VOL. XV No. 12 Dec. 3, 2018

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1 VOL. XV No. 12 Dec. 3, 2018 Election Update CSBS Fintech Lawsuit Seattle Releases Public Bank Feasibility Study Appraisal Thresholds Raised ALEC States and Nation Policy Summit Council of State Governments Shared State Legislation Committee NCSL Capital Forum Working Group on State Issues Calendar of Upcoming Events Election Update On Nov. 6, voters went to the polls for elections that included 36 governors races, 6,069 state legislative seats and over 160 statewide ballot measures. According to the National Conference of State Legislatures (NCSL) the big news is that Democrats made modest gains while Republicans held their robust lead in terms of legislative control. By the numbers, 337 legislative seats, went from Republican to Democrat and Democrats picked up partisan control of six legislative chambers (Colorado Senate; Connecticut Senate; Maine Senate; Minnesota House; New Hampshire Senate; and New York Senate). In total, Republicans control 61 legislative chambers and Democrats hold 37 (numbers exclude Nebraska which has a unicameral, nonpartisan legislature). Demographics of legislatures also changed. According to NCSL more women will serve in state legislatures than at any point in American history. Starting in January, women will occupy 28 percent of legislative seats. Women will also hold the majority of all seats in the Nevada Assembly (22 seats out of 42 seats). In terms of governors races, going into the election, Republicans held 33 governorships, Democrats held 16 and one seat was held by an independent (Alaska). After the election, Democrats picked up control in seven states (Illinois, Kansas, Maine, Michigan, New Mexico, Nevada and Wisconsin). Notable ballot measures tracked by ABA included measures related to medical and adult use marijuana, taxes, interest rates and public banks. Medical marijuana passed in Missouri and Utah, while adult-use marijuana passed in Michigan and was defeated in North Dakota. In Arizona, a measure (Proposition 126), prohibiting political subdivisions from imposing a sales taxes on gross income derived from any service performed in the state passed. Colorado passed a measure (Proposition 111) that reduces the maximum APR on deferred deposits or payday loans to 36 percent. In Maine, (Question No. 1) residents voted against raising taxes for high-income earners that would have provided money for universal home care for the elderly. Finally, voters in Los Angeles (Charter Amendment B) rejected a proposal to amend the city charter to allow the city to move forward on creating a public bank.

2 CSBS Fintech Lawsuit After a dismissal of their original lawsuit in April, the Conference of State Bank Supervisors (CSBS) has again filed suit against the Office of the Comptroller of the Currency (OCC), challenging their decision to grant a special-purpose national bank charter for financial technology (fintech) companies. CSBS, which represents the banking and financial services regulators from all 50 states has long-held the view that the OCC lacks the legal authority to issues charters to non-depository institutions. Thus, the current suit is an outgrowth of the view that regulation of fintech companies should be left to state regulators. As background, in 2016, the OCC announced that it would begin the process of developing a special purpose national charter for fintech companies that provide bank-like services, but do not take deposits. The OCC proposal was presented as a white paper that solicited public comment on the proposal. Shortly thereafter, CSBS filed suit claiming among other things that OCC does not have the legal authority to issue special purpose charters and that the process for developing the regulations violated proper rulemaking procedures. In the prior suit, the court decided that this dispute was not ripe for a decision by the court. A related suit filed by the New York Department of Financial Services met a similar fate earlier this year in federal court in New York. Seattle Release Public Bank Feasibility Study In October, a consulting firm engaged by the city of Seattle to examine the feasibility of creating public bank released a report detailing the challenges the city would face in establishing a bank. The report examined several options for establishing a bank including a bank that would duplicate the current services the city receives from its relationship with a private bank and a bank that in addition to serving the city, would also offer supplementary activities including accepting retail deposits, extending loans to private citizens and serving the cannabis industry. The report concluded that based on the complexity of a public entity establishing a bank, the process would at best be a long-term project. Further, compared with the city s existing banking relationship, a model where the city replaces the role currently played by the private sector would not provide cost savings and the city would not be able to redirect savings towards other public policy goals. To establish a city-owned bank, the report identified key steps that would need to be taken, those include: developing a business plan for the bank that takes into consideration how to fund the bank and how to establish corporate independence; amending the city charter for the authority to pursue a bank; receiving approval from state agencies to charter a bank; obtaining approval from the Federal Reserve and changing state laws that would constrain the banks activities. Appraisal Thresholds Raised Banks in many areas of the country have in recent years faced shortages in the number of appraisers available for home inspections. In many instances, the shortage of appraisers has led to price increases and delayed closings. This shortage is in part due to the educational requirements placed on appraisers. To ease regulatory requirements and keep up with rising home prices, the Federal Deposit Insurance Corporation, the Federal Reserve Board of Governors and Office of the Comptroller of the Currency recently announced that it is planning to raise the minimum dollar threshold in a residential mortgage transaction that requires an appraisal from $250,000 to $400,000. This is the first increase for the residential appraisal threshold since According to the regulators, rather than obtaining an appraisal, banks should obtain a valuation that is consistent with safe and sound banking practices. Evaluations do not need to be made by a state-licensed or certified appraiser.

