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IBA E-News 3-29-19



Statehouse Summary

Committee work picked up this week, as the committee report deadline provides only two weeks remaining for committee meetings to take place. A bill must pass out of committee before April 11 for it to be eligible for passage in 2019. There are still many bills garnering attention that need action before the upcoming deadlines.
Following are a few bills of note:

House Bill 1347 – Municipally Owned Utilities

Authors: Rep. Woody Burton, R-Whiteland / Sen. Jack Sandlin, R-Indianapolis

Summary: Provides that all rates, charges, and other fees for services rendered by a municipally owned utility (other than a municipally owned sewer utility) to property occupied by someone other than the owner are payable by the person occupying the property if the account or other customer or billing records maintained by the utility for the property indicate that: (1) the property is occupied by someone other than the owner; and (2) the person occupying the property is responsible for paying the rates, charges, and fees. Provides that rates, charges, and fees assessed by a municipally owned utility with respect to property occupied by someone other than the owner do not constitute a lien against the property. Specifies that these provisions do not: (1) prohibit a municipal legislative body from imposing any requirement to: (A) ensure payment by; or (B) the creditworthiness of; the person occupying the property; or (2) abrogate or limit the authority of the owner of a multi-unit building to engage in electrical submetering. Provides that in the case of real property: (1) that is occupied by someone other than the owner; and (2) for which municipal sewer fees become 60 days delinquent after June 30, 2019; a lien attaches to the real property only if the municipal utility provides notice of the delinquency to any first lien mortgage holder of record not later than 20 days after the time the fees become 60 days delinquent. (Current law requires that notice of the delinquency be provided only to the owner of the property.)

Latest action: The bill passed the Senate Utilities Committee on March 21 by a vote of 8-2 and is now eligible for second reading amendments.

House Bill 1473 – Indiana Bond Bank

Authors: Rep. Greg Steuerwald, R-Avon / Sen. Randy Head R-Logansport

Summary: Allows the Indiana bond bank to require certain entities to establish separate reserve accounts as additional security in connection with the issuance of bonds or notes. Allows and establishes terms and procedures for certain entities to assign or otherwise transfer a future stream of revenue to the Indiana bond bank or certain other entities to obtain funding. Establishes conditions under which the state board of finance may sell, transfer, or liquidate agreements that evidence the state’s right to make deductions from state tuition support to pay advances from the common school fund under the school corporation and charter school safety advance program. Provides that the state board of education must report to the budget committee each year on any defaults on the repayment of advances from the common school fund by charter schools that have closed or otherwise ceased operations. Requires the department of local government finance to notify the Lake County auditor of the estimated and certified tax revenue that will be withheld from the county's certified distribution and distributed to the secretary-treasurer of the northwest Indiana regional development authority(authority).Requires the auditor of state to withhold local income tax revenue from the county’s certified distribution and distribute it to the secretary-treasurer of the authority.

Latest action: The bill passed the Senate Tax and Fiscal Policy Committee Tuesday by a vote of 11-0 and is now eligible for second reading amendments.

Senate Bill 613 – Consumer Credit

Authors: Sen. Andy Zay, R-Huntington / Rep. Matt Lehman, R-Berne

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) 25monthsifthe 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 loansharking statute, includes a nonrefundable prepaid finance charge.

Latest action: The bill was heard in the House Financial Institutions Committee on Tuesday, but was held for a vote for a future date.

House Bill 1330 – Disposal of Abandoned or Derelict Aircraft

Authors: Rep. Mike Speedy, R-Indianapolis / Sen. Blake Doriot, R-Syracuse

Summary: Specifies that a “person” includes a political subdivision for purposes of the statute concerning liens for the repair, storage, servicing, or furnishing of supplies for certain motor vehicles, airplanes, machinery, and equipment. Establishes a procedure for the disposal and removal of an abandoned aircraft or a derelict aircraft from the premises of: (1) a public-use airport; or (2) a fixed-base operator at a public-use airport.

Latest action: The bill passed the Senate Homeland Security and Transportation Committee Tuesday by a vote of 6-0 and is now eligible for second reading amendments.



House Financial Services Committee Passes Cannabis Banking Bill

The House Financial Services Committee passed the Secure and Fair Enforcement Banking Act (H.R. 1595) by a vote of 45-15 yesterday. The SAFE Banking Act would address the issue of providing financial services to cannabis-related businesses by specifying that proceeds from cannabis-related legitimate businesses would not be considered unlawful under federal money laundering rules or other laws.

Rep. Trey Hollingsworth, R-IN, District 9, voted in favor of H.R. 1595.

IRS Issues Proposed Regulations on BOLI Transfers

The Internal Revenue Service and the Department of the Treasury have issued proposed regulations related to new reporting rules for certain transfers of life insurance policies that were included in the 2017 tax reform law.

Among other provisions, the regulations provide needed clarity regarding circumstances in which bank-owned life insurance policies are transferred as part of a bank merger or acquisition. In general, the guidance provides that tax-free transfers of policies between C corporations that do not have more than 50 percent of their assets in BOLI policies are not subject to the new reporting and income inclusion rules.

View the proposed regulations.

Bill Would Level Playing Field for Banks on Farm Real Estate Loans

Rep. Steve Watkins (R-Kan.) has introduced the Enhancing Credit Opportunities for Rural America Act (H.R. 1872), which would end taxation of interest earned from agricultural real estate loans.

This bill would provide rural bankers with the same tax status as Farm Credit System lenders when making loans secured by ag real estate, thus leveling the playing field between banks and the tax-advantaged FCS.