legislation: 100-hr-5094
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| 100-hr-5094 | 100 | hr | 5094 | Depository Institutions Act of 1988 | Finance and Financial Sector | 1988-07-26 | 1988-09-27 | Placed on Union Calendar No: 589. | House | Rep. St Germain, Fernand J. [D-RI-1] | RI | D | S000762 | 0 | (Reported to House from the Committee on the Judiciary with amendment, H. Rept. 100-822 (Part III)) Depository Institutions Act of 1988 - Makes technical amendments to the Bank Holding Company Act of 1956. Title I: Securities Activities of National Banks and Bank Holding Company Subsidiaries - Amends the Banking Act of 1933 to permit banks which are members of the Federal Reserve System (member banks) to be affiliates of qualified securities subsidiaries. Sets forth transitional rules for nonbank subsidiaries of bank holding companies engaging in securities activities. Amends the Bank Holding Company Act of 1956 to allow bank holding companies to own shares of qualified securities subsidiaries. Defines a "qualified securities subsidiary" as any company: (1) which is a subsidiary of a bank holding company, is not a bank or insured institution or a subsidiary of a bank or insured institution, engages in securities activities, and is registered as a broker or dealer under the Securities Exchange Act of 1934; and (2) the formation or acquisition of which by a bank holding company has been approved by the Federal Reserve Board. Allows a qualified securities subsidiary to: (1) underwrite, distribute, and deal in municipal securities, commercial paper, asset-back securities, and certain other securities; (2) securities brokerage, investment advisory services, financial advisory services and certain other activities permitted for brokers or dealers registered under the Securities Exchange Act of 1934 or for investment advisers registered under the Investment Advisers Act of 1940; (3) buy and sell foreign currency, coin, and bullion and engage in interest rate and currency swaps; (4) engage in, or acquire the shares of a company engaged in, certain activities with the approval of the Federal Reserve Board; and (5) engage in distributing securities issued by certain investment companies. Prohibits a qualified securities subsidiary from: (1) underwriting, distributing, or dealing in certain corporate debt securities; (2) underwriting, distributing, placing, or dealing in any equity security; (3) underwriting, distributing, placing, or dealing in any derivatives or variants of such debt or equity securities; or (4) acting as a promoter or sponsor of certain investment companies. Prohibits the Federal Reserve Board from allowing any securities subsidiaries to: (1) engage in any activities other than those allowed by this Act; or (2) engage in securities activities in a capacity as a trustee, executor, administrator, custodian, or guardian of estates. Requires bank holding companies to obtain the approval of the Federal Reserve Board prior to the formation or acquisition of a qualified securities subsidiary by a bank holding company. Prohibits such approval if the Federal Reserve Board determines that the establishment of such a subsidiary would cause: (1) an adverse effect on holding company resources to the detriment of depository institution subsidiaries; or (2) undue concentration in the banking and securities industries. Requires the disapproval of the Federal Reserve Board if an applicant submits an incomplete application, or if the Board determines that certain community benefit, public benefit, or minimum risk-based capital requirements have not been met. Requires any bank holding company that establishes a qualified securities subsidiary to transfer out of its depository institution subsidiaries any securities related activity. Allows certain exceptions to such transfer requirement. Allows up to a one-year transition period for the transfer of such activities if the Federal Reserve Board determines that such a transfer would cause undue hardship or excessive disruption to the operations of the bank holding company. Prohibits any nonbank subsidiary of a bank holding company (other than a qualified securities subsidiary) from engaging in any securities activity after the earlier of: (1) the date a qualified securities subsidiary of such bank holding company commences operations; or (2) two years after the enactment of this Act. Provides exceptions to such prohibitions for advisory services or discount brokerage services, for international or foreign business activities, and for government securities brokers and dealers. Authorizes the Federal Reserve Board to require the divestment of a qualified securities subsidiary by a bank holding company if certain risked-based capital requirements are not met. Specifies that no provision of this Act shall be construed as: (1) superseding any provision of any Federal securities law or regulation relating to the registration or regulation of brokers, dealers, underwriters, or members of exchanges by the Securities and Exchange Commission; or (2) limiting the authority of the Federal Reserve Board to prescribe regulations, issue orders, require reports and make examinations with respect to qualified securities subsidiaries or to regulate bank holding companies and bank holding company subsidiaries. Sets forth additional definitions relating to securities activities for purposes of this Act. Restates and reorganizes certain provisions of Federal banking laws relating to the general powers of national banks and the powers of national banks to engage in securities activities and commercial paper activities. Amends the Federal Deposit Insurance Act to limit the securities affiliations of insured nonmember banks to those in which a national bank may engage. Specifies that a State may not prohibit a bank or a bank holding company from being affiliated with a qualified securities subsidiary solely because the securities subsidiary is engaged in activities permitted by this Act. Allows certain exceptions to Federal Reserve Board approval requirements in connection with certain bank reorganizations. Sets forth expedited procedures for certain reorganizations of banks into bank holding companies and for bank holding companies to seek approval to engage in certain nonbanking activities. Requires the Federal Reserve Board to monitor and supervise the foreign currency operations of bank holding companies. Requires the Federal Reserve Board (and the Comptroller of the Currency) to submit a report to the Congress concerning the proposed regulations to implement the provisions of this Act. Sets forth the effective date of the final regulations required by this