ARIZONA STATE SENATE
Phoenix, Arizona
financial institutions
Exempts out-of-state
chartered banks from trust certification by the State Banking Department and
make other modifications to state laws governing lenders.
Financial
institutions receive a license to conduct business, called a charter, from one
of two places. Institutions are
chartered either by the federal government, or by the state in which they do
business. The Arizona Department of
Banking (the Department) is seeking to make numerous changes to statute and to
create a more competitive atmosphere among financial institutions and a market
with more choices for consumers. They
also seek to apply uniform regulations on financial institutions doing business
in Arizona, including advance fee loan brokers. The changes proposed by the agency more closely align Department
requirements to federal practices.
Exemptions
Currently, the State Banking
Department provides exemptions to Federal Deposit Insurance Corporation (FDIC)
member national banks, federal savings institutions, and Arizona chartered
banks and thrifts. No exemption is
given to financial institutions chartered by other states. In different statutes, out-of-state
state-chartered mortgage brokers and personal bankers receive an
exemption. The Department believes that
out-of-state state-chartered banks are at a competitive disadvantage because
the exemption does not apply to them.
S.B. 1046 offers exemptions to out-of-state financial institutions, as
long as certain requirements, like being a member FDIC bank, are met. A second exemption from state regulation is
offered to individuals who make loans with their own money or for their own
investment.
Credit Unions
Recent changes in the
federal law regarding financial institutions, including the Credit Union
Membership Access Act, require changes to Arizona law. Currently, credit unions calculate quarterly
capital reserve amounts using gross earnings as a variable. SB 1046 modifies the way credit unions
calculate quarterly capital reserve requirements by eliminating the gross
earnings variable, which causes the default use of National Credit Union
Association (NCUA) guidelines.
Regulations
Currently, the Department
regulates various financial transactions.
Part of this regulation is the establishment of a secondary motor
vehicle finance rate and the maximum amounts allowed by law. Individuals involved in secondary motor
vehicles transactions can be sellers, bailors, lessor or a title lender, who
loan money for purchase of an auto, and hold a lien on the title. SB 1046 clarifies that lenders for the
purchase of secondary automobiles are subject to the maximum finance rates and
formulas. Similarly, many of the
changes to current statute reflect attempts by the Department to clarify
current practices or to conform to federal practices. The Department is also
seeking the elimination of obsolete statutory provisions, such as the
requirement that loans must be in writing, with the purpose of the loan stated.
According to the Department, there is no fiscal impact associated with this bill.
1. Exempts financial institutions that are FDIC member institutions and that are authorized to conduct business in Arizona, either under federal laws or under any other state’s law, from obtaining a trust certificate from the State Superintendent of Banking.
2. Exempts from state regulation as advance fee loan brokers, persons who make loans with their own money or for their own investments.
3. Eliminates the requirement that credit unions use gross earnings to calculate capital reserve amounts.
4. Clarifies that lenders for the purchase of secondary automobiles are subject to the maximum finance rates and formulas.
5. Codifies the current practice that a mortgage banking licensee name a new responsible individual within 90 days after the Superintendent of Banks receives notice of that the licensee’s current responsible individual will cease to be in active management of the licensee.
6. Eliminates the requirement that loan applications be in writing and state a purpose for the loan.
7. Makes numerous conforming and technical changes.
8. Provides for a general effective date.
Prepared by Senate Staff
January 16, 2001