SF 181 – Banking, Professional Licensing omnibus
SF 182 — Reinsurance provisions for domestic insurers
SF 183 – Credit Union omnibus
SF 189 — Risk management insurance regulation
COMMITTEE ACTION:
SF 181 /SSB 1139 incorporates recommendations by the Department of Commerce’s Banking Division and the Division’s Professional Licensing Bureau. Federal law recently changed to allow banks to pay interest on business demand deposit accounts. Currently, Iowa’s public funds law does not allow banks to pay interest on deposits of public funds that are in demand deposit accounts. Banks have historically used N.O.W. accounts as a way to pay interest in these situations, but with the change in federal law, it is appropriate to amend the deposit of public funds law to authorize the payment of interest on traditional demand deposit accounts. The bill amends provisions that currently prohibit a depository, defined as a bank or credit union in which public funds are deposited, from directly or indirectly paying interest to a public officer on a demand deposit of public funds, and prohibit a public officer from taking or receiving interest. The bill provides that a depository may pay interest to a public officer on deposits of public funds, and a public officer may take or receive it. The bill deletes a provision that the previous prohibition did not apply to interest on time certificates of deposit or savings accounts for public funds.
Two years ago, changes were made to the legal lending limit law relating to corporate borrowing groups. After the changes, the same language is used in two different places in the lending limit law. This has created confusion. The bill streamlines the language to provide clarity both to the banks and to the State’s bank examiners. This change is consistent with safe and sound banking practices and in some cases could increase credit availability in the state.
The bill also makes several similar modifications throughout Code chapters relating to those engaged in the businesses of debt management, money transmission, currency exchange and delayed deposit services. The Superintendent of Banking may authorize applicants and licensees to be licensed through a nationwide licensing system and to pay the corresponding system processing fees, and the Superintendent may establish by rule or order new requirements, such as requirements that applicants, including officers and directors and those who have control of the applicant, submit to fingerprinting and criminal history checks. The legislation also makes licensure expiration and renewal dates consistent as December 1 for renewal and either December 31 or January 1 (in the case of a delayed deposit services business) for expiration. Licenses that would otherwise have expired on or before the bill’s effective date of July 1, 2013, will remain in effect until the expiration date as modified by the bill.
SF 181 includes updates to the Real Estate Appraiser Board, clarifies board member qualifications and the quorum requirement, and allows a member to serve for three rather than two consecutive three-year terms. It also authorizes criminal history background checks, through the Iowa Division of Criminal Investigation, as required by the Appraisal Qualifications Board for appraisers certified for federally related transactions as of January 1, 2015. This will not apply to currently licensed appraisers. To comply with federal regulations, the Board needs this statutory authority to meet criteria for certification across the nation for federally related transactions. Iowa homebuyers, homeowners wishing to refinance and lenders would suffer substantial harm if Iowa fails to comply with the federal mandate and could no longer certify real estate appraisers eligible to appraise in connection with federally related transactions. Residential real estate lending in Iowa would virtually dry up. The Bureau will absorb the costs of the background checks.
The bill also removes business entity registration with the Architectural Board. Current law requires authorization from the Board before a business entity can offer or perform architectural services in Iowa, and that has proved burdensome, ineffective and unfair. This “red tape” requirement is replaced with rulemaking authority so the Board can address public safety concerns more effectively and in a more flexible manner. Stakeholder groups have participated in developing proposed rules for this purpose and additional stakeholders will be consulted before formal rulemaking is begun. The new approach will be more fluid, will focus more responsibility on the architect, and will include a less regulatory approach to business entities that hire or otherwise retain or associate with architects. [2/12: short form]
SF 182 /SSB 1052, a recommendation by the Iowa Insurance Division (IID) of the Department of Commerce, updates Iowa’s antiquated law covering reinsurance, based on a model act by the National Association of Insurance Commissioners (NAIC). It includes provisions that allow a domestic insurer to cede reinsurance to an assuming insurer and receive credit for the cession as either an asset or a reduction from liability on account of the reinsurance ceded if certain requirements are met. Iowa is one of 15 states with pending legislation, and 11 states have already adopted the NAIC proposal. Provisions take effect January 1, 2014. [2/12: short form]
SF 183/SSB1128 is a recommendation by the Division of Credit Unions, Iowa Department of Commerce. It makes technical corrections and updates, condenses the dissolution process and adds “branch acquisition” as a type of permitted merger activity. It allows a CUSO (credit union service organization) to form as a limited liability company, in addition to the currently allowed limited partnerships or corporations. The statute governing limited liability companies did not exist when CUSOs were defined in Iowa law many years ago. SF 183 changes Code references to the “chief financial officer” now defined as an elected member of the board to “financial officer whose title is designated by the board.” This reflects current practice that the chief financial officer is typically an executive position serving in management of the credit union. [2/12: short form]
SF 189/SSB 1079, a recommendation by the Iowa Insurance Division (IID) of the Department of Commerce, creates a new Code chapter that requires specified insurers domiciled in Iowa to maintain a risk management framework, complete an internal risk and solvency assessment, and file a summary report of the assessment with the Insurance Commissioner. The reports will be kept confidential. The provisions will apply to an estimated 17 “big player” companies in Iowa (insurers with annual premiums of $500 million or more and insurance groups of which domiciled insurers are members, with annual premiums of $1 billion or more). Most companies are eligible for exemption because their annual direct written premiums are less than $500 million. The proposal is based on a model act by the National Association of Insurance Commissioners, which will also provide a guidance manual. The bill will likely reduce the workload of State insurance examiners by allowing them to focus on specific areas of risk assessment identified through the confidential reports. The legislation takes effect January 1, 2015. [2/12: short form]