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IBA E-News 3-1-19



FLD Day at the Statehouse

It’s not too late to register for the 2019 FLD Day at the Statehouse, scheduled for March 12 at The Westin Indianapolis. The event includes presentations on IBA lobbying and grassroots advocacy, visits with elected officials and access to the Indiana Statehouse. For more information, contact Josh Myers; to register, contact Susan Clark.

Statehouse Summary

This week marks the halfway point of the 2019 legislative session! As we roll the calendar into March, there are only two months left for the legislature to conclude the state’s work. Many issues remain alive for the second half of session, where the final push for bills to become law will occur.

Issues garnering the most attention in the first half of session were: the state budget containing additional education funding, bias crimes and potential gaming expansion.

Below are a few of the bills that have caught the attention of the IBA GR Team.

Senate Bill 104 - Small Loan Finance Charges

Author: Sen. Greg Walker, R-Columbus

Summary: Changes the current incremental finance charge limits that apply to a small loan to a maximum annual rate. Prohibits making, or taking other actions with respect to, a small loan with a greater rate or amount of interest, or other fees and charges, than allowed under the statute governing small loans. Prohibits a credit services organization from providing certain functions with respect to a small loan and makes a violation a deceptive act.

Latest action: The bill failed to pass the Senate by a vote of 22-27.

Senate Bill 613 - Installment Small Loans

Author: Sen. Andy Zay, R-Huntington

Summary: Makes the following changes to the Uniform Consumer Credit Code (UCCC): (1) Repeals a provision specifying a reference base index for use by the Department of Financial Institutions (department) in adjusting specified dollar amounts designated as subject to change throughout the UCCC. (2) Replaces: (A) the tiered credit service charge authorized for consumer credit sales; and (B) the 25% loan finance charge authorized for consumer loans; with a flat charge of 36% per year on the unpaid balances. (3) Increases the: (A) minimum credit service charge for consumer credit sales; and (B) minimum loan finance charge for consumer loans; from $30 (subject to indexing) to $50 (not subject to indexing). (4) Eliminates indexing of the authorized $5 delinquency charge for consumer credit sales and consumer loans. (5) Provides that a seller in a consumer credit sale may take a security interest in goods sold if the debt secured is at least $1,500 (not subject to indexing), versus $300 (subject to indexing) in current law. (6) Changes the authorized nonrefundable prepaid finance charge for consumer loans not secured by an interest in land from $50 to $150. (7) Provides that if a consumer loan is paid in full by a new loan from the same lender: (A) less than 61 days (versus three months under current law) after the date of the prior loan, the lender may not charge a new nonrefundable prepaid finance charge; or (B) more than 60 days after the date of the prior loan, the lender may charge a new $150 prepaid finance charge. (8) Specifies that the prohibition in current law against a lender assessing more than two nonrefundable prepaid finance charges to the same debtor applies if the new loans are used to pay a previous loan from the lender. (9) Repeals: (A) the definition of “supervised loan”; and (B) the provision establishing the authorized loan finance charge for supervised loans. Makes conforming amendments throughout the UCCC and the Indiana Code. (10) Provides that for a consumer loan: (A) with a loan finance charge greater than 25%; and (B) in which the principal is $4,000 or less (not subject to indexing); a lender may not contract for an interest in land as security. (Current law prohibits a lender from contracting for an interest in land as security if the loan principal is $4,000 or less (subject to indexing) without regard to the loan’s finance charge.) (11) Provides that consumer loans having a loan finance charge exceeding 25% and in which the principal is $4,000 or less are payable over a period of not more than: (A) 37 months if the principal is more than $1,100 (versus $300, subject to indexing, in current law) but not more than $4,000; or (B) 25 months if the principal is $1,100 (versus $300, subject to indexing, in current law) or less. (Current law specifies these maximum loan terms for loans with a principal amount of $4,000 or less (subject to indexing) without regard to the loan’s finance charge.) (12) Provides that a creditor in a consumer loan transaction may not contract for or receive a separate charge for property casualty insurance unless the amount financed exclusive of charges for the insurance is at least $1,000 (versus $300, subject to indexing, in current law), and the value of the property is at least $1,000 (versus $300, subject to indexing, in current law). Authorizes a lender that is licensed by the department to make small loans under the UCCC to make unsecured consumer installment loans under the same license. Defines an “unsecured consumer installment loan” as a loan: (1) with a principal amount that is: (A) more than $605 and not more than $1,500; and (B) payable in three or more substantially equal periodic payments; and (2) in which the lender holds one or more checks of the borrower for a specific period, or is authorized to debit the borrower’s account on one or more occasions for a specific period, before the lender deposits the check or debits the account. Requires that the loan term for an unsecured consumer installment loan be at least six months but not more than 12 months. Provides for the following with respect to unsecured consumer installment loans: (1) An authorized finance charge and monthly maintenance fee. (2) An annual fee assessed on lenders of $1,000 per license and $1,000 per Indiana branch location, for financial education programs. Prohibits: (1) the renewal of an unsecured consumer installment loan; and (2) a borrower from having: (A) a small loan and an unsecured consumer installment loan; or (B) more than one unsecured consumer installment loan; outstanding at the same time. Establishes requirements for the licensure and conduct of persons issuing small dollar loans. Defines “small dollar loan” as a loan with a maximum loan amount of $4,000 and a term of at least 180 days. Provides that with respect to a small dollar loan, a lender may contract for a loan finance charge of not more than 99%. Specifies that a “rate,” for purposes of the loan-sharking statute, includes a nonrefundable prepaid finance charge.

