5), to the customer within 3 business days, beginning of the first business day after the customer contacts the bank or otherwise responds to the solicitation. The bank may not obligate the customer to pay for the contract until after the bank has received the customer’s written acknowledgment of receipt of disclosures unless the bank does all of the following: DFI-Bkg 3.08(6)(c)1.1. Maintains sufficient documentation to show that the bank provided the acknowledgement of receipt of disclosures to the customer as required by this section. DFI-Bkg 3.08(6)(c)2.2. Maintains sufficient documentation to show that the bank made reasonable efforts to obtain from the customer a written acknowledgement of receipt of the long form disclosures. DFI-Bkg 3.08(6)(c)3.3. Permits the customers to cancel the purchase of the contract without penalty within 30 days after the bank has mailed the long form disclosures to the customer. DFI-Bkg 3.08(6)(d)(d) Electronic election. An affirmative election and acknowledgement made electronically shall be in a manner consistent with the requirements of the Electronic Signatures in Global and National Commerce Act, 15 USC 7001 et seq. DFI-Bkg 3.08(7)(7) Safety and soundness requirements. A bank shall manage the risks associated with debt cancellation contracts and debt suspension agreements in accordance with safe and sound banking principles. Accordingly, a bank shall establish and maintain effective risk management and control processes over its debt cancellation contracts and debt suspension agreements. Such processes include appropriate recognition and financial reporting of income, expenses, assets and liabilities, and appropriate treatment of all expected and unexpected losses associated with the products. A bank shall also assess the adequacy of its internal control and risk mitigation activities in view of the nature and scope of its debt cancellation contract and debt suspension agreement programs. DFI-Bkg 3.08 NoteNote: This section takes effect on April 1, 2006, except for those provisions comparable to the provisions of 12 CFR sec. 37 that are subject to a delayed effective date by the United States Office of the Comptroller of Currency. These provisions shall become effective when the comparable provisions of 12 CFR sec. 37 become effective. The administrator for the division of banking shall issue interpretive letters confirming which provisions of this section have become effective and the effective date of these provisions.
DFI-Bkg 3.08 HistoryHistory: CR 05-045: cr. Register January 2006 No. 601, eff. 4-1-06; CR 23-039: am. (1) (h) (intro.), 1., 2., cr. (2) (intro.), am. (2) (a), (b), (c) (intro.), (5) (c) 1. (title), 2. (title), r. (5) (c) 3. to 5., am. (5) (d) 1. (title), 2. (title) Register March 2024 No. 819, eff. 4-1-24.
