LRB-1418/1
MDK:kjf:pg
2005 - 2006 LEGISLATURE
January 19, 2006 - Introduced by Law Revision Committee. Referred to
Committee on Housing and Financial Institutions.
SB512,1,8
1An Act to renumber 138.10 (6);
to renumber and amend 138.10 (2m) and
2138.10 (7);
to amend 138.10 (2), 217.02 (9), 218.04 (1) (a), 221.0316 (4), 223.07
3(1), 224.02, 551.63 (2), 553.26 (4m) and 553.31 (2);
to repeal and recreate
4138.09 (title); and
to create 138.10 (15) and 220.02 (2) (g) and (h) of the
5statutes;
relating to: various changes regarding the Department of Financial
6Institutions and persons regulated by the Department of Financial Institutions
7and granting rule-making authority (suggested as remedial legislation by the
8Department of Financial Institutions).
Analysis by the Legislative Reference Bureau
Pawnbrokers
Currently, pawnbrokers are subject to multiple licensing and operational
requirements under the trade regulation statutes, the licensed lender statutes, and
the pawnbroker statutes. Under the licensed lender statutes, before any person,
including a pawnbroker, may charge interest in excess of 18 percent per year, the
person must obtain a license from the Division of Banking (division) within the
Department of Financial Institutions (DFI). The division must investigate all of the
relevant facts regarding each applicant. If the division finds that the applicant is of
sufficient character and general fitness, is financially responsible, and meets all
other requirements specified under the licensed lender statutes, the division must
grant the license. The licensed lender statutes also contain requirements regarding
annual reports by licensees to the division and licensee record keeping.
Under the pawnbroker statutes, a pawnbroker may not charge interest in
excess of 3 percent per month or, unless the pawnbroker is a licensed lender, make
a loan in excess of $150. The pawnbroker statutes also mandate a specific procedure
that a pawnbroker must follow when selling property deposited with the pawnbroker
as security for a loan.
This bill exempts any person that is a licensed lender from the current
prohibitions on charging interest in excess of 3 percent per month and making loans
in excess of $150. In addition, the bill exempts any pawnbroker that is also a licensed
lender from the current, mandated procedure regarding the sale of property
deposited as security for a loan. Finally, the bill grants the division the authority to
promulgate rules and issue orders to administer and enforce the licensed lender
statutes.
Authority of the Division of Banking
Under current law, the division has general authority to enforce all laws
relating to banks and banking in this state. In addition, the division has specific
authority to regulate certain financial institutions, including mortgage bankers,
loan originators, mortgage brokers, and certain commercial institutions that lend to
small businesses. This bill specifies that the division's general authority to enforce
laws relating to banks and banking includes the authority to enforce laws relating
to these financial institutions.
Trust services
Currently, a state bank may exercise certain trust powers with the approval of
the division. In addition, with the approval of the division, a trust company bank or
a state bank exercising trust powers may offer trust services at the offices of certain
other financial institutions, as long as the offices are in this state. This bill expands
the authority of the division to allow a state bank or a trust company bank to offer
trust services at the out-of-state offices of these financial institutions.
Sellers of checks
With certain exceptions, current law requires any person who engages in the
business of selling and issuing checks, transmitting money, or receiving money for
transmission (seller of checks) to obtain a license from the division. Current law also
contains numerous regulations specifically governing sellers of checks. Currently,
any telegraph company that receives money for immediate transmission by
telegraph is exempt from the definition of "seller of checks" and, as a result, from
these laws relating to sellers of checks. This bill removes this exemption.
Securities and investments
With certain exceptions, current law prohibits a person from engaging in the
business of banking without being organized and chartered as a specified banking
institution under state or federal law. Certain agents who receive and hold money,
pending investment in real estate or securities on behalf of the person who deposited
the money, are not engaged in the business of banking, as that term is currently
defined. However, this exemption from the definition of banking only applies if the
agent keeps the money in a separate trust fund, does not commingle the money with
the agent's own property, and does not agree to pay interest on the money other than
to account for the actual income that is derived from the money while held pending
investment.