Act. Title II: Safeguard Provisions for Bank Safety, Investor and Consumer Protection, and Fair Competition - Part A: Safeguard Provisions Enforcement by Federal Depository Institutions Regulatory Agencies - Limits certain types of transactions between affiliates within a bank holding company where the holding company controls a qualified securities subsidiary. Prohibits any bank or insured institution subsidiary of a bank holding company which controls a securities subsidiary from engaging in specified financial transactions with such a securities subsidiary. Prohibits bank holding companies and subsidiaries of bank holding companies (other than a securities subsidiary) from extending credit to any person for the purpose of purchasing any security during a specified period in which the security is the subject of a distrubution in which a securities subsidiary of such bank holding company participates as an underwriter or a member of a selling group. Limits the types of transactions allowed between bank or insured institution subsidiaries of a bank holding company and the customers of affiliated securities subsidiaries. Prohibits a bank or insured institution subsidiary of any bank holding company which controls a securities subsidiary from disclosing any confidential customer information to any securities subsidiary of such holding company without the consent of the customer. Prohibits a bank or insured institution subsidiary of a bank holding company from sharing corporate names, logos, premises, and advertising with a securities subsidiary. Prohibits any reciprocal arrangement between a bank holding company and subsidiaries of a bank holding company. Prohibits a bank holding company from allowing any director, officer, or employee of any securities subsidiary of such bank holding company to serve at the same time as a director, officer, or employee of any bank or insured institution subsidiary of such bank holding company or any subsidiary of any such bank or insured institution except for clerical, accounting, bookkeeping, statistical, or similar functions or with the approval of the Federal Reserve Board. Allows a bank or insured institution subsidiary of a bank holding company to sell loan assets to securities subsidiaries under specific, limited circumstances. Provides that any bank which owns any interest in a bankers' bank affiliated with a qualified securities subsidiary, or any interest in a holding company which controls such a bankers' bank, shall be treated as a bank affiliated with such qualified securities subsidiary for purposes of the prohibitions required by this Act. Provides an exception to the prohibition against extension of credit between banks and securities affiliates for intra-day extensions of credit in connection with clearing government securities. Prohibits discriminatory treatment of securities firms that are not affiliated with banking organizations. Requires that each bank holding company which controls a securities subsidiary, and each bank or other insured institution subsidiary of such bank holding company, have an annual audit made of its consolidated financial statements by an independent public accountant in accordance with generally accepted auditing standards. Allows the Federal Reserve Board to grant exemptions to such requirement under specified circumstances. Prohibits a bank or insured institution subsidiary of a bank holding company and subsidiaries of such bank or insured institution from providing an opinion to any customer as to doing business with a securities subsidiary or other nonbank affiliate of such bank holding company unless a disclosure is made to the consumer that: (1) the securities subsidiary or affiliate is an affiliate of such bank, insured institution, or subsidiary; (2) the securities subsidiary or affiliate is not a bank or insured institution and is a separate corporate entity; and (3) the securities underwritten, sold, offered, or recommended by the securities subsidiary or affiliate are not federally insured, guaranteed, or otherwise an obligation of the affiliated bank or insured institution. Sets forth criminal penalties and civil money penalties for violations of any of the prohibitions required by this Act. Specifies the appropriate federal regulatory agency for specified types of financial institutions for purposes of this Act. Authorizes the Federal Reserve Board to require a bank holding company to terminate its control of any bank or insured institution subsidiary if the Board has reason to believe that the bank holding company or any of its subsidiaries has engaged in a continuing course of conduct involving violations of the securities activities provisions or the inter-affiliate provisions of this Act. Provides notice, administrative hearing and adjudicatory procedures for requiring such a divestiture. Requires the Federal Reserve Board to submit a report to the Congress containing proposed regulations required to implement the provisions of this Act. Sets forth the effective date of the final regulations required to implement the provisions of this Act. Part B: Safeguard Provisions Enforced by the Securities and Exchange Commission - Amends the Securities Exchange Act of 1934 to prohibit a securities subsidiary of a bank holding company to engage in certain financial transactions with an affiliated bank, insured institution, or their subsidiaries. Specifies the prohibited transactions. Prohibits the disclosure of confidential customer information by securities subsidiaries. Prohibits securities subsidiaries from sharing corporate names, logos, premises, and advertising with an affiliated bank, insured institutions, or their subsidiaries. Requires a securities subsidiary of a bank holding company to prominently disclose in writing to its customers that: (1) the securities subsidiary is not a federally insured bank or insured institution and it is a separate corporate entity from its affiliated bank or insured institution; and (2) the commercial paper and securities underwritten, sold, offered, or recommended by the securities subsidiary are not federally insured, guaranteed, or otherwise an obligation of the affiliated bank or insured institution. Prohibits certain reciprocal arrangements between a bank holding company and subsidiaries. Prohibits any director, officer, or employee of any securities subsidiary of a bank holding company from serving at the same time as a director, officer, or employee of an affiliated bank, insured institution, or their subsidiaries except for clerical, accounting, bookkeeping, statistical, or similar functions and where the Federal Reserve Board allows exceptions to such