CBAI attended the OCC’s Central District outreach meeting for trade associations on October 17, 2018. David Schroeder, CBAI’s senior vice president federal government relations, helped inform the OCC about community bank concerns and opportunities. Representing the OCC was Tony Bland (Senior Deputy Comptroller, Midsize and Community Bank Supervision), Blake Paulson (Deputy Comptroller, Central District) Ralph DeLeon (Director Banking Relations), and Ben Lemanski (Associate Deputy Comptroller, Central District).
The day-long outreach meeting began with a Central District Overview which included the District profile and performance, common examination findings, current and emerging risks, district priorities and hot topics. A regulatory relief (S. 2155 implementation) update was provided by the OCC’s Assistant Director of Legislative and Regulatory Affairs (via teleconference from D.C.), and a review of the OCC’s innovation initiative (fintech) was provided by their Innovations Officer (via teleconference from Washington, D.C.).
CBAI used the open discussion period to question the OCC about the implementation of CECL and how we are hearing continued calls from some about the need for community banks to purchase expensive modeling software to comply with the new requirements. The OCC was adamant about not requiring this purchase if a bank can develop an appropriate method for CECL compliance without using expensive software.
Other important issues raised during the open discussion period included the upcoming modernization of the CRA, payments system improvements, and the harm caused by the FDIC’s deposit rate caps. CBAI is actively engaged in each of these regulatory initiatives and encourages continued community banker involvement through member communications.
CBAI is encouraging Illinois community bankers to provide critical feedback as the Federal Reserve considers its role in faster payments. The Fed is hosting a series of town hall meetings on facilitating real-time interbank settlement of faster payments and a liquidity management tool to support settlement services. Learn More About Faster Payments.
The town hall meetings begin next week in each of the Fed’s 12 regional districts. At these meetings, Fed representatives will provide an overview of the conceptual approaches, answer questions and facilitate stakeholder discussions. Register for Town Hall Meetings.
Also, the Fed is now accepting comments on its role in the future of faster payments. CBAI encourages Illinois community bankers to weigh-in on the importance of the Fed in providing fair and impartial access to the payments system for financial institutions of all sizes and charter types. Comments are due to the Fed by December 14th. See Instructions for Commenting.
CBAI has been actively engaged in representing the interest of community banks with Fed meetings in Chicago and St. Louis as well as sending detailed recommendations to the Fed and various other banking agencies highlighting the need for the Fed to play a leading role in payments system improvements. Read Article on Payments Forum. See CBAI Letter to the Fed.
NEWS FROM THE FRONT - 10/09/18
Early voting is now open until November 5. Election day is Tuesday, November 6.
All constitutional offices, including the governor, are up for election on November 6, as well as all 118 House legislative seats, 39 Senate seats, and the 18 Congressional districts. Democrats hope to ride the “blue wave” of liberal voters angry at President Trump, along with a predicted higher turnout of union votes, to an overwhelming victory throughout the state this fall.
The great unknown – how voters will really turn out in November – will determine the results of election day, more so than the individual achievements or potential of the candidates. Very few predicted the outcome of the 2016 elections, but most are betting that with a national blue wave and much higher union motivation and involvement in Illinois, the Democrat voter turnout will far exceed two years ago.
Please click here to read more about key races in CBAI’s Election Preview Guide.
Chicago Mayoral Race
Bill Daley, former Mayor Richard Daley’s brother; Cook County Board President Toni Preckwinkle; former Chicago Chief of Police Garry McCarthy; former Chief of Staff for Mayor Daley, Gery Chico; and former Chicago Public Schools CEO Paul Vallas are among those already announcing a run for Chicago Mayor following Rahm Emanuel’s decision not to run for a third term. Jesus “Chuy” Garcia has announced that he will not run for mayor.
