Highlights of the 2005 Kansas Legislative Session
By: Sonya L. Allen, General Counsel
The regular session of the 2005 Kansas Legislature has come to a close. The OSBC proposed a number of law changes this session that affected the entities we regulate. Following is a brief description of the bills proposed by the OSBC that were passed by the legislature. They are divided into two categories. The first category is bills that modify the State Banking Code and the second is bills that modify the Consumer Credit Code. All of these new laws will take effect on July 1, 2005, unless otherwise noted.
Banking Code:
SB 101 amended K.S.A. 9-1805 to allow the State Banking Board to prohibit an officer or director the Board had previously removed from a state-chartered bank or trust company from being involved with any other state bank or trust company in Kansas in the future.
SB 104 amended K.S.A. 9-1702 to authorize the commissioner to examine the fiduciary affairs of an officer or director of a state bank or trust company, but only if that fiduciary activity would have an effect on the safety and soundness of the bank or trust company. Further, the bill grants the commissioner the authority to examine any affiliate of the bank. The term "affiliate" is defined the same as such term is defined in section 2(k) of the federal Bank Holding Company Act.
SB 114 created a new provision in the Banking Code that authorizes the commissioner, with the approval of the State Banking Board, to impose civil money penalties on state banks or trust companies, or the officers, directors, employees or agents of state banks or trust companies who engage in unsafe or unsound practices or other activities which constitute violations of the Banking Code. The entities or individuals assessed such penalties, which are limited to $1,000.00 per day, are given a right to an administrative hearing conducted in accordance with the Kansas Administrative Procedure Act. Further, the bill prohibits imposition of any penalty by the commissioner if another government agency has already assessed a monetary penalty for the same act or practice.
HB 2097 amended K.S.A. 9-1303 to authorize the OSBC to share examinations and other regulatory information with the Office of Thrift Supervision and the Financial Crimes Enforcement Network.
HB 2098 amended K.S.A. 9-1601, the statute which authorizes the commissioner to grant trust powers to state banks. The bill provides that state banks may offer medical savings accounts and health savings accounts to their customers without obtaining trust powers from the commissioner, so long as the governing instrument limits investment of the funds in those accounts to time or savings deposits in the bank. Another bill, HB 2276, further amended the provision of HB 2098 to authorize state banks without trust powers to offer such accounts, provided the investments were limited to time, savings or demand deposits at the bank. HB 2098 became effective on April 7, 2005, and HB 2276 became effective on April 21, 2005.
Consumer Credit Code:
Senate Substitute for HB 2172 was the result of a legislative compromise. Senate Sub for HB 2172 includes the language from two of the OSBC's bills, SB 196 and HB 2145, and also includes the language of one bill from the payday lending industry, SB 223. SB 196 consisted of amendments to the Kansas Mortgage Business Act, which will not affect banks. Likewise, the bulk of the provisions of HB 2145 primarily affected licensed supervised lenders. However, there are some provisions that may also affect banks making consumer loans, including but not limited to the following:
K.S.A. 16a-2-103 was amended to allow lenders to use either the amortization method or the actuarial method to calculate finance charges for consumer loans secured by real estate. Current law requires use of the actuarial method.
K.S.A. 16a-3-205 was amended to clarify that a lender is required to provide a borrower with a payoff statement on any consumer loan free of charge.
K.S.A. 2004 Supp. 16a-3-308a was amended to prohibit a lender from recording a mortgage if the funds are not available for disbursement to the borrower following the expiration of all applicable rescission or other waiting periods.
The bills discussed above consist of only those bills that were brought forward by the OSBC and passed by the legislature. There are a number of other new laws that will affect banks' operations. The Kansas Bankers Association's Legislative Bulletin is a good resource for a broader overview of all legislation that may affect bank activities.