Latest action: The bill passed the Senate by a vote of 26-23.

Senate Bill 516 – Regulation of Hemp

Author: Sen. Randall Head, R-Logansport

Summary: Establishes the Indiana hemp advisory committee to provide advice to the office of the state seed commissioner regarding Indiana’s hemp laws. Changes references from “industrial hemp” to “hemp” and amends the definition of hemp to conform with the federal definition. Eliminates a limitation the provides that the state police department may not inspect a licensed hemp operation more than two times in a year without obtaining a search warrant. Allows the state seed commissioner to perform a criminal background check of an applicant for a hemp license or agricultural hemp seed production license. Establishes a uniform expiration date for hemp licenses and agricultural hemp seed production licenses. Requires a person who sells agricultural hemp to have a seed distribution permit. Provides that: (1) the state seed commissioner may revoke the hemp license of a licensee that fails to cooperate with the state seed commissioner, the state police, a federal law enforcement agency, or a local law enforcement agency in an inspection of the licensee’s crop; and (2) the failure to cooperate constitutes probable cause for the state seed commissioner, state police, federal law enforcement agency, or local law enforcement agency to search the premises of the licensee’s hemp operation. Provides that if the state police department, a federal law enforcement agency, or a local law enforcement agency cooperates with the state seed commissioner in the detention, seizure, or embargo of a hemp crop, the state police department, federal law enforcement agency, or local law enforcement agency is immune from civil liability for the detention, seizure, or embargo. Provides that a hemp grower shall reimburse the state seed commissioner for the cost of testing conducted on the grower’s crop. Provides that the state seed commissioner may enter into agreements with laboratories selected by the Indiana state police department to perform testing of hemp samples. Requires any civil penalties collected under the hemp law to be transferred to the Indiana state department of agriculture and used for hemp marketing and research purposes. Provides that in addition to payment of any civil penalty imposed by the state seed commissioner, a person who violates hemp licensing requirements, terms, conditions, or rules shall reimburse the state seed commissioner for any costs incurred by the state seed commissioner for laboratory testing of material pertaining to the violation. Provides penalties for negligent violations of the hemp law. Allows the state seed commissioner to adopt emergency rules to comply with federal requirements. Establishes procedures by which the state seed commissioner shall apply to the U.S. Department of Agriculture for approval of Indiana’s hemp regulation. Requires a person who sells hemp to: (1) be licensed in Indiana and in the jurisdiction in which the hemp is grown; and (2) provide certain information to the buyer. Provides that hemp bud and hemp flower may be sold only to a licensed hemp processor and that the state seed commissioner may assess a civil penalty of not more than $2,500 for a violation. Provides that a person who: (1) violates a term, condition, or requirement of a hemp license; or (2) violates a rule adopted under the hemp law; commits a Class B misdemeanor, and provides that the offense is a Class A misdemeanor if the person has a prior unrelated conviction for a drug offense. Provides that: (1) dealing in smokable hemp is a Class A misdemeanor; and (2) possession of smokable hemp is a Class C misdemeanor. Provides that civil penalties collected under the controlled substance laws shall be first used to reimburse the state seed commissioner for any expenses incurred by the state seed commissioner for laboratory testing of material pertaining to the violation, with the remainder deposited in the state general fund. Makes conforming changes.

Latest action: The bill passed the Senate by a vote of 47-1.

House Bill 1495 - Real Estate Land Contracts

Author: Rep. Vanessa Summers, D-Indianapolis

Summary: This bill defines “principal dwelling land contract” (contract) as a land contract for the sale of real property: (1) designed for the occupancy of one to four families; and (2) that will be occupied by the buyer as the buyer’s principal dwelling. The bill provides that the seller under a contract must provide the buyer with an FHA appraisal of the property, a description of any liens encumbering the property, and make certain other disclosures to the buyer at least 10 days before the contract is executed. It requires a contract to provide for the payment of preexisting liens, and specifies that all preexisting liens must be satisfied by the end of the contract term. The bill also prohibits penalties or additional charges for prepayment, and requires the buyer to record the contract within 30 days of execution. This bill requires the Indiana Real Estate Commission (commission), in consultation with the Department of Financial Institutions (DFI), to adopt a standard contract form and standard disclosure forms, and requires a seller to use these forms after December 31, 2019. It requires a contract to include a notice informing the buyer of certain protections for contract transactions under Indiana law, and requires a seller to provide a similar disclosure in the event of a default by the buyer. The bill specifies that the seller must provide the buyer with an annual statement of account. It establishes remedies for violations. The bill requires the commission, in consultation with the DFI, to adopt rules to implement the new provisions. The bill also provides that a buyer who has completed the buyer’s obligations under the contract is entitled to the homestead deduction regardless of whether the seller has conveyed title.