Notes from Springfield
Governor Rauner issued executive orders eliminating 53 inactive or unnecessary boards and commissions in continued efforts to streamline state government operations. The State of Illinois has created more than 600 authorities, boards, bureaus, commissions, task forces, etc., and a majority of those have either completed their work or have not met in several years but still appear as organized.
Deputy Governor and former Comptroller Leslie Munger is now Acting Director of the Department of Commerce and Economic Opportunity. Director Sean McCarthy recently resigned to accept a position in the private sector.
Representative Mike Marron (R) of Danville now replaces retiring Chad Hays in the 104th District. Marron is also on the November 6 ballot.
General Assembly Anti-Harassment Recommendations
The Illinois Anti-Harassment, Equality and Access Panel was formed earlier this year by Speaker Michael Madigan after several allegations of capitol-related sexual harassment and misconduct. The panel held six listening sessions throughout the state and released a report advising political parties to encourage campaigns to adopt policies and training that would prevent sexual harassment. The panel’s report also outlines what should constitute harassment, including derogatory or insensitive jokes, slurs, invasive questions about personal lives, unwelcome sexual or romantic advances, touching, massaging, and bullying. Click here to read the report.
Salary History Bill Veto
Governor Rauner vetoed by Representative Anna Moeller (D) which attempted to prohibit an employer from using wage or salary history in hiring or promoting considerations, meant to help equalize salaries for women. A similar bill passed the General Assembly last year but was also vetoed by Governor Rauner. by Senator Jennifer Bertino-Tarrant (D) offered alternative language by business groups, including CBAI, banning the question of wage and salary history but offering employers an affirmative defense in a potential lawsuit and prohibiting employees from suing in both federal and state courts. SB 3100 was not called for a Senate vote.
Department of Insurance Issues Guidance on Limited Lines Producers Licenses
During the 2017 legislative session, CBAI spearheaded House Bill 759 (P.A. 100-0349) that brought clarity to insurance producers licenses for bank employees. Even with the new, very clear, law on the books, some insurance companies have challenged community bankers about the need for front line employees to hold insurance producer’s licenses. To provide further clarity, CBAI along with a coalition of banking industry groups asked the Illinois Department of Insurance to issue a letter of guidance clearly outlining how they interpret the law. This is intended to quell any further challenges from insurance companies.
From the letter of guidance;
“This legislation amended the Illinois Insurance Code to make it clear that financial institutions and their employees are not required to obtain a limited lines producer’s license or any other form or license to enroll borrowers in group credit insurance policies the financial institution sponsored, and to provide administrative services for those policies.”
Click here to read the full letter of guidance.
Illinois Fiscal Outlook
S&P Global Ratings says Illinois is one of 15 states with an “elevated risk” of severe financial stress during a recession due to lack of budget reserves and higher than average percentage of fixed costs, including pension and retiree healthcare benefits. A potential future economic downturn would create a significant budget revenue shortfall, as high as $3.4 billion, as well as an increase in Medicaid spending which would cost another $732 million. A severe recession, like in 2008, could cost Illinois as much as $7 billion.
Since the 2008 recession, personal income growth in Illinois is among the worst in the nation, only behind Connecticut and Mississippi. Personal income growth rose just 0.7 percent on an annualized basis from 2007 to 2018.
Regarding the fixed costs for Illinois, the state will owe $54 billion in future healthcare costs for retired teachers alone, which is about $4,000 per each adult in Illinois. The state also owes $130 billion in unfunded teacher pension liabilities.
Real Fiscal Reform Needed
Moody’s Investor Services issued a report indicating that three new laws enacted in Illinois in response to the huge backlog of unpaid bills actually fail to address the underlying root problem that led to the state’s reliance on payment deferrals. While the new laws are designed to make the accumulation of old bills less costly and more transparent, Moody’s argues that the laws fail to address the underlying problem of chronic budget deficits and allow the state to defer bill payments into future fiscal years. Today’s bill backlog stands at $8.1 billion, down from a record high of $16 billion reached during the 2-year budget impasse. Moody’s warns that Illinois needs to achieve a budget surplus over the course of several years in order to fully eliminate the backlog without resorting to measures such as bonding.