prohibition. Prohibits a securities subsidiary of a bank holding company from purchasing any asset of an affiliated bank, insured institution, or their subsidiaries for the purpose of including such asset in pool of assets held by the securities subsidiary except under specific and limited circumstances. Provides an exception to the prohibition against the extension of credit between banks and securities affiliates for any credit obtained, received, or used by a securities subsidiary as part of an intra-day extension of credit in connection with clearing government securities. Sets forth special audit requirements for securities subsidiaries of bank holding companies. Authorizes the Securities and Exchange Commission (SEC) to adopt regulations to implement the provisions of this Act. Amends the Investment Company Act of 1940 to require any bank or affiliated person which distributes securities issued by an investment company to prominently disclose in writing to each of such bank or affiliated person's customers that: (1) the investment company is not a federally insured bank and is a separate corporate entity; and (2) the securities of such investment company are not federally insured, guaranteed by any bank or otherwise an obligation of any bank. Amends the Securities Act of 1933 to exempt from certain registration requirements securities covered by specified guarantees. Amends the Trust Indenture Act of 1939 to provide a similar exemption. Part C: Additional Investor Protections - Subpart 1: Broker - Dealer Provisions - Amends the Securities Exchange Act of 1934 to revise the definitions of "broker" and "dealer" with respect to the securities activities of banks. Authorizes the SEC to exempt any person from the definitions of "broker" or "dealer." Requires banks which fit the definitions of "broker" or "dealer" to place their securities activities in a separate corporate entity. Subpart 2: Bank-Investment Company Activities - Amends the Investment Company Act of 1940 to prohibit a bank which is affiliated with a registered management company to serve as custodian of such management company's assets except in accordance with such regulations and orders as the SEC may prescribe. Revises the definitions of affiliated persons and transactions for purposes of such Act. Prohibits a registered open-end company to borrow from any affiliated bank except as the SEC may allow by regulation or order. Revises the definitions of interested person, bank holding company, broker, and dealer for purposes of such Act. Prohibits any registered investment company which has a bank as an investment adviser or distributor from using any name, title, or logo which is similar to, or a variation of, the name, title, or logo of such bank. Sets forth rules for the treatment of publicly advertised common trust funds. Removes the exclusion from the definition of investment adviser for banks that advise investment companies. Part D: Additional Requirements - Requires the Federal Reserve Board, the Comptroller of the Currency, the Federal Deposit Insurance Corporation (FDIC), the Federal Home Loan Bank Board (FHLBB), the Federal Savings and Loan Insurance Corporation (FSLIC), and the Securities and Exchange Commission (SEC) to each establish a program for monitoring and enforcing compliance with the amendments by this Act by bank holding companies, banks, insured institutions, qualified securities subsidiaries, and other nonbank subsidiaries of bank holding companies. Requires the Federal Reserve Board and the SEC to conduct a study evaluating the impact on the securities markets and the banking system of the amendments made by this Act and the effectiveness of this Act in protecting investors and minimizing risks to the safety and soundness of the banking system and the Federal deposit insurance system. Requires the Federal Reserve Board and the SEC to report to the Congress concerning the results of such study. Title III: Insurance Activities - Bank Holding Company and National Bank Improvements Act of 1988 - Amends the Bank Holding Company Act of 1956 to prohibit a bank holding company and its subsidiaries, including any bank or insured institution subsidiary, from engaging in insurance activities in the United States, unless such activities qualify under specified exemptions. Allows certain grandfather rights for bank holding companies to continue to engage in certain insurance activities. Specifies that such prohibition against insurance activities shall not apply to any financial guaranty insurance provided by any financial guaranty insurance subsidiary of a bank holding company to the extent permissible under State law. Requires the approval of the Federal Reserve Board prior to the establishment of such a financial guaranty insurance subsidiary. Sets forth factors to be considered by the Federal Reserve Board prior to granting such approval. Limits interlocking directors and officers between banks or insured institutions and affiliated financial guaranty insurance subsidiary. Prohibits a bank holding company and its subsidiaries which engages in any allowable insurance activities from: (1) disclosing any confidential customer information; or (2) favoring certain insurance agents. Amends the National Bank Act to prohibit a national bank or a subsidiary of a national bank from engaging in insurance activities except for: (1) credit insurance to assure the repayment of credit extensions in the event of the death, disability, or involuntary unemployment of the debtor; and (2) certain title insurance activities. Provides that a national bank located in a place with a population of 5,000 or less may act as an agent or broker for an insurance company if the insurance activities of such bank or subsidiary are authorized by the appropriate State authorities and certain other specified conditions are met. Prohibits a national bank, or subsidiary of a national bank, which is allowed to sell insurance in places with a population of 5,000 or less from: (1) assuming or guaranteeing the payment of any premium on insurance policies; or (2) guaranteeing the truth of any statement made by an insurance customer in filing such customer's application for insurance. Title IV: Consumer Protection Provisions - Subtitle A: Community Benefits - Community Benefits Amendments of 1988 - Amends the Bank Holding Company Act of 1956 and the National Housing Act to require that minimum community reinvestment standards be met by banks and savings and loan institutions and by bank holding companies and savings and loan holding companies prior to any approval of an application for the acquisition of: (1) out-of-state subsidiaries; or (2) interests