April 11, 2008
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| It may not have been the prettiest of endings, but the General Assembly adjourned Sine Die April 4. Ordinarily the presiding officers of the two chambers simultaneously gavel the session to a close. However this year, the House adjourned several minutes before midnight as the Senate continued in session voting on one last bill. While the media has constantly focused on all that was not done and the obvious acrimony among the leadership, the session turned out to be a good one for the banking industry. In the two years of this Legislative session, the GBA monitored, asked to be introduced, or worked to amend 73 separate bills. Historically, most legislation of interest to bankers would be considered by either the House or | Senate banking committees. While a number of important bills passed through these committees, we also had to work with the House Ways and Means Committee, House Judiciary Committee, Senate Finance Committee and Senate Judiciary Committee. Issues as far ranging as bank taxation, foreclosure reform, class action law suits against banks, and preserving the use of bank-issued checks were considered by these committees. While some legislators had a steep learning curve, overall we developed a good working relationship and were successful. The following bills were of most interest this session. With questions, please contact GBA's Senior Vice President, Government Relations, Elizabeth Chandler. | |
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 S.B.
355 was introduced by Senate Judiciary Committee
chairman Preston Smith and others. In its original
form, the bill would have eliminated any checks, other than
lawyer trust account checks, as being equivalent to collected
funds in a mortgage transaction. We worked with Sen. Smith
to add back bank-issued checks to those equivalent to collected
funds. In the House, that allowance was clarified to mean
cashier's checks which are what most banks use today. Rep.
Larry O'Neal (R-Warner Robins) had the bill amended to
conform the Georgia statute to the Federal Truth in Lending
Act as it applies to loans with rescission rights. The
current Georgia statute required loans involving settlement
agents (closing attorneys) to be funded the day the loans were
closed. Rescission loans are usually funded with the
settlement agents the day after the rescission period ends.
Most lenders were unaware of the conflict. In last week's
Legislative Update, we told you about former Governor Roy
Barnes' complaint to the legislature that removing the
conflict was somehow anti-consumer. Through Rep. Don
Wix (D- |
Mableton), he
tried to remove Rep. O'Neal's language, but that effort failed.
However, in a surprise move, Sen. Smith had the bill amended to
require funding the day prior to disbursement - a practice not
followed by the industry. A conference was held between
the House and Senate and Sen. Smith agreed to not require the
funding of rescission loans until the disbursement day.
However, he told us his bill was solely intended to help closing
attorneys disburse "good" funds and wanted to avoid the
possibility of a lender getting an extra day of float on the
loan proceeds. Therefore he insisted rescission loans be
funded by 11:00 am on the disbursement day, and the Senate
conferees (Sen Smith, Sen. Joe Carter (R-Tifton) and Sen.
Bill Cowsart (R-Athens) refused to agree to a final bill
without this language. In order to eliminate a possible
class action law suit against innocent lenders who were unaware
of the Truth in Lending Act conflict, the House members agreed
to the Senate language. We do not expect this to be a
problem for lenders, but wanted you to be aware of this new
requirement. |
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 The
House and Senate passed a final version of H.B. 1093, a bill that
clarifies the notification provisions for liquidated damages
which result from the failure to satisfy a mortgage within the
current 60-day period after a loan has been paid. The bill was
introduced by House Judiciary Committee chairman, Wendell
Willard (R-Sandy Springs). The bill is in response to a
number of class action cases which have been filed against
lenders throughout Georgia. The last time this particular
statute was amended was in the late 1990's. While the
statute requires that cancellations be made with the clerk of
superior court within 60 days, some lenders were inadvertently
missing that deadline. Most of the instances we had heard
of dealt with the final payment not matching the amount due.
On audit, most of these loans were settled and the lender sent
the cancellation notice to the clerk. While this may have
been a technical violation of the statute, no harm was
essentially done to the borrower. Enter the trial lawyers. It had been assumed
by lenders that in order
for a borrower to receive the liquidated damages, the borrower
would have to give notice to the lien holder and demand the
payment. Plaintiff lawyers have taken that a step further and
are now saying the demand can be made when a suit is filed
seeking the payment not only for the borrower, but also for
any other
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borrowers of the lender whose
mortgages had not been satisfied within the 60 day period.