This bill expands this exemption from the definition of banking. Under this bill,
an agent who receives and holds money, pending investment in real estate or
securities on behalf of the person who deposits the money, is not engaged in the
business of banking, regardless of whether the money is separately kept and
regardless of whether the agent agrees to pay interest on the money. Thus, under
this bill, an agent may pay interest on money that the agent receives and holds,
pending investment in real estate or securities on behalf of the person who deposited
the money.
Under current law, the Division of Securities in DFI oversees the licensing of
securities broker-dealers, agents, investment advisers, and investment adviser
representatives. Current law generally requires every order of the Division of
Securities to be appropriate for the protection of both investors and the public
interest. Current law also specifically requires the Division of Securities to restrict
or suspend a license if the licensee fails to pay court-ordered child support and to
revoke a license if the licensee is liable for delinquent taxes. This bill clarifies that
the general standard regarding protection of investors and the public interest does
not apply to an order restricting, suspending, or revoking a license due to unpaid
child support or delinquent taxes.
Franchises
Under Wisconsin's current franchise investment law, a person attempting to
sell a franchise must generally register the franchise offered for sale with the
Division of Securities. It is unclear, though, whether the person is similarly required
to register any material changes to the registration statement. This bill clarifies
that, once a person has properly registered a franchise, the person is not required to
file any additional information except amendments that reflect material changes to
the registration statement. This bill also changes the effective date of any
amendment filed after the effective date of the registration from the date the Division
of Securities approves of the amendment to the date the Division of Securities
receives the amendment.
Collection agencies
Currently, a person who engages in business as a collection agency must be
licensed by the commissioner of banking in DFI and is subject to laws specifically
governing collection agencies. However, current law exempts certain entities from
the definition of "collection agency" and, as a result, from the statutes governing
collection agencies. Currently, certain professional men's associations that collect
accounts for their members on a nonprofit basis are exempt from the definition of
"collection agency." The term "professional men's association" is not currently
defined.
This bill removes this exemption for professional men's associations.
For further information, see the Notes provided by the Law Revision
Committee of the Joint Legislative Council.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
Law Revision Committee prefatory note: This bill is a remedial legislation
proposal, requested by the Department of Financial Institutions and introduced by the
Law Revision Committee under s. 13.83 (1) (c) 4., stats. After careful consideration of the
various provisions of the bill, the Law Revision Committee has determined that this bill
makes minor substantive changes in the statutes, and that these changes are desirable
as a matter of public policy.
SB512, s. 1
1Section
1. 138.09 (title) of the statutes is repealed and recreated to read:
SB512,4,2
2138.09 (title)
Licensed lenders.
SB512, s. 2
3Section
2. 138.10 (2) of the statutes is amended to read:
SB512,4,54
138.10
(2) Maximum loan. Unless made by a person licensed under s. 138.09,
5a A pawnbroker's loan may not exceed $150.
SB512, s. 3
6Section
3. 138.10 (2m) of the statutes is renumbered 138.09 (13) and amended
7to read:
SB512,4,108
138.09
(13) Pawnbroking by licensed lenders. The division
of banking may
9promulgate rules
regulating the conduct of pawnbroking by persons licensed under
10s. 138.09 and issue orders to administer and enforce this section.
SB512, s. 4
11Section
4. 138.10 (6) of the statutes is renumbered 138.10 (13).
SB512, s. 5
12Section
5. 138.10 (7) of the statutes is renumbered 138.10 (14) and amended
13to read:
SB512,4,1714
138.10
(14) Penalty. Any pawnbroker who
shall refuse refuses to comply with
15sub.
(6) (13) shall
, upon conviction, be punished by imprisonment be imprisoned in
16the county jail
for not more than one year or
by fine fined not
exceeding more than 17$500.
SB512, s. 6
1Section
6. 138.10 (15) of the statutes is created to read:
SB512,5,32
138.10
(15) Exception. This section does not apply to any person that is
3licensed under s. 138.09.