in securities subsidiaries and certain other nonbanking subsidiaries. Specifies such minimum standards as an imputed community reinvestment rating of #2 or better (on a scale of #1-excellent to #5-poor) as determined by standards set forth in this Act. Sets forth special rules for financial institutions and holding companies with above average community reinvestment ratings. Allows the preliminary approval of such an application by a financial institution or holding company with a rating of #3 if such institution or holding company enters into commitments to improve such rating to #2 within two years. Allows certain acquisitions involving financial institutions or bank holding companies with a rating of less than #3 under specified, limited circumstances. Requires the disapproval of such an application if the applicant bank, savings and loan, holding company or any subsidiary has established a pattern of acquiring or chartering federally insured depository institutions or opening or closing deposit facilities in a manner that tends to exclude low-and moderate-income neighborhoods or equivalent areas. Prohibits the approval of any application of a holding company to establish a securities subsidiary, or of a securities firm to acquire a bank or savings and loan unless the applicant enters into commitments that the combination of banking and securities activities will not diminish the availability of credit and deposit services for low-and moderate-income persons or small businesses or within low-and moderate-income neighborhoods or equivalent areas. Imposes additional requirements for securities firms applying to acquire a bank or savings and loan. Provides special rules for holding companies with five or more depository institutions subsidiaries in one state and with five or more depository institution subsidiaries in more than one state. Excludes certain specified depository institutions from such community reinvestment standards. Sets forth procedures for the consideration of such applications by the Federal Reserve Board and the FSLIC including public notice of applications, the acceptance of public comments, the holding of informal hearings, and the issuance of written findings. Amends the Community Reinvestment Act of 1977 to require the appropriate Federal regulatory agency to publish a newspaper notice of the examination of a financial institution's record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods. Requires each regional unit of the appropriate Federal regulatory agency to prepare and mail to any requesting person a weekly bulletin listing the insured depository institutions within such region undergoing such an examination. Requires the appropriate Federal regulatory agencies to jointly develop a format for collecting data from insured depository institutions in connection with such examinations. Provides that in the case of insured depository institutions with assets of $100,000,000 or more such format shall require additional types of information. Requires the appropriate Federal regulatory agencies to prepare a written evaluation, following each such examination, of the institution's record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods. Specifies that such an evaluation shall have a public section and a confidential section. Sets forth topics to be considered in such evaluation. Requires the Federal depository institutions regulatory agencies to jointly develop and publish rating guidelines for assigning a numerical rating to an insured depository institution's performance in meeting the credit needs of its entire community, including low- and moderate-income neighborhoods. Specifies that the underlying goal of such rating process shall be to measure the extent to which an insured depository institution in committing financial and managerial resources to community reinvestment activities. Requires the appropriate Federal regulatory agencies to provide public notice and opportunity to comment prior to developing and publishing such guidelines. Requires that such rating guidelines be reviewed annually and revised if necessary. Requires each agency to assign such a rating to each depository institution. Provides that any community reinvestment rating assigned to any insured depository institution shall reflect such institution's community reinvestment performance on a comparative basis relative to the community reinvestment performance of other insured depository institutions with similar resources. Specifies that any numerical rating assigned with respect to any insured depository institution shall be determined on the basis of a five point performance rating scale ranging from #1-excellent to #5-poor or sustantial noncompliance. Provides that in approving an application, assessing or compiling data, or rating the performance of an insured depository institution pursuant to this Act, the Federal depository institution's regulatory agency may take into consideration the activities of an institution's parent holding company or nonbank or nonthrift institution affiliates which help to meet the credit needs of the insured depository institution's local community and the activities of any community development corporation which is sponsored by such insured depository institution or the holding company which controls such insured depository institution. Requires the appropriate Federal regulatory agencies to submit annual reports to the Congress containing a compilation of data collected under the provisions of this Act. Subtitle B: Agency Reforms - Requires the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Federal Home Loan Bank Board to establish a consumer division within each of their respective agencies. Sets forth the duties of such consumer divisions, including the periodic examination of each insured depository institution within its jurisdiction to determine the extent to which such institution is in compliance with all applicable laws and regulations relating to consumer protection, including community reinvestment laws. Requires each Federal Reserve bank to establish a community review board. Sets forth the membership of such boards and administrative provisions concerning the operation of such boards. Specifies the duties of such boards, including advising regulatory agencies with respect to, and reviewing the Federal depository institutions regulatory agencies' enforcement of, community reinvestment and consumer protection laws. Subtitle C: Access to Financial Services - Financial Services Access Act - Requires every depository institution to offer consumers a basic financial services account which may be used to obtain: (1) basic