AB822: Bill Text

LRB-4902/3

ARG&KRP:emw&ahe

2017 - 2018 LEGISLATURE

2017 Assembly BILL 822

January 10, 2018 - Introduced by Representatives Katsma, E. Brooks, R. Brooks, Felzkowski, Jacque, Kerkman, Kitchens, Tauchen, Weatherston, Born and Tusler, cosponsored by Senators Marklein, Cowles and Feyen. Referred to Committee on Ways and Means.

AB822,1,12 An Act to renumber and amend 645.46 (11); to amend 34.07, 138.052 (5) (am) 1., 186.235 (16) (a), 214.54 (1), 214.54 (2), 214.725 (3) (intro.), 215.03 (2) (a), 220.04 (1) (a), 220.06 (1m) and 223.105 (3) (a); and to create 186.235 (7) (b) 4., 214.725 (3m), 214.755 (1) (f), 215.02 (6) (a) 7., 221.0328 (4), 645.05 (3), 645.46 (11) (b) and 645.54 (1) (b) 3. of the statutes; relating to: confidentiality of financial institution information maintained by the Department of Financial Institutions; periodic examinations of financial institutions; savings bank loan limitations; interest on residential mortgage loan escrow accounts; capital of state banks; security provided by public depositories; insurance company liquidation proceedings; and modifying an administrative rule of the Department of Workforce Development related to an exemption from overtime pay requirements for outside salespersons.

Analysis by the Legislative Reference Bureau

This bill allows the Division of Banking (division) and the Office of Credit Unions (OCU) in the Department of Financial Institutions to disclose certain financial institution information to a Federal Home Loan Bank and to accept and rely on information collected by other agencies or independent third parties in conducting financial institution examinations. The bill also increases the limit on loans by a savings bank to a single person. The bill eliminates the requirement that financial institutions and mortgage bankers pay interest on escrow accounts for residential mortgage loans originated on or after the effective date of the bill. The bill also specifies that the security that may be provided by a public depository to secure the repayment of public deposits includes an irrevocable letter of credit issued by a Federal Home Loan Bank or financial institution. The bill further allows a state bank, with approval of the division, to reduce its capital and distribute cash or other assets to its shareholders. The bill also includes provisions applicable to collateral and other security interests of Federal Home Loan Banks in insurance company liquidation proceedings. Finally, the bill modifies an administrative rule of the Department of Workforce Development to conform the rule to a similar provision under the federal Fair Labor Standards Act (FLSA).

Disclosure of information to Federal Home Loan Bank

Under current law, the division regulates state banks, savings banks, and savings and loan associations and OCU regulates state credit unions (collectively, financial institutions), and this regulation includes periodic examinations of these financial institutions by, and reports from these financial institutions to, the division or OCU. Current law generally requires the division and OCU to maintain the confidentiality of examination information and of reports provided to the division or OCU. However, limited exceptions allow disclosure under certain circumstances, including disclosure to state regulatory authorities and to the Federal Deposit Insurance Corporation or National Credit Union Administration.

This bill allows the division or OCU to furnish to a Federal Home Loan Bank, upon request, a copy of any examination report made by, or other supervisory information created by, the division or OCU if the Federal Home Loan Bank agrees to treat the information confidentially.

Periodic examinations of financial institutions

With exceptions, current law requires the division and OCU to examine the records and affairs of financial institutions under their respective jurisdictions at least once every 18 months.

Under this bill, in conducting these periodic examinations, the division and OCU may accept and rely on information collected by other agencies or independent third parties in determining whether a financial institution has satisfied any requirement that is part of the examination.

Limit on savings bank loans to one borrower

Under current law, with exceptions, a savings bank may not make loans to a single person totaling more than 15 percent of the savings bank's capital.

This bill increases this limit to 20 percent.

Interest on residential mortgage loan escrow accounts

Under current law, subject to certain exceptions, a financial institution or mortgage banker that originates a residential mortgage loan and requires an escrow to assure the payment of taxes or insurance must pay interest on the outstanding principal balance of the escrow at the following annual rate: 1) if the loan was originated between February 1, 1984, and December 31, 1993, not less than 5.25 percent; or 2) if the loan was originated on or after January 1, 1994, a variable rate calculated annually by the division and OCU using the average interest rate paid on passbook accounts.

Under this bill, financial institutions and mortgage bankers are not required to pay interest on escrow accounts for residential mortgage loans originated on or after the effective date of the bill.

Security for public deposits

Under current law, the Investment Board and the governing bodies of counties, municipalities, and certain other local governmental units (collectively, public depositors) must designate one or more federal or state credit unions, federal or state savings and loan associations, state banks, savings and trust companies, federal or state savings banks, or national banks in this state (public depositories) for deposit of all public moneys received by the public depositor. The public depositor must specify whether security is required of the public depository to secure the repayment of deposits exceeding deposit insurance.

This bill specifies that the security that may be provided by a public depository includes an irrevocable letter of credit issued by a Federal Home Loan Bank, state bank, national bank, federal or state savings bank, federal or state credit union, or federal or state savings and loan association.

Capital reduction by state banks

Current law requires the division, immediately following a state bank's organization, to determine the required capital of the bank, including the required capital stock. “Capital stock" means the bank's stock other than preferred stock, and “capital” includes the bank's capital stock, preferred stock, surplus, and undivided profits. Subject to certain requirements and limitations, a bank's board of directors may declare and pay a dividend from its undivided profits, but the bank's dividends may not impair or diminish the bank's capital except to reduce undivided profits.