We are aware of nine class action lawsuits pending in Georgia
dealing with this subject. While the first lawsuit to be
heard was ruled in favor of the lender, the plaintiff is
pursuing the case by filing an appeal and has told us he plans
to take the matter all the way to the Supreme Court. While
the courts may eventually rule in favor of the lenders, that
could be several years away. The House Judiciary Committee
worked with both the GBA and the Georgia Trail Lawyers
Association in developing a compromise. The committee
was convinced the original legislation should not be interpreted
to give a new plaintiff right, but was also concerned that a
better notice to consumers who were satisfying their obligations
was in order. Therefore the committee passed legislation
which requires a new notice to the borrowers within 60 days of a
loan being paid off informing them of the satisfaction
requirement. But more importantly, the final bill also addresses
the class action issue by requiring the borrower to give the
lender a 15 day notice prior to filing suit to give the lender
time to file the notice. The bill also prevents the
borrower from assigning his interest in liquidated damages to an
attorney. Our
thanks to Sen. Bill Cowsart (R-Athens) for
handling the bill in the Senate. |
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| We began the session expecting foreclosure-related legislation to be among the top priorities of several legislators. We had been told to expect an all-out attack on Georgia's non-judicial foreclosure process, but that did not surface until relatively late in the session. Although a number of bills were introduced, no action occurred until Sen. Bill Hamrick, Chairman of the Senate Banking and Financial Institutions Committee, joined a number of activist legislators and introduced S.B. 531. As introduced, the bill primarily dealt with foreclosures that are conducted in the name of someone other than the lender, a practice common today with securitized mortgages. Sen. Hamrick held hearings on that bill along with another bill he introduced that extended the notification of foreclosure from 15 to 30 days. Both bills passed the Senate, but at his request, the House Judiciary Committee combined the bills into one. After extensive negotiations among lenders and borrower-activists, a compromise bill was reported. As passed, the bill |
changes the current 15-day notice of foreclosure
sale to a 30-day notice; requires the security instrument or
an assignment to be filed with the clerk of superior court prior
to a foreclosure sale; and requires the notice to include the name,
address, and telephone number of the individual or entity who
has full authority to negotiate, amend, and modify all the terms
of the mortgage with the debtor. The legislators and
activists pushing to change Georgia foreclosure laws from a
non-judicial process to a judicial process continued to offer
amendments up to the final day of the session. Sen.
Hamrick would not agree to that language. While this bill will require some changes
to foreclosure procedures, it is far more benign than moving to
a judicial foreclosure process. |
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You may recall
the Perdue Administration sponsored legislation in 2005 creating
a new tax liability for banks that invested in U.S. Obligations
- essentially every bank.
The new tax burden was
disproportionately felt by community banks. In the 2007,
legislation introduced at GBA's request reverted the statute to
the pre-2005 version which would have saved banks almost $8
million. However, Governor Sonny Perdue vetoed that
legislation and assured us the Department of Revenue (DoR)
would work with us and consider a way, by regulation, to lessen
the new tax burden. GBA's Tax Advisory Committee
considered several options and made two separate proposals to
DoR which were rejected. When the Legislature convened,
one of their first acts was to override 12 of Governor Perdue's
vetoes, and his veto of our tax bill was one of those
overridden. However, the Senate failed to take action on
any of the overrides except the one bill that allowed the Senate
to create their own budget office. Throughout the session, Rep.
David Knight (R-Griffin) met with us and
Administration officials looking for other alternatives. He
kept constantly being told the statutory formula was tying the
hands of the DoR and they had no choice
except to use the formula. In fact, during the session,
the DoR actually proposed a new regulation adopting the
troublesome language from the original legislation.