transaction services; and (2) government check cashing services. Sets forth the terms of such an account. Sets forth the requirements for government check cashing with such an account. Allows a depository institution to impose a $2 fee for cashing government checks. Requires credit unions to cash government checks for members without charging such a fee. Allows the suspension of government check cashing services to prevent losses due to fraud. Requires the Federal Reserve Board to conduct a study and submit a report to the Congress on the incidence of fraud in connection with government check cashing. Requires depository institutions to post a conspicuous notice that informs account holders and potential account holders that basic financial services accounts and government check cashing services are available. Sets forth rules for the administrative enforcement of such requirements relating to basic financial services accounts and government check cashing services. Subtitle D: Notice of Branch Closures By Bank and Thrift Institutions - Notice of Bank and Thrift Branch Closure Act of 1988 - Requires any national bank which proposes to close any branch to provide a written notice of such proposed closing to the Comptroller of the Currency and to customers of such branch not less than 90 days or more than 180 days before such closing. Specifies the required form and content of such notices. Amends the Home Owners' Loan Act of 1933 to require any savings and loan association which proposes to close any branch to provide written notices of such proposed closing to the Federal Home Loan Bank Board (FHLBB) and to customers of such branch not less than 90 days or more than 180 days before such closing. Specifies the form and content of such notices. Requires the Comptroller of the Currency and the FHLBB, upon receipt of such notice, to determine whether the closing of such branch will result in a significant reduction in the availability of services of depository institutions in the area in which such branch is located and to provide assistance to the community in exploring the feasibility of replacing such branch with adequate banking facilities. Subtitle E: Truth in Savings - Truth in Savings Act - Requires each advertisement, announcement, or solicitation by a depository institution which refers to a specific interest, yield, or rate of earnings on amounts held in any account to state the following information clearly and conspicuously: (1) the annual percentage yield and the period such yield is in effect; (2) all minimum initial deposit, minimum balance, and time requirements for earning such yield; (3) fees or other conditions that could reduce the yield; (4) the annual rates of simple interest; (5) a statement that an interest penalty is required for early withdrawal; and (6) the effective percentage yield on the date of maturity for a certificate of deposit. Authorizes the Federal Reserve Board to exempt advertisements, announcements, or solicitations made by any broadcast or electronic medium or outdoor advertising displays not on the premises of a depository institution from the disclosure requirements relating to initial deposit requirements, fees, and annual rates of simple interest if such dislosure would be unnecessarily burdensome. Prohibits any depository institution from advertising an account as a free or no-cost account if: (1) there are minimum balance or limited transaction requirements to avoid fees; or (2) there is any service fee or transaction fee imposed for such account. Prohibits any institution from making any advertisement, announcement, or solicitation that is inaccurate or misleading or that misrepresents its deposit contracts. Requires each depository institution to maintain a schedule, written in clear and plain language, of fees, changes, yields, and terms and conditions such as minimum balance and time requirements applicalbe to each class of accounts offered. Requires that such schedule be disclosed to potential customers and requesting individuals and mailed to account holders. Directs the Board to require modified disclosure requirements concerning the annual yield on variable rate accounts, multiple rate accounts, guaranteed-rate accounts that mature in less than one year, and accounts for which the interest rate is not guaranteed. Requires a depository institution to calculate the amount of interest on an interest-bearing account based on the full amount of principal in the account for each day of the stated calculation period at the rates of interest disclosed pursuant to the requirements of this Act. Specifies that such requirement shall not be construed as prohibiting or requiring the use of any particular method of compounding or crediting of interest. Directs the Federal Reserve Board to prescribe regulations to carry out such disclosure requirements and to provide for public notice and comment on, and publication of, model forms and clauses for the disclosures required by this Act. Provides for the enforcement of this Act and the civil liability of a depository institution that fails to comply with requirements of this Act. Sets forth limitations on such liability and factors to be considered by the court in determining class action awards. Provides that an institution may not be held liable for a violation if the institution demonstrates that the violation was not intentional and resulted from a bona fide error, or if the institution makes a notification of and an adjustment for errors within a specified time. Establishes U.S. district court jurisdiction and a one-year statute of limitations for actions brought under this Act. Directs the National Credit Union Administration to provide for the similar regulation of credit unions. Specifies that such disclosure provisions do not annul, alter, or affect the laws of any State relating to the disclosure of information in connection with terms of deposit accounts, except to the extent such laws are inconsistent with this Act. Subtitle F: Home Equity Loan Requirements - Home Equity Loan Consumer Protection Act of 1988 - Amends the Truth in Lending Act to prescribe disclosure requirements for any open end consumer credit plan secured by a consumer's dwelling, including: (1) the fixed annual percentage rate; (2) the variable percentage rate with a detailed description of how such rate is calculated and adjusted; (3) an itemization of other fees imposed by the creditor; (4) estimates of fees which may be imposed by third parties; (5) a statement that the consumer risks the loss of the dwelling in the event of any default; (6) any conditions to which disclosed terms may be subject; (7) a statement of the