The General Assembly adjourned June 16, 2016, finishing the second year of the 2015-2016 session and SCBA enjoyed a successful session with all SCBA-supported bills passing. No bills averse to banking or opposed by SCBA were enacted. The General Assembly will convene on January 10, 2017 for the next two-year session. Below is a summary of bills in 2016 affecting banking.
Enacted Bills Supported by SCBA
- Bad Faith Assertion of a Patent –H3682
- Bank Evaluations of Real Property – H5023
- Uniform Power of Attorney Act – S778
- Revised Uniform Fiduciary Access to Digital Assets Act – S908
Top Issues and Bills for 2015 -2016 Session
Patent Trolls (H3682) – Enacted – This is SCBA’s priority bill establishing a private cause of action, Bad Faith Assertion of Patent Infringement, for banks and other businesses to bring against these entities that attempt to extort high license fees for questionable patent claims. Patent trolls focus on aggressive litigation and threats, without specific evidence of infringement, in an attempt to extort money from target defendants – usually small businesses, including banks. For banks allegations are usually made against processes in ATM and mobile banking technology. For one of these small businesses, defense against a patent infringement claim can easily cost more than $1 million so the business is often left paying the license fee. Thirty-two states have now enacted similar legislation including North Carolina and Georgia.
Bank Evaluations & Appraisal Licensing (H5023) – Enacted –The appraiser licensing statute was amended to allow banks’ employees who are not licensed appraisers to conduct in-house evaluations that comply with the federal banking agencies’ 2010 Interagency Guidelines. The amendment was necessary as even though the Guidelines allowed evaluations, state law still required a licensed appraiser to conduct an appraisal. SCBA brought this to the attention of the Appraiser Licensing Board and they agreed to support H5023 to make this change. Additionally, SCBA worked with the State Board of Financial Institutions to issue an operational instruction to modify an old regulation and allow state-chartered banks to conduct evaluations, in accordance with the Interagency Guidelines. The State Board agreed and issued an operational instruction. Both H5023 and the operational instruction are effective immediately.
Uniform Powers of Attorney Act (S778) – Enacted – This is the South Carolina Bar’s bill addressing Power of Attorney sections intentionally left out of the probate bill from two years ago. S778 adopts a significant portion of the Uniform Power of Attorney Act. SCBA worked with the SC Bar to favorably resolve an issue SCBA raised about allowing banks to request opinions of counsel when a power of attorney is presented.
Revised Uniform Fiduciary Access to Digital Assets (S908) – Enacted – This act extends the traditional power of a fiduciary to manage tangible property to include management of a person’s digital assets. The act allows fiduciaries to manage digital property like computer files, web domains, and virtual currency, but restricts a fiduciary’s access to electronic communications such as email, text messages, and social media accounts unless the original user consented in a will, trust, power of attorney, or other record. For a summary of the Revised Act from the Uniform Law Commission click here.
Savings Promotion Contests (S652) – Enacted – S652 allows banks to conduct savings promotions contests with depositors to incentivize saving. Congress recently passed legislation allowing banks (credit unions already could) to conduct these contests that involve depositors establishing a savings account or making a monthly savings deposit and when they do they are entered into a prize contest. There is no risk to the depositor (and this is not a raffle) as there can be no fee to participate, no loss of deposit for participating and no loss of earned interest.
ABLE Accounts (H3768) – Enacted – This act allows the creation of IRS Code 529 accounts, known as ABLE accounts, that are tax-advantaged savings accounts for individuals with disabilities and their families. The State Treasurer is developing the SC ABLE program to guide interested parties on information required to open an ABLE account, the documentation needed to prove ABLE account eligibility, details of qualified disability expenses and tax reporting documentation. It is effective immediately.
Mandatory Electronic Lien Transmission (H5089) – Enacted – DMV’s legislation makes it mandatory for any commercial lienholder to electronically file the satisfaction of an automobile lien. DMV will establish a fee for filing a satisfaction and will have a higher fee for any commercial entity that files by paper a satisfaction. The bill contains SCBA’s language that any fee charged by DMV to a lender would be considered a permissible fee under the SC Consumer Protection Code. The new law becomes effective in February 2017.
Money Service Businesses (H4554) – Establishes the South Carolina Anti-Money Laundering Act with provisions for the regulation and oversight of money transmission services in South Carolina. Until H4454 was passed, South Carolina was the only U.S. state lacking comprehensive regulatory authority over money transfers. Law enforcement argued that this made the state a center for money laundering activities that facilitated organized criminal enterprises and terrorist activities. The new law establishes new requirements for the licensure and regulation of money transmission and currency exchange services and the South Carolina Attorney General will serve as the primary regulator. Banks and their money service related activities are exempt from the provisions of H4554. It is effective January 1, 2017.
Bills involving lending issues that were not SCBA’s that did not pass but will return next year:
PACE Loans (S668) – S668 was introduced to allow commercial Property Assessed Clean Energy loans made by local governments or other entities to businesses to finance upgrading to energy-efficient systems. In order for the PACE loan to be effective the PACE lien would need to be senior to an existing mortgage for the amount of arrearage. SCBA got language into the bill that a PACE loan can be made only if the mortgagee give express, written consent to not only the senior position of the PACE lien but also consent to the loan itself.
Appraisal Management Companies (S1335) – Although this bill did not move forward it will be re-introduced next session to provide a licensing and regulatory scheme for Appraisal Management Companies. The Dodd-Frank Act required all states to pass such laws within three years of the adoption of the Federal Reserve’s final rule regulating AMCs. The final rule was adopted in 2015 so South Carolina’s law must be passed by 2018.
For a more detailed discussion of bills handled during the 2016 session, click here to view the latest SCBA State Legislative Update. The General Assembly’s website can be found at www.scstatehouse.gov.
The SCBA Government Relations team actively monitors and lobbies on all bank-related state legislation throughout the year. Please contact Neil Rashley at (803) 779-0850 or firstname.lastname@example.org if you have any questions on state legislation, regulations or related matters.