Major issues are still on tap in the fledging 2019 Regular Session, with more controversial topics popping up seemingly every week. As legislators began the third week of the session, issues such as repealing “Common Core,” legalizing medical marijuana, and adopting one of two competing lottery proposals were fresh on everyone’s mind. Added to the list this week were prison reform – the U.S. Department of Justice notified Alabama that the condition of the state’s three men’s prisons likely violated the U.S. Constitution’s prohibition against “cruel and unusual punishment” – and ethics reform – two powerful Senators sponsored a 65-page rewrite of the state’s Code of Ethics.
On the banking side, both the House Financial Services Committee and the Senate Fiscal Responsibility and Economic Committee favorably reported a committee substitute of the Future Advance Mortgage Protection Act. The new version of the bill codifies when a future advance mortgage is created and outlines how future advances, whether obligatory or optional, could achieve priority over other potential liens. Candidly, whether the legislation will continue to advance is the subject of much discussion right now, after a week-old Alabama Supreme Court ruling provided the financial services industry with as much certainty in this area of the law – or maybe more –than the legislation.
Additionally, legislation was introduced this week that would allow a certified real estate appraiser to perform a real estate valuation. While current state law does not restrict who can perform valuations, a certified real estate appraiser, by law, is only allowed to create appraisals. This bill would relax these constraints and allow an appraiser to also perform valuations, while not otherwise impacting who can, or cannot, perform an evaluation. The bill has the support of Senate President Pro Tempore Del Marsh (R-Anniston) and the Real Estate Appraisers Board.
As always, Capitol Notes provides readers with a brief summary of legislation that might impact Alabama’s banking industry. Those summaries are as follows:
House Bill 101 by Rep. Kerry Rich (R-Albertville) and Senate Bill 54 by Sen. Shay Shelnutt (R-Trussville) adopts the National Association of Insurance Commissioners’ Insurance Data Security Law. Federal data security regulations already apply to financial institutions, including those institutions’ insurance-related subsidiaries. To ensure that this legislation did not also apply to those entities, the association, working with the American Bankers Association, drafted an amendment exempting financial institutions from the provisions of this bill. The amendment was unanimously adopted in both the House and Senate versions of the bill. Both bills passed out of their houses of origin this week and are now ready to be considered by the other chamber.
House Bill 133 by Rep. Jim Hill (R-Pell City) would require state taxes or fees not already distributed to the Education Trust Fund or State General Fund to be deposited in the State General Fund unless those taxes or fees are constitutionally required to be distributed to a specific fund for a specific purpose. As introduced, this bill would likely divert assessment fees paid by state-chartered banks away from the State Banking Department and into the State General Fund, since assessment fees are not required by the constitution to be distributed to the State Banking Department. The association has historically opposed efforts to divert bank assessment fees away from the State Banking Department. Several other agencies are similarly impacted, and the association is working with them, as well as with the State Banking Department, to amend the legislation. This bill was added to, then removed from, the committee calendar earlier this week.
House Bill 139 by Rep. K.L. Brown (R-Jacksonville) would require a lender that holds all or part of a payment for an insurance claim to, upon request by the insured for payment, either issue the payment or provide a detailed notice of why the payment is being withheld and the steps the insured needs to take for the payment to be released. As currently written, the lender would have 10 days to provide information to the insured or risk paying 20 percent interest on any insurance proceeds held by the lender. This legislation is allegedly in response to issues that arose in the aftermath of the tornadoes that impacted Jacksonville and the surrounding areas last May. The association is in discussions with the sponsor and other interest groups, such as the Homebuilders Association of Alabama, about the legislation and hopes a compromise can be reached, especially with respect to the timelines and interest rate. More than likely, a substitute version of this legislation will be considered by the House Financial Services Committee at their April 17.
House Bill 140 by Rep. Kyle South (R-Fayette) would allow banks and the Department of Revenue to voluntarily enter into an agreement to share certain identification information for bank customers who have been determined by the department to be delinquent taxpayers. Under current law, more than half of all garnishment notices sent to banks are returned because the subject of the notice is not a bank customer. In theory, a data match agreement between a bank and the department would eliminate these “useless” notices. So far, the department has been extremely accommodating in helping the association work out the industry’s causes for concern. Those discussions are ongoing.
House Bill 162 by Rep. Chris Blackshear (R-Phenix City) and Senate Bill 127 by Sen. Shay Shelnutt (R-Trussville) is the Future Advance Mortgage Protection Act. As introduced, the bill would make clear that future advance mortgages are created upon their execution and not, as the state Supreme Court has ruled, when funds are actually advanced. Discussions with the Homebuilders Association of Alabama resulted in additional language being added to the bill to provide clarity on the subject of lien priority for obligatory or optional future advances. A committee substitute to these bills was adopted in the House and Senate this week.
House Bill 304 by Rep. Merika Coleman (D-Birmingham) and Senate Bill 181 by Sen. Shay Shelnutt (R-Trussville) makes clear that certified real estate appraisers can perform a valuation for certain financial transactions involving real estate. While federal law allows valuations to be performed by anyone in certain situations, current state law provides that real estate appraisers can only perform appraisals, effectively eliminating professional real estate evaluators from the current valuations market.
Senate Bill 106 by Sen. Andrew Jones (R-Centre) would allow a member of any branch of the Armed Forces of the United States to contract with a financial institution to obtain a loan or open a checking or savings account. Generally speaking, current state law prohibits anyone under the age of 19 from entering into a contract, including a contract with a financial institution. A person may join the Armed Forces at age 17 with parental consent, or at age 18 or older without parental consent. This bill will be on the Senate Banking and Insurance Committee agenda for next Wednesday.
As of the end of the sixth legislative day, representatives have introduced 611 bills – 365 in the House and 246 in the Senate – and 119 resolutions. The 2019 Regular Session can last for no more than 30 legislative days and must end on or before June 17.
The Legislature will reconvene for its eighth legislative day on April 9.
Questions or comments? Contact Jason Isbell, ABA’s VP of Legal and Governmental Affairs, at jisbell@alabamabankers.com.