rights of the creditor with respect to extensions of credit; (8) a description of repayment options and the minimum periodic payments required; (9) an example, based on a $10,000 outstanding balance, of minimum payments and the maximum repayment period; (10) a statement concerning balloon payments; (11) a statement concerning negative amortization, if applicable; (12) a description of any limitations and minimum amount requirements on extensions of credit; (13) a statement that the consumer should consult a tax adviser regarding the deductibility of interest and charges under the plan; and (14) any other requirements established by the Federal Reserve Board. Sets forth requirements for: (1) the time and form of such disclosures; and (2) disclosures with respect to third party credit applications. Requires creditors to provide to any applicant for such an open end consumer credit plan a pamphlet to be published by the Federal Reserve Board as required by this Act or any pamphlet which provides substantially similar information. Requires the Federal Reserve Board to publish such pamphlet containing: (1) a general description of open end credit plans secured by consumer dwellings and the terms and conditions on which such loans are generally extended; and (2) a discussion of potential advantages and disadvantages of such plans. Imposes additional disclosure requirements for advertisements of open end credit plans secured by consumers' dwellings. Prohibits any advertisement from being misleading concerning the tax deductibility of any interest expense. Prohibits the use of advertisements for any home equity loan which refer to such loan as "free money" or use other terms determined by the Federal Reserve Board to be misleading. Requires that any information concerning discounted initial interest rates and any required balloon payments be included with such advertisements. Requires that the index or other rate of interest to which changes in the annual percentage rate of such credit plans are related must be based on an index or rate of interest which is publicly available and not under the control of the creditor. Prohibits a creditor from unilaterally terminating such a credit plan or requiring immediate repayment of the outstanding balance of such a credit plan, except in cases of: (1) fraud or material misrepresentation on the part of the consumer; (2) failure by the consumer to meet repayment terms; or (3) other acts or failures on the part of the consumer which adversely affect the creditor's security. Prohibits a creditor from making any unilateral changes in the terms of such a credit plan, except under specified circumstances. Requires a creditor to refund all application fees of a consumer if the creditor changes any terms of the credit time between the time an application is made and the time the account is opened. Prohibits the imposition of any nonrefundable fees by a creditor before the end of the three-day period beginning after the consumer receives all the required disclosures. Requires the Federal Reserve Board to conduct a study and report to the Congress on whether the use of the same term, such as an annual percentage rate, to describe the cost to the consumer for extensions of credit under all forms of consumer credit plans may unduly mislead consumers with respect to the comparability of the various forms of such extension of credit. Subtitle G: Expedited Funds Availability Amendments - Amends the Expedited Funds Availability Act to treat certain credit unions as local originating depository institutions for purposes of such Act. Terminates such treatment after a three-year period. Requires the Federal Reserve Board to report to the Congress within 18 months on the incidence of check fraud losses and certain other specified subjects. Makes exceptions to the expedited funds availability schedules for Federal, state and local government checks. Requires that U.S. Treasury checks and checks drawn on a depository institution and deposited in a branch of that institution located in the same state or check processing region be provided next day availability if deposited at a staffed depository institution. Extends from September 1, 1988, to December 31, 1988, the effective date of the civil liability provisions of the Expedited Funds Availability Act. Subtitle H: Access to Credit - Amends the Equal Credit Opportunity Act to require the Federal Reserve Board to prescribe regulations requiring that no class of transactions primarily for personal, family, or household purposes or commercial or business loans may be exempted from the coverage of such Act unless the Board determines, after a hearing, that such coverage would not contribute substantially to effecting the purposes of such Act. Limits to five years any exemption granted. Requires entities making business or commercial loans subject to such Act to maintain records for at least one year. Title V: Real Estate Activities - Amends the Bank Holding Company Act of 1956 to impose a two-year moratorium on the real estate activities of banks and bank holding companies. Allows exceptions for real estate activities engaged in before July 27, 1988, and in certain other circumstances. Amends the National Bank Act to impose a similar two-year moratorium on the real estate activities of national banks. Allows an exception for national banks engaged in real estate activities before July 27, 1988. Requires the Federal Reserve Board to conduct a review and report to the Congress concerning the real estate activities of banks and bank holding companies. Title VI: Enhanced Enforcement Powers - Depository Institutions Enhanced Enforcement Powers Act of 1988 - Subtitle A: Insider Abuse Prevention and Enhanced Enforcement Powers - Amends the Federal Deposit Insurance Act, the Home Owners' Loan Act of 1933, and the National Housing Act to make employees, agents, and shareholders of banks and thrift institutions subject to administrative enforcement orders. Amends the Federal Credit Union Act to make committee members, employees, or agents of an insured credit union subject to administrative enforcement orders. (Current law provides that only officers and directors of depository institutions are subject to such enforcement orders.) Revises the authority of the Federal Deposit Insurance Corporation (FDIC), the Federal Home Loan Bank Board (FHLBB), the Federal Savings and Loan Insurance Corporation (FSLIC), and the National Credit Union Administration (NCUA) to issue cease and desist orders concerning depository institutions within their respective jurisdictions. Allows such agencies to issue cease and desist orders to: (1) require affirmative