Note: Under current law, pawnbrokers are subject to regulation under s. 138.10,
stats., which, among other things, limits loans to $150 and caps interest rates at 3% per
month. If a pawnbroker wants to charge interest rates greater than 18%, the pawnbroker
must also register as a licensed lender under s. 138.09, stats. To register as a licensed
lender, a pawnbroker must meet certain character and fitness, and financial
responsibility requirements. In addition, the pawnbroker must meet certain record
keeping and annual reporting requirements. This Section provides that if a pawnbroker
registers as a licensed lender, the pawnbroker is exempt from the requirements of s.
138.10, stats.
SB512, s. 7
4Section
7. 217.02 (9) of the statutes is amended to read:
SB512,5,95
217.02
(9) "Seller of checks" means a person who, as a service or for a fee or
6other consideration, engages in the business of selling and issuing checks or the
7receiving of money for transmission or the transmitting of money, or the transmitting
8of money to foreign countries
, but does not include the business of a telegraph
9company in receiving money for immediate transmission by telegraph.
Note: This Section deletes the exemption of telegraph companies from the
definition of "seller of checks." Telegraph companies no longer exist.
SB512, s. 8
10Section
8. 218.04 (1) (a) of the statutes is amended to read:
SB512,5,1811
218.04
(1) (a) "Collection agency" means any person engaging in the business
12of collecting or receiving for payment for others of any account, bill or other
13indebtedness. It shall not include attorneys at law authorized to practice in this state
14and resident herein, banks, express companies, state savings banks, state savings
15and loan associations, insurers and their agents, trust companies
, or professional
16men's associations collecting accounts for its members on a nonprofit basis, where
17such members are required by law to have a license, diploma or permit to practice
18or follow their profession, real estate brokers
, and real estate salespersons.
Note: Under current law, a person who engages in business as a collection agency
must be licensed by the division of banking in the department of financial institutions
(DFI) and is subject to laws that specifically regulate collection agencies. Certain
"professional men's associations" that collect accounts for their members on a nonprofit
basis are exempt from the definition of "collections agency." Since the term "professional
men's association" is currently not defined and DFI cannot locate any such organizations,
this Section deletes the exemption.
SB512, s. 9
1Section
9. 220.02 (2) (g) and (h) of the statutes are created to read:
SB512,6,32
220.02
(2) (g) Mortgage bankers, loan originators, and mortgage brokers under
3subch. III of ch. 224.
SB512,6,44
(h) Nondepository small business lenders under subch. IV of ch. 224.
Note: Under current law the division of banking (division) in the department of
financial institutions has the specific authority to regulate mortgage brokers, mortgage
bankers, loan originators and certain institutions that lend to small businesses. In
addition the division's general authority authorizes it to enforce all laws relating to banks
and banking in this state. This Section specifies that the division's general authority
includes the authority to regulate mortgage brokers, mortgage bankers, loan originators
and certain institutions that lend to small businesses.
SB512, s. 10
5Section
10. 221.0316 (4) of the statutes is amended to read:
SB512,6,146
221.0316
(4) Trust service offices. A state bank exercising trust powers may,
7with the approval of the division, establish and maintain a trust service office at any
8office
in this state of any other depository institution, as defined under s. 221.0901
9(2) (i). A state bank may, with the approval of the division, permit any other
10depository institution, as defined under s. 221.0901 (2) (i), exercising trust powers
11or any trust company bank organized under ch. 223 to establish and maintain a trust
12service office at any of its banking offices. The establishment and operation of a trust
13service office are subject to s. 223.07. This subsection does not authorize branch
14banking.
SB512, s. 11
15Section
11. 223.07 (1) of the statutes is amended to read:
SB512,7,216
223.07
(1) Any trust company bank may, with the approval of the division,
17establish and maintain a trust service office at any office
in this state of a depository
18institution, as defined in s. 221.0901 (2) (i), if the establishment of the trust service
1office has been approved by the board of directors of the
state or national bank 2depository institution at a meeting called for that purpose.
Note: Under current law, the division of banking (division) in the department of
financial institutions may allow a state bank to exercise certain trust powers. In addition,
the division may allow a trust company bank or a state bank exercising trust powers to
offer trust services at the offices of certain other financial institutions, as long as the
offices are in this state. During the 1995-1996 legislative session, the legislature
amended the law to allow out-of-state depository institutions to establish a Trust Service
Office at a bank or branch location in Wisconsin. This and the preceding Section expand
the authority of the division to allow a Wisconsin state bank or trust company bank to
offer trust services at the out-of-state offices of certain financial institutions.
SB512, s. 12
3Section
12. 224.02 of the statutes is amended to read:
SB512,7,17
4224.02 Banking, defined. The soliciting, receiving, or accepting of money or
5its equivalent on deposit as a regular business by any person, partnership,
6association, or corporation, shall be deemed to be doing a banking business, whether
7such deposit is made subject to check or is evidenced by a certificate of deposit, a
8passbook, a note, a receipt, or other writing, provided that nothing herein shall apply
9to or include money left with an agent, pending investment in real estate or securities
10for or on account of the agent's principal.
Provided, however, that if money so left with
11an agent for investment shall not be kept in a separate trust fund or if the agent
12receiving such money shall mingle same with the agent's own property, whether with
13or without the consent of the principal, or shall make an agreement to pay any certain
14rate of interest thereon or any agreement to pay interest thereon other than an
15agreement to account for the actual income which may be derived from such money
16while held pending investment, the person receiving such money shall be deemed to
17be in the banking business.
Note: This Section exempts from the definition of "business of banking" agents
who receive and hold money pending investment in real estate or securities on behalf of
the person who deposits the money. Under current law such an agent would only be
exempt if the agent kept the money in a separate trust fund, did not mingle the money
with the agent's own property, and did not agree to pay interest on the money. This
Section exempts such agents regardless of whether they pay interest or whether the
money is kept separate. According to the Department of Financial Institutions, the
amendment provides a clear exemption from the definition and will allow "agents for
investments" to pay interest on free credit balances for their clients.
SB512, s. 13
1Section
13. 551.63 (2) of the statutes is amended to read:
SB512,8,82
551.63
(2) No Except as provided under s. 551.34 (1m) (b) and (c), no rule, form
3or order may be made, amended or rescinded unless the division finds that the action
4is necessary or appropriate in the public interest and for the protection of investors.
5In prescribing rules and forms the division may cooperate with the securities
6administrators of other states and the securities and exchange commission with a
7view to achieving maximum uniformity in the form and content of registration
8statements, notice filings, applications and reports wherever practicable.
Note: The current standard in s. 551.63 (2), stats., for actions of the division of
securities prohibits rules, forms, or orders from being made, amended, or rescinded
unless the division finds that the action is necessary or appropriate in the public interest
and for the protection of investors. However, current s. 551.34 (1m) (b) and (c), stats.,
require action when a licensee fails to pay court-ordered child support or is liable for
delinquent taxes.
This Section amends s. 551.63 (2), stats., to exclude the actions required for child
support enforcement and delinquent taxes from the general standard used for division
actions.
SB512, s. 14
9Section
14. 553.26 (4m) of the statutes is amended to read:
SB512,8,1510
553.26
(4m) A person who has complied with sub. (1) need not file with the
11division, during the period when the registration is effective, any more information,
12including any amendments to the offering circular
other than an application or
13amendment required to be filed under s. 553.31. The division may not require
14changes in the offering circular filed by the franchisor, subject to the division's
15authority to suspend or revoke a registration for any of the causes under s. 553.28.
Note: This
Section results from
1995 Wisconsin Act 364. The legislation,
introduced as 1995 Assembly Bill 782, would have repealed s. 553.31, stats., which
requires a franchise registrant to file material amendments to its uniform franchise
offering circular. Assembly Amendment 4 to Assembly Bill 782 deleted the proposed
repeal of s. 553.31. However, the amendment did not include the necessary changes to
s. 553.26 (4m), stats., to remove inconsistent language and to clarify that the
amendments required under s. 553.31, stats., must still be filed with the division of
securities in the department of financial institutions. This
Section makes those changes.