SS HCS HB 738 -- FINANCIAL SERVICES

This bill makes several changes in the law regarding financial
institutions and services.

TAX CREDITS

The bill:

(1)  Allows any employee of Harley-Davidson in Kansas City to be
considered a resident of an enterprise zone, even if the
employee ceases to live in an enterprise zone, as long as the
individual:

(a)  Was a resident of an enterprise zone for one calendar month
prior to his or her employment with Harley-Davidson;

(b)  Remains employed with the Harley-Davidson facility; and

(c)  Continues to reside in Missouri (Section 135.230, RSMo);

(2)  Exempts financial institutions that pay tax obligations
from escrow accounts from certain local delinquent property tax
repayment laws relating to the time and interest at which
delinquent real property tax payments may be made (Sections
139.050, 139.052, and 139.053);

(3)  States that, if the corporate franchise tax is repealed for
Missouri corporations other than financial institutions, then:

(a)  Financial institutions will be granted a tax credit, in
place of the existing tax credit, of 1.5% of net income.  S
corporations must pass the tax credit through to their
shareholders; and

(b)  All taxes and tax credits on S corporations will be passed
through to the shareholders, with certain exceptions (Section
148.064); and

(4)  Allows insurance companies, beginning with the tax year
2003, to carry premium tax deductions for examination fees
forward to any of the 5 subsequent tax years in order to claim
the full deduction.  These deductions will be credited against
the General Revenue Fund and not the County Foreign Insurance
Fund (Section 148.400).

FINANCIAL INSTITUTIONS

The bill:

(1)  Clarifies the manner in which subordinate liens on motor
vehicles or trailers must be perfected (Section 301.600);

(2)  Modifies bank stockholders' meeting laws to allow voting
shareholders to transact all business required at annual or
special meetings by unanimous written consent (Section 362.044);

(3)  Allows state bank and trust companies to hold
noncontrolling equity interests in financial business entities
that are owned by other financial institutions located in
Missouri, lend money on real estate, and handle real estate
closings and escrows (Section 362.105);

(4)  Allows certain bank and trust companies in communities with
sufficiently small populations, as established by rule of the
Division of Finance, to keep the additional powers granted to
them for 5 years after they exceed the allowable population
(Section 362.105);

(5)  Allows state bank and trust companies to offer any product
or service that a national bank can offer, as long as the state
bank follows federal law while conducting these practices,
follows Missouri insurance and licensing laws, and is approved
for these purposes by the Division of Finance after a prescribed
notice period (Section 362.106);

(6)  Provides that state law preempts the field of future
legislation by political subdivisions as to the regulation of
financial institutions (Section 362.109);

(7)  Expands the capital investment allowances granted to state
banks to include holding companies authorized to do business in
the state (Section 362.119);

(8)  Clarifies that investment prohibitions on certain trust
companies do not apply to allowable investments not mentioned in
the prohibitions, other than stocks or investment securities
(Section 362.170); and

(9)  Allows bank and trust stockholders to appoint a chief
executive officer or a president.  Current law only allows a
president to be appointed (Sections 362.270, 362.325, 362.335,
and 362.495).

TITLE LOANS AND OTHER SMALL LOANS

The bill:

(1)  Redefines consumer credit loans, beginning on January 1,
2002, as unsecured loans for personal, family, or household
purposes in amounts of $500 or more (Section 367.100);

(2)  Allows persons seeking renewal of a license to provide
consumer credit loans to have the option of providing a surety
bond or irrevocable letter of credit in the amount of $100,000
to the Division of Finance, in place of the current requirement
of an annual audit report (Section 367.215);

(3)  Removes the requirement that title loan borrowers pledge
their property to the title lender.  The title loan lender will
no longer retain the certificate of title during the length of
the loan.  The bill also removes the provision stating that
money borrowed under a title loan agreement is not a debt of the
borrower and that the borrower is not personally liable under
the agreement (Section 367.500);

(4)  Clarifies that all information submitted by a lender to the
Director of the Division of Finance is confidential (Section
367.503);

(5)  Requires title lenders to be licensed with the Division of
Finance.  Current law only requires registration (Section
367.506);

(6)  Requires title lenders to post a $20,000 surety bond or
irrevocable letter of credit for each location, removes the
requirement that title loan lenders be residents of Missouri,
and retains a $1,000 investigation fee for each location upon
renewal of license (Section 367.509);

(7)  Removes the requirement that title loan borrowers pay fees
at the time of renewal of the loan and requires them to reduce
the principal of the loan by 10% of the total principal upon the
third or any subsequent renewal.  Current law requires a
reduction of 10% of the original principal (Section 367.512);

(8)  Requires title lenders to provide defaulting borrowers with
the same notice and opportunity to cure defaults as other
borrowers and repeals the existing requirement whereby a title
loan borrower is required to deliver the property described in
the loan to the borrower at the end of the first loan period
(Section 367.512);

(9)  Allows title lenders to charge only those interest rates
and fees allowed to other small loan lenders.  Small loan
lenders may charge any interest agreed to by the parties, but
may only charge fees on the initial loan contract, and those
fees cannot exceed 5% of the principal or $50, whichever is less
(Section 367.515);

(10)  Requires certain additional disclosures and forms for all
title loans, including informational notices to borrowers, the
potential consequences of default, and the maximum rates charged
by the lender (Section 367.518);

(11)  Subjects title lenders and borrowers to the same default
and foreclosure proceedings as other lenders (Sections 367.521
and 367.527);

(12)  Requires title lenders to keep records on the loans and
notices given to their customers for at least 2 years and
requires that all title lenders be examined by the Division of
Finance prior to ceasing business (Section 367.524);

(13)  Enacts certain notice and posting requirements for title
lenders (Section 367.525);

(14)  Creates a procedure for revocation or suspension of title
lender licenses which includes a hearing before the Director of
the Division of Finance and establishes civil penalties of up to
$1,000 per day or cease and desist orders for title lenders who
violate the provisions of the bill (Section 367.532);

(15)  Allows bona fide fees to be collected on residential real
estate loans for any actual and necessary services associated
with the loan (Section 408.052);

(16)  Allows late payment charges not to exceed 5% of the
payment due or $50, whichever is less, on small loans overdue
for 15 days or more (Section 408.140); and

(17)  Requires all lenders in the business of making unsecured
loans under $500 ("payday lenders"), with exceptions for certain
types of loans, to comply with the same principal reduction,
notice and opportunity to cure, interest and fee limitations,
disclosures and forms, record-keeping, examination, default
collection, and penalty provisions that are applied to title
lenders throughout the bill, except that the principal reduction
requirements for lenders making unsecured loans under $500 do
not apply until the fifth renewal and no surety bond is required
of these lenders (Section 408.500).

INSURANCE

The bill:

(1)  Prohibits any regulation regarding the charging of
insurance commissions on credit insurance or the payment of fair
market value consideration on contracts to facilitate the sale
of insurance from being more restrictive on financial
institutions than regulations are on insurance agents, subject
to enforcement actions by the Division of Finance or the
Division of Credit Unions as necessary to protect the safety and
soundness of the financial institution (Section 427.220); and

(2)  Increases the attachment exemption for unmatured life
insurance contracts of persons in bankruptcy proceedings from
$5,000 to $150,000 (Section 513.430).

Missouri House of Representatives
Last Updated November 26, 2001 at 11:45 am