action to correct conditions resulting from certain violations or practices, including making restitution or reimbursement, providing indemnification, rescinding contracts, or disposing of assets or loans; (2) limit the activities or functions of the depository institution or any director, officer, or other person participating in the conduct of the affairs of the institution; and (3) require the cessation of certain activities if the depository institution's books and records are incomplete or inaccurate or require the restoration of books and records to a complete and accurate state. Revises rules concerning the suspension or removal of a director or officer of a depository institution due to misconduct by the FDIC, the FHLBB, the FSLIC, and the NCUA. Deletes the requirement that the regulatory agency must show misconduct by an officer or director which results in "substantial" financial loss or other damage to the depository institution. (Allows the temporary removal of an officer or director for misconduct pending a permanent removal if necessary for the protection of the institution or depositors). Provides for identical standards for such removal regardless of where the misconduct occurred. (Current law provides for different standards depending on whether the misconduct took place at another institution or business enterprise or at the particular institution from which removal is sought.) Allows the regulatory agency involved to seek such a suspension or removal in cases where an officer or director has violated any written agreement between the institution and the regulatory agency. Prohibits any person who has been removed or suspended from office or prohibited from participating in the affairs of a depository institution by an order of the FDIC, the FHLBB, the FSLIC, or the NCUA from holding any office in, or participating in the affairs of, any federally regulated depository institution or holding company or subsidiary. (Presently, the regulatory agency can only prohibit persons from participating in the affairs of the institution in which he or she is presently located.) Allows an exception to such prohibition upon written approval of the appropriate regulatory agency. Provides for the judicial review of denial of such an exception. Authorizes the FDIC, the FHLBB, the FSLIC, and the NCUA to provide notice of the intention to prohibit any person from participating in the affairs of any federally regulated depository institution, notwithstanding the fact that such person has ceased to hold the position of officer or director or has ceased to participate in the conduct of the affairs of such a depository institution before such notice is served. Increases from $1,000 per day to $2,500 per day the civil penalty for the violation of a cease and desist order or an order for the suspension or removal of an officer or director issued by a Federal banking regulatory agency. Imposes a $2,500 civil penalty (in addition to penalties for violations of such orders) for a violation of: (1) any law or regulation; (2) any written condition imposed by the appropriate Federal banking agency in connection with the grant of any application or other request; or (3) any written agreement between the depository institution and the appropriate Federal banking agency. Imposes criminal penalties upon any person who participates in the affairs of any federally regulated depository institution or holding company or subsidiary after having been suspended, removed from office, or prohibited from participating in the affairs of any depository institution by an order of the appropriate Federal banking regulatory agency. (Current law imposes criminal penalties only for participating in the affairs of the institution from which the person was prohibited, removed, or suspended.) Revises procedures for the termination of FDIC deposit insurance to delete provisions requiring 120 days' advance notice by the FDIC to the appropriate Federal and State banking regulatory agencies prior to such a termination. Increases from $100 per day to $2,500 per day the penalty for unauthorized participation in the affairs of a depository institution by any person who has been convicted of any criminal offense involving dishonesty or a breach of trust. Makes both the depository institution and the individual involved subject to such penalty. (Current law makes only the depository institution subject to such penalty.) Authorizes the FHLBB and the FSLIC to issue civil enforcement orders concerning a service corporation of an association or a subsidiary of such service corporation, whether wholly or partly owned. (Current law limits such authority to orders concerning an affiliate service corporation of an association.) Amends the Bank Protection Act of 1968 to repeal requirements for depository institutions to submit periodic reports with regard to the installation, maintenance, and operation of security devices and procedures. Imposes civil penalties for the filing of false or misleading reports of condition by depository institutions and holding companies. (Current law allows penalties only for late reports.) Requires the FDIC, the FHLBB, the FSLIC, and the NCUA to publicly disclose all notices and orders with respect to any enforcement proceeding initiated against any depository institution or individual. Deletes the "willful" standard for penalties for violations of the Change in Bank Control Act and the Change in Savings and Loan Control Act. Subtitle B: Report to Congress - Requires the Comptroller of the Currency, the Federal Reserve Board, the FDIC, the FHLBB, the FSLIC, and the NCUA to submit annual reports to the Congress concerning: (1) the number of formal and informal supervisory, administrative, and civil enforcement actions undertaken by the agency; (2) the number of individuals and institutions against whom civil money penalties were assessed; (3) a description of all other enforcement efforts and initiatives relating to unsafe and unsound practices; and (4) recommendations concerning the need for additional legislation or financial resources. Title VII: Federal Asset Disposition Association - Federal Asset Disposition Association Dissolution Act - Amends the National Housing Act to specify that the purpose for establishing new savings and loan associations in connection with liquidations is for such an association to operate as an issuer of savings accounts and a lender and investor and not as an institution having the special purpose of managing or disposing of assets acquired from insured institutions in default. Specifies that provisions of the National Housing Act shall not be construed as authorizing the