Latest action: The bill passed the House by a vote of 82-14.

House Bill 1406 - Water Infrastructure Assistance Fund and Program

Author: Rep. Edmond Soliday, R-Valparaiso

Summary: The bill provides that money from certain sources in the Water Infrastructure Assistance Fund (fund) is continuously appropriated for the purposes of the law concerning the Water Infrastructure Assistance Program.  The bill authorizes the IFA to establish: (1) the interest rate; or (2) parameters for establishing the interest rate; on each loan made from the fund. It provides that a participant, to receive a loan, grant, or other financial assistance from the fund: (1) must have an asset management program; and (2) must demonstrate to the authority that it has a plan to participate with one or more other participants in cooperative activities. It requires the IFA to establish a project prioritization system and project priority list for the purposes of awarding loans and grants from the fund. It requires the IFA to set aside 40% of the fund for purposes of providing grants, loans, and other financial assistance to or for the benefit of utilities serving less than 3,200 customers. It authorizes the IFA to provide advisory services to participants in connection with loans from the fund. It provides that, if appropriate, the IFA shall require a participant receiving a loan or other financial assistance from the fund to establish and maintain sufficient user charges, fees, taxes, special assessments, or revenues to: (1) operate and maintain; and (2) pay the obligations of; its water or wastewater collection and treatment system. It authorizes the IFA to make loans or provide other financial assistance from the fund to or for the benefit of a participant to establish guaranties, reserves, or sinking funds or for other purposes. The bill also authorizes the IFA to use the money in the fund to provide a leveraged loan program and other financial assistance programs to or for the benefit of participants. The bill provides that a participant, after receiving a loan or grant from the fund, must maintain its asset management program: (1) as long as the loan remains unpaid; or (2) during the useful life of the asset financed with the loan or grant. It requires a participant, if appropriate, to conduct or participate in efforts to determine and eliminate the causes of non-revenue water in its water distribution system.

Latest action:  The bill passed a third reading vote in the House 97 – 0 on Feb. 18. The Senate sponsor is Sen. Charbonneau. 




FDIC Proposes Changes to Assessment Regs

The Federal Deposit Insurance Corp. has proposed for comment changes to its deposit insurance regulation to apply the community bank leverage ratio framework to the deposit insurance assessment system. Under the proposal, the FDIC would assess all banks that elect to use the CBLR framework as small banks. Each bank would have the option to use either CBLR tangible equity or tier 1 capital for its assessment base calculation. Banks would also be given the option of using either the CBLR or the tier 1 leverage ratio for the leverage ratio that the FDIC uses to calculate an established small bank’s assessment rate.
The FDIC plans to provide an assessment estimation tool on its website that estimates deposit insurance assessment amounts under the proposal. Comments are due by April 22.

House Panel Plans Hearings on CFPB, Flood Insurance

Consumer Financial Protection Bureau oversight and National Flood Insurance Program reauthorization are among the topics of House Financial Services Committee hearings next month. In a newly released calendar, the panel also included hearings on deterring financial crime, disaster recovery, and Securities and Exchange Commission rules.

View the calendar.

Senators Call for GAO Review of Fed’s Large Bank Guidance

A group of five senators – including Senate Banking Committee Chairman Mike Crapo (R-Idaho) – last week wrote to the Government Accountability Office calling for a review of Federal Reserve guidance on large bank supervision. The lawmakers asked GAO to determine if the guidance – which was issued by the Fed’s Large Institution Supervision Coordinating Committee – constitutes a rule for purposes of the Congressional Review Act.

The guidance outlines the Fed’s approach to large bank examination, and “imposes substantive requirements relating to capital, liquidity, corporate governance, and recovery and resolution planning,” the lawmakers noted. They added that “determining whether the LISCC guidance is a ‘rule’ under CRA is particularly important because the Federal Reserve has never revealed the criteria by which certain supervised institutions become subject to (or may avoid becoming subject to) the LISCC designation and associated requirements.”

Read the letter.

Banking Committee Clears Calabria, HUD Nominees

The Senate Banking Committee by a party line vote approved the nomination of Mark Calabria to lead the Federal Housing Finance Agency. The committee also approved the nominations of Seth Appleton and Robert Hunter Kurtz to serve as assistant secretaries for the Department of Housing and Urban Development.

In addition, the committee approved Bimal Patel as an assistant Treasury secretary and Dino Falaschetti as director of Treasury’s Office of Financial Research. Kimberly Reed was approved as president of the Export-Import Bank, while Spencer Bachus and Judith DeZoppo Prior were cleared to join the bank’s board of directors.

The nominations of Rodney Hood and Todd Harper as members of the National Credit Union Administration board also advanced. All the nominees must now be confirmed by the Senate.