Comptroller’s Report Highlights Impact of Budget Impasse
Illinois Comptroller Susana Mendoza issued a report this detailing the impacts that the budget impasse had on the state of Illinois. A full copy of the report is Mendoza’s press release provides the following report highlights:
- State contracting with non-profits declined due to the lack of state budgets. Grant contracts with non-profits decreased from 6,333 in fiscal year 2015 to 3,916 in fiscal year 2016—a drop of just over 38 percent. While it’s difficult to pinpoint the number of social service providers that closed as a direct result of the impasse, this drop-in contract shows the negative effect on the state’s provider network.
- During the impasse, public universities and community colleges enrolled 72,196 fewer students, cut 7,490 jobs, and the state lost roughly $948.7 million in generated economic output—$461.7 million of which was felt outside the Chicagoland area.
- The Monetary Award Program (MAP), which is a college tuition grant program designed to benefit low-income students, experienced a decrease in funding from $364.1 million to $169.8 million, a 53.36 percent cut. The number of MAP grants awarded continues to lag pre-impasse levels to this day.
- The bill backlog hit a record peak of $16.7 billion. By the end of calendar year 2017, the amount of late payment interest penalties linked to the budget impasse period totaled $1.139 billion—more than the combined late payment interest penalties over the previous 18 years.
- The fiscal year 2018 budget included $6 billion in general obligation bonding authority to pay down a portion of the backlogged debt. The Office of the Comptroller stopped the clock on most interest accruing bills and used federal matching funds to pay nearly $8.8 billion in backlogged bills. Even with the large paydown, Illinois’ bill backlog remains above pre-impasse levels.
- In interest alone, Illinois will pay $1.936 billion on this new general obligation debt. However, that is much less than the projected cost if the state had failed to refinance a portion of the backlog—between $6.02 billion and $8.02 billion.
Veto Session Preview
The fall veto session is scheduled to convene November 13-16 and conclude the week of November 27-29. Governor Rauner has vetoed 81 pieces of legislation in 2018 including 52 total vetoes and 29 amendatory vetoes. It is likely to be a very busy veto session with the General Assembly taking up override motions.
CBAI is hopeful that the House will take up a concurrence motion on House Bill 3806 containing changes to the Revised Uniform Unclaimed Property Act (RUUPA). The legislation passed the Senate unanimously in the spring but still needs House approval before being sent to the Governor.
CBAI will also work to uphold the Governor’s veto of The legislation would prohibit financial institutions form charging dormancy fees on rebate cards. CBAI opposes statutory fee restraints. The bill passed the House 67-44 and the Senate 35-17, both below thresholds needed to override a veto. .
Community BancPac Raises $19,000 at Convention
The governmental relations team enjoyed seeing hundreds of community bankers at the CBAI annual convention in St. Louis this year. Thanks to those who stopped by the governmental relations booth in the exhibit hall to say hello and talk politics with us.
Thanks to the generosity of community bankers who donated great items and others who bid generously on them, we were able to raise over $18,000 for Community BancPac during the silent and live auctions.
A special thank you goes out to Damian Papish of Quad Cities Bank and Trust who risked life and limb after fellow community bankers spontaneously raised $1,000 in Community BancPac donations to encourage him to ride a mechanical bull at one of the convention social events. That’s truly taking one for the team.