However, Rep. Knight used another of his bills that was working
its way through the process, and |
amended that bill to delete the formula
altogether. The bill passed and is awaiting the
Governor’s signature. Rep. Knight
has been assured by Administration officials that alternatives can now be considered
in spite of the recent regulations being adopted. We
will continue to work on this issue in an attempt to lessen this
new tax burden. Our thanks to Rep. Knight for his
continuing efforts to find an equitable solution.
In other tax legislation, the Administration sponsored legislation designed to tax Real Estate Investment Trusts (REITs). An article last year in the Wall Street Journal exposed the way Wal-Mart rents their buildings from their REIT and moves that income through off-shore tax exempt entities. That tax scheme has drawn the attention of other legislatures throughout the country. The Georgia legislation was drawn to go after that kind of REIT; but as is often the case, it is difficult to precisely carve out bad practices from good. While most of our members do not have REITs, those that do are using them for legitimate purposes such as raising Tier 1 capital. The legislation that was under consideration, H.B. 447 would have increased the tax burden on these institutions along with other well-known Georgia companies like UPS and Home Depot and raised millions of new tax dollars. Our thanks to Ways and Means Committee Chairman, Larry O'Neal for quickly understanding the ramifications on legitimate REITs and for not pursuing the legislation this year. We expect a more narrow bill to be introduced in the 2009 session and will be working to ensure an equitable result for our members. |
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Following is a
list of the major legislation GBA monitored that received final
passage during the 2007. Governor Perdue has the option of
signing or vetoing these bills within 40 days of the end of the
session. Those he chooses not to sign or veto will go into
effect July 1 unless another date is stated in the bill.
Uniform Securities Act Credit Reports and File
Freezes Identity Theft S.B. 24 by Sens. Staton, Shafer, Carter, Chance, Rogers and Harp. Prohibits persons from using the Internet or electronic mail to induce another to provide identifying information by falsely representing themselves to be a business without the authority or approval of the business. Clarifying language has been added protecting businesses who are unaware of their employee's use of company equipment to violate this law. Liens Filing Fees Trust |
Infrastructure Bank H.B. 1019 by Reps. Lunsford, Smith, Mills, Sheldon, Graves and Shaw. Introduced at the request of Governor Perdue, the bill establishes an infrastructure bank to fund local transportation projects through a revolving loan fund. Motor Vehicles H.B. 470 by Reps. Parrish, Rice, Parham and Powell. Creates a new state lemon law for vehicles. Provisions relating to lease arrangements would be of most interest to our members but do not seem to be problematic. Lottery Annuity Assignment
Mobile/Manufactured Homes Asset Protection Waivers Health Savings Accounts Resolutions Honoring Bankers S.R. 985 by Sens. Hill, Wiles and Rogers. A resolution recognizing Kessell Stelling, CEO of Bank of North Georgia, for his many years of civic involvement and for most recently being named by Governor Sonny Perdue to the Board of Regents.
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| GBA
closely monitored the various versions of Speaker Richardson's
plan that originally would have replaced ad valorem taxes with a
sales tax on services including banking services. After
several attempts at other versions of the concept and a late
move by the Senate to offer an income tax reduction as an
alternative, no tax bill passed.
Bankruptcy Exemptions Home Inspector Licensing |
Retraining Tax Credits This was a carryover issue from the 2007 session. You may recall that the Department of Revenue attempted to eliminate most tax credits banks use when they are training their employees for new positions. We were successful in getting that language removed from the legislation last year, but the bill remained an active vehicle throughout the session to be moved. However, in the end, no action was taken.
Payday/Alternative Lending
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Contact GBA Staff Lobbyists With Questions |
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GBA's three lobbyists were onsite at the Capitol all session to be available to legislators and staff as questions arose about the various bills that may have affected the banking industry. If you have questions about any legislation, please call on these professionals for their help. Also, GBA's State Issues Page of our website contains more information about all bills monitored. |
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Georgia Bankers Association • 50 Hurt Plaza, Suite 1050, Atlanta, GA 30303 • Phone 404.522.1501 • Fax 404.522.9848 • www.gabankers.com |
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