Federal Savings and Loan Insurance Corporation (FSLIC) to organize a new Federal association for the purpose of managing or disposing of any assets: (1) of an insured institution for which the FSLIC has been appointed receiver; or (2) acquired by the FSLIC in order to prevent a default. Authorizes the FSLIC to delegate such liquidation functions to an appropriate regional office. Prohibits the Federal Asset Disposition Association (FADA) from engaging in any new activities after the date of the enactment of this Act. Directs the FSLIC to require FADA to assign all its rights and obligations under any contract to the FSLIC. Requires the FSLIC, within 60 days after the enactment of this Act, to revoke the charter of FADA and assume its assets and liabilities. Specifies that this Act shall not be construed as any recognition or ratification by the Congress of: (1) any authority of the FSLIC to charter FADA; or (2) any authority of FADA to act on behalf of the FSLIC. Requires the FSLIC to prepare and submit to the Congress a report describing: (1) the manner in which the dissolution of FADA was implemented; (2) the results of such dissolution; and (3) FSLIC's actions as the receiver of FADA. Specifies certain information to be included in such report. Requires the FSLIC to take such action as may be necessary to ensure that the FSLIC and all officers and employees of the FSLIC maintain full compliance with the competitive procurement requirements of the Federal Property and Administrative Services Act of 1949. Requires the FSLIC to liquidate the assets of insolvent savings and loan associations in a manner which: (1) minimizes the cost to the FSLIC; (2) maximizes the return which the FSLIC realizes on the assets; and (3) encourages the use of services of persons in the private sector in managing and disposing of such assets to the maximum extent possible. Requires the FSLIC to ensure that no individuals are employed by the FSLIC under personal service contracts except to the extent that such employment: (1) does not exceed 60 days in any one-year period; or (2) is determined to be necessary because of unusual circumstances which do not allow the position involved to be filled by a civil service employee. Provides that the number of asset liquidation personnel employed by the FSLIC shall not be subject to any limitation imposed by any officer of the executive branch who is not an officer of the FSLIC. Imposes a statutory limit on the number of asset liquidation employees that may be employed at any time by the FSLIC. Requires the FSLIC to establish an employment grade structure for asset liquidation employees which is comparable to the grade structure for employees of the Federal Deposit Insurance Corporation who manage or dispose of assets. Requires representatives of specified Government agencies and the private sector to conduct a multiagency study on options for reducing the duplication, overlap, and inconsistency among Federal agencies and instrumentalities and for making better use of private sector resources in managing and disposing of assets. Requires that a report concerning the results of such study be submitted to the Congress within one year after the enactment of this Act. Title VIII: Miscellaneous Provisions and Technical and Conforming Amendments Relating to Reorganization - Amends the Depository Institution Management Interlocks Act to reduce from 50 percent to 25 percent the level of common ownership required to treat two depository institutions as affiliated. Excludes advisory and honorary directors of depository institutions with assets of less than $100,000,000 from the prohibition on serving as a management official of two depository institutions. Exempts for five years management officials of failed or failing depository institutions or holding companies which are acquired by other institutions. Allows a director of a depository institutions holding company to serve as a director of a nonaffiliated diversified savings and loan holding company provided that the appropriate Federal regulatory agency is given notice and subsequently approves such service. Extends from ten to 15 years the exemption from the requirements of such Act for depository institution management officials whose service began before the enactment of such Act. Requires the Federal Reserve Board, in consultation with the Attorney General, Comptroller General, and the FDIC, to prepare a study of the effects that hostile acquisitions in the banking industry could have on the U.S. banking and financial markets. Specifies the issues to be included in such study. Requires the Federal Reserve Board to report to the Congress concerning the results of such study. Requires the Secretary of the Treasury to consult with the appropriate Federal banking agencies on methods for increasing the use of underutilized minority banks, women's banks, and low income credit unions as depositaries or financial agents of Federal agencies. Requires the Secretary and each appropriate Federal banking agency to submit a report to the Congress concerning any actions taken to increase such use of underutilized minority banks. Amends the Equal Credit Opportunity Act to prohibit discrimination in providing credit on the basis of any course of study pursued or intended to be pursued by the applicant. Amends the National Housing Act to exempt from cross-marketing restrictions subsidiaries of a diversified savings and loan holding company having assets of less than a specified amount. Amends the Bank Holding Company Act of 1956 to prohibit a nonbank bank controlled by a bank holding company from making commercial loans or accepting demand deposits or transaction accounts unless the Federal Reserve Board allowed such activity as of specified dates. Allows: (1) a national bank or bank holding company to own stock in a bankers' bank or bankers' bank holding company; and (2) a bankers' bank holding company to own qualified securities subsidiaries. Permits a bankers' bank or bankers' bank holding company serving minority owned banks to accept non-voting capital investment by investors other than depository institutions. Extends for two years (until August 10, 1990) the limit on the asset growth of nonbank banks. Requires the Federal Reserve Board to make a study of the effects that foreign acquisitions in the banking industry could have on the safety and soundness of banking in the United States. Specifies issues to be included in such study. Requires the Board to submit a report to the Congress on the results of such study. Makes specified technical and conforming amendments to the Bank Holding Company Act of 1956. | 2025-01-14T18:20:21Z |