3 ALEC States and Nation Policy Summit The American Legislative Exchange Council (ALEC) held the 2018 States and Nation Policy Summit on Nov in Washington, D.C. This annual event featured standing task force meetings and general session events and speakers. ABA Foundation Executive Director Corey Carslile addressed the Education Task Force during a presentation titled Personal Finance Instruction: Essential Skills for College and Career Readiness. This presentation focused on the ways banks are educating their communities about financial literacy. ABA also tracked two model policies that were considered at the meeting. The first resolution urges states to enact policies that support use of distributed ledger technology. Included in the resolution is a clause that references state-chartered banks reluctance to do business with companies utilizing blockchain technology for tokens or coins. ABA worked with the sponsors of the resolution to make clear that while banks have embraced blockchain or distributed ledger technology, coins or tokens based on blockchain present a different level of uncertainty. The second policy was the sunset of a resolution that lays out the importance of offshore affiliated reinsurance in risk-spreading and management throughout the insurance business. Due to changes to the tax treatment of reinsurance made by the Tax Cuts and Jobs Act of 2017, the resolution became outdated. Council of State Governments Shared State Legislation Committee The Council of State Governments (CSG) Shared State Legislation (SSL) Committee will meet on Dec. 6 and Dec. 8 as part of the CSG National Conference in Covington, Ky. Among the issues being followed by ABA is a recently passed law in Maryland ensuring the continued eligibility under IRS guidelines for contributions to HSA Accounts for certain preventative care procedures. The committee will also take up policy on financial literacy, unclaimed property and student loan servicing. The SSL Committee met most recently on Sept. 14 as part of the CSG West meeting in Snowbird, Utah. The condensed schedule for SSL Committee meetings is part of the change to combine SSL Committee meeting with regional CSG meetings, rather than a stand-alone meeting that was held at CSG headquarters in Lexington, Ky. The goal of the SSL Committee is to serve as a resource to state legislators by identifying, curating and disseminating a compilation of novel approaches to public policy issues. Although the committee focuses on whether the legislative approach is innovative, and not necessarily on whether it is wise, inclusion of a bill in the SSL compilation could be seen as tacit endorsement by some legislators, and at the very least provides a platform for increased cross-state visibility to the legislation. For more information about the SSL Committee, visit csg.org/ssl. NCSL Capital Forum The National Conference of State Legislatures (NCSL) will hold the 2018 Capitol Forum Dec. 5-7 in Washington, D.C. This annual gathering provides an opportunity for state legislators and public policy advocates the opportunity to participate in a host of panel discussions and informational forums on a host of state policy issues. The meeting also includes a Lobby Day for state legislators to engage in visits on Capitol Hill to influence policy in Congress. As part of the Capitol Forum, the Communications, Financial Services and Interstate Commerce (CFI) Committee will hold a business meeting on Thursday Dec. 6, from 10:15 11:30 a.m. During this meeting, the committee will consider policy directives and resolutions offered by public-sector members of the committee. In addition, the CFI Committee plans to address policy issues including sports betting; robocalls; cybersecurity and insurance and internet regulation. Learn more about the CFI Committee s Forum agenda.

4 Editor s Note: Contribute to the Uniform State Laws Bulletin The Uniform State Laws Bulletin invites recipients to contribute content, including published articles, to our Bulletin. We are open to ideas and suggestions that you would like to see featured in our next edition. If you are aware of any recent changes to laws or regulations affecting uniform laws practice in your state or region, we would like to include those as well. Please send your suggestions to Andy Guggenheim or Sabrina Bergen. Working Group on State Issues The American Bankers Association Working Group on State Issues (WGSI), which provides ABA members and state bankers associations with updates on state legislative activity, has ended its weekly call schedule for the year. For the remainder of 2018, ABA will hold calls monthly and provide a weekly e- mail update of relevant state activity. Membership in WGSI is free to ABA members who are active in state legislation and to personnel from state bankers associations. All WGSI conference calls are held on Fridays, at 11 a.m. ET. The call-in number is ; the ID code is WGSI. To join WGSI or if you have any questions, please contact Andy Guggenheim at or Sabrina Bergen at State Legislative Calendar 2018 regular legislative sessions are ongoing in: Illinois, Michigan, New Jersey, Ohio, Pennsylvania, Rhode Island and Washington, D.C. Legislative sessions are complete in: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Nebraska, New Hampshire, New Mexico, New York, North Carolina, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia, and Wyoming. Calendar of Upcoming Events NCSL Capitol Forum Dec. 5-7, Washington, D.C. National Council of Insurance Legislators Annual Meeting Dec. 5-8, Oklahoma City, Okla. CSG 2018 National Conference Dec. 6-8, Cincinnati, Ohio U.S. Conference of Mayors Winter Meeting Jan , Washington, D.C. The Uniform State Laws Bulletin is a service of the American Bankers Association. ABA Members: To unsubscribe and to manage your subscriptions, please visit ABA Bulletins and check or uncheck the appropriate boxes. For other inquiries, please contact ABA s Andy

5 Guggenheim or Sabrina Bergen, Office of Legislative Affairs & Chief Counsel American Bankers Association 1120 Connecticut Avenue, NW Washington, DC 20036