This bill provides that, with approval of the division, a state bank may, by vote of its shareholders, reduce its capital and distribute cash or other assets to its shareholders.

Insurance company liquidation proceedings

Current law contains various provisions applicable in a proceeding brought by the commissioner of insurance for the liquidation or rehabilitation of an insurer. Any receiver, liquidator, or rehabilitator appointed in such a proceeding may seek and obtain from a court a restraining order or injunction to prevent specified conduct by the insurer, including its transaction of business, transfer of property, or wasting of assets.

This bill specifies that a Federal Home Loan Bank may not be stayed, enjoined, or prohibited from exercising or enforcing any right or cause of action regarding collateral pledged under any security agreement or similar arrangement.

Current law provides certain powers for the liquidator in a liquidation proceeding, including the power to enter into contracts as necessary to carry out the liquidation and the power to affirm or disavow any contracts to which the insurer is a party. Also in a liquidation proceeding, if one of the specified conditions is met, a liquidator may avoid a preference and recover property or its value. A “preference” is a transfer of an insurer's property to or for the benefit of a creditor based on a preexisting debt if the transfer is made within one year before the liquidation petition and the transfer's effect is to enable the creditor to obtain a greater percentage of his or her debt than another creditor of the same class.

This bill provides that a liquidator does not have the power to disavow any Federal Home Loan Bank security agreement or similar arrangement, and may not avoid any transfer of money or property in connection with any Federal Home Loan Bank security agreement or similar arrangement, except that a transfer may be avoided if it was made with actual intent to hinder, delay, or defraud creditors.

Exemption from overtime pay requirements for outside salespersons

The FLSA currently provides an exemption from the minimum wage and overtime pay provisions of the FLSA for employees employed as outside salespersons, as defined under the Code of Federal Regulations. Rules promulgated by DWD currently provide an exemption from state overtime pay provisions for outside salespersons who spend 80 percent of their time away from the employer's place of business.

The bill modifies the administrative rule provision to conform the state exemption for outside salespersons to the exemption under the FLSA. Specifically, the bill provides that the state exemption applies to an employee 1) whose primary duty is either making sales or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer, and 2) who is customarily and regularly engaged away from the employer's place of business in performing that primary duty.

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

AB822,1 Section 1 . 34.07 of the statutes is amended to read:

AB822,4,7 34.07 Security. A surety bond or other security, including an irrevocable letter of credit issued by a federal home loan bank, state bank, national bank, federal or state savings bank, federal or state credit union, or federal or state savings and loan association, may be required of or given by any public depository for any public deposits that exceed the amount of deposit insurance provided by an agency of the United States and the coverage provided under s. 34.08 (2).

AB822,2 Section 2 . 138.052 (5) (am) 1. of the statutes is amended to read:

AB822,5,8 138.052 (5) (am) 1. Except as provided in par. (b) and unless the escrow funds are held by a 3rd party in a noninterest-bearing account, a bank, credit union, savings bank, savings and loan association or mortgage banker which originates a loan on or after January 1, 1994, and before the effective date of this subdivision .... [LRB inserts date], or a loan subject to subd. 3., and which requires an escrow to assure the payment of taxes or insurance shall pay interest on the outstanding principal balance of the escrow at the variable interest rate established under subd. 2.

AB822,3 Section 3. 186.235 (7) (b) 4. of the statutes is created to read:

AB822,5,15 186.235 (7) (b) 4. Furnish to a federal home loan bank, upon request, a copy of any examination report made by, or other supervisory information created by, the office of credit unions of any credit union, if the federal home loan bank agrees to treat the information received under this subdivision with the same degree of confidentiality that is required of employees of the office of credit unions under par. (a).

AB822,4 Section 4 . 186.235 (16) (a) of the statutes is amended to read:

AB822,5,25 186.235 (16) (a) Except as provided in par. (b), at least once every 18 months, the office of credit unions shall examine the records and accounts of each credit union. For that purpose the office of credit unions shall have full access to, and may compel the production of, each credit union's records and accounts. The office of credit unions may administer oaths to and examine each credit union's officers and agents. In conducting examinations under this paragraph, the office of credit unions may accept and rely on information collected by other agencies or independent 3rd parties in determining whether a credit union has satisfied any requirement that is part of the examination.

AB822,5 Section 5. 214.54 (1) of the statutes is amended to read:

AB822,6,5 214.54 (1) Except as provided in sub. (2) and s. 214.49 (4), the total of outstanding loans and extensions of credit, both direct and indirect, made by a savings bank to a single person shall be subject to limits established by rule of the division, but may not exceed 15 20 percent of the savings bank's capital.

AB822,6 Section 6 . 214.54 (2) of the statutes is amended to read:

AB822,6,12 214.54 (2) Total outstanding loans and extensions of credit, both direct and indirect, made by a savings bank to a single person may exceed the 15 20 percent limit under sub. (1), but may not exceed 25 percent of the savings bank's capital, if all loans or extensions of credit that exceed the 15 20 percent limit are at least 100 percent secured by readily marketable collateral having a market value that may be determined by reliable and continuously available price quotations.

AB822,7 Section 7 . 214.725 (3) (intro.) of the statutes is amended to read:

AB822,6,15 214.725 (3) (intro.) An Subject to sub. (3m), an examination shall include a review of all of the following: