OLR Bill Analysis
AN ACT CONCERNING DEPARTMENT OF BANKING LICENSEES
This bill (1) makes it clear that a prohibition on charging excessive prepayment penalties applies specifically to secondary mortgage lenders; (2) for purposes of calculating a secondary mortgage lender's liability for imposing excessive prepaid finance charges, adopts a general definition of prepaid finance charges that, among other things, incorporates items specified in federal regulations; (3) clarifies when check cashing facilities must obtain the banking commissioner's approval for certain administrative activities; (4) updates bonding requirements under the Money Transmission Act; and (5) requires the notice that lenders send notifying borrowers of their right to cancel certain insurance products purchased during the high-cost home loan process to be in at least 12-point type and mailed separately. The bill also deletes obsolete language and makes technical changes.
EFFECTIVE DATE: October 1, 2003
PREPAID FINANCE CHARGES
The bill replaces a list of specific prepaid finance charges with the general statutory definition of prepaid finance charges, that includes charges specified in federal regulations, plus fees and commissions relating to the lender's sale of certain insurance and other products during the mortgage process, in computing the liability of a secondary mortgage lender who fails to comply with the statutory limitation on such charges.
CHECK CASHING FACILITIES
The bill requires a check cashing facility to file an application and get the banking commissioner's approval before changing the location specified on its license. Current law prohibits check cashing facilities from changing the location specified on their license application without filing an application to do so with the commissioner, but it does not require them to obtain his approval. The bill eliminates the prohibition on a check cashing facility changing from a general to a limited or a limited to a general facility without filing a new application for the changed facility's license and the applicable application fee.
Current law prohibits check cashing facilities from changing the days and hours specified on their application without the commissioner's prior written approval. The bill limits this prohibition to limited facility licensees and makes it clear that they must file an application seeking approval. (A limited check cashing facility is a mobile facility providing payroll check cashing services on an employer's property on up to two days per week. )
MONEY TRANSMITTERS
The bill makes it clear that entities exempt from the Money Transmission Act are not subject to the Act's prohibition on unlicensed people issuing or selling Connecticut payment instruments or engaging in money transmission activities. It applies requirements regarding conduct of business (such as holding sale proceeds and liability for loss) by a licensee's agent or subagent to people and entities otherwise exempt from the act. These include banks, credit unions, and the U. S. Postal Service. The bill also expands the exemption to include Connecticut banks.
The bill allows the bond required of licensees to be any form of surety bond rather than only a corporate surety bond and requires the attorney general to approve its form rather than the commissioner. It clarifies that the bond covers claims arising during the period that the license is in full force and effect and for two years after it has been surrendered, revoked, suspended, or has expired. Current law states only that the bond remains in place for two years after the licensee stops doing business in Connecticut. If a license is surrendered, revoked, suspended, or has expired, the bill allows the commissioner to lower the bond's required principal sum from the statutorily specified levels (which are $ 300,000, $ 500,000, or $ 1 million, depending on level of business) based on the licensee's level of business and outstanding Connecticut payment instruments.
CONNECTICUT ABUSIVE HOME LOAN LENDING PRACTICES ACT
Current law requires lenders making high-cost home loans to send notice to borrowers who buy credit life, accident, health, disability, or unemployment insurance products from them of the right to cancel the insurance product at any time and receive a refund of any unearned premiums paid. The bill requires the notice, starting October 1, 2003, to be in at least 12-point type and to be sent separately.
COMMITTEE ACTION
Banks Committee
Joint Favorable Report
Yea |
19 |
Nay |
0 |