Legislation Enacted into Law
Public Act 100-589: Amends Section 2MM of the Consumer Fraud and Deceptive Business Practices Act to prohibit credit bureaus from charging any fee for placement, temporary lift or removal of a security freeze on a consumer’s credit file; previously, only consumers 65 and older; victims of identity theft and military personnel were immune from such fees, which were allowed up to $10. [ effective date: June 8, 2018]
Public Act 100-626: CBAI initiative……. Amends the recently (2017) enacted Installment Sales Contract to exempt loans that for religious purposes are structured to avoid “interest” payment. [ effective date: July 20, 2018]
Public Act 100-635: Amends Section 1-5 of the Student Loan Servicing Rights Act to add attorneys and law firms to the list of persons or businesses that are exempt from that Act’s licensing and regulation regarding servicing of student loans; banks, thrifts and credit unions were already exempt. [ effective date: December 31, 2018]
Public Act 100-652: CBAI initiative……. Amends the Savings Bank Act by repealing Section 9014; that Section required savings banks to annually pay for an independent audit of their financial condition in addition to the examination from bank examiners.
Public Act 100-661: Amends Section 30 of Illinois’ Electronic Fund Transfer Act to reduce the amount of the fines that may be imposed on a non-financial institution that has established a cash-dispensing only ATM but violates the disclosure mandates in Section 30. [ effective date: August 1, 2018]
Public Act 100-664: Amends Section 48.1 of the Illinois Banking Act, Section 4013 of Illinois’ Savings Bank Act, and Section 10 of the Illinois Credit Union Act to include among the exemptions from the prohibition against disclosure of customer bank/CU records disclosure to the Illinois Department of Human Services or Illinois Department of Healthcare and Family Services (“Agency” or “Agencies”) financial information to be used for determination or re-determination of the customer’s eligibility for long-term Medicaid or other long-term care programs; requires notarized and witnessed customer signature and includes a statutory model form for this authorization to disclose records to the Agencies; permits revocation of consent; bank/CU is required to deliver the records to the Agency within 10 days after receiving the authorization form, but may delay delivery until after receipt of any fees charged to the customer for search, reproduction and delivery of the records; bank/CU discloses records to the Agency, not to the long-term care provider. [ effective date: January 1, 2019]
Public Act 100-778: Amends the Illinois Credit Union Act (“CU Act”) to permit non-subpoena/warrant disclosure of customer records to law enforcement upon the law enforcement agency’s written request explaining suspicion that there may be an imminent threat to the customer’s “personal security and safety;” CU is exempt from liability when disclosing in reliance on the law enforcement request. Also amends the CU Act to distinguish independent audit requirements for CUs: Less than $5 million in assets need not get an annual certified audit from a licensed CPA or CPA firm; more than $10 million are required to have a certified audit by a licensed CPA or CPA firm; between $5 million and $10 million must engage a CPA or CPA firm to either: (1) perform a full independent audit (i.e., same as CUs over $10 million); or(2) establish agreed-upon procedures and standards for a non-CPA certified audit (i.e., comparable to CUs under $5 million). Also amends the CU Act to clarify CU’s authority to acquire, for liquidity and asset/liability management purposes, deposit funds from banks and to purchase assets from banks (with the approval of IDFPR). [ effective date: August 10, 2018]
Public Act 100-783: Amends Sections 78 and 79 of the Illinois Banking Act to expand the size of the State Banking Board of Illinois from 11 to 12 members, with the additional member being from a state-chartered savings bank; an alternate savings bank appointee shall be named to participate on the State Banking Board in the absence of the primary savings bank appointee. Amends the Residential Mortgage License Act of 1987 to eliminate references to the Residential Mortgage Board. [ effective date: August 10, 2018]
Public Act 100-786: Amends Section 6.5 of Illinois’ Trusts and Trustees Act to eliminate the requirement that a transfer of real property to a trust must be “accepted by the trustee.” [ effective date: January 1, 2019]
Public Act 100-795: Amends Section 3-3 of Illinois’ Residential Mortgage License Act of 1987 regarding advertisement requirements and restrictions pertaining to mortgage lending. [NOTE: Banks and “first tier subsidiaries” of banks are exempt from the provisions of that Act. [ effective date: August 10, 2018]
Public Act 100-809: Amends the Illinois Notary Public Act to require the applicant’s business address to be stated on her/his application if notarial duties constitute “any portion” of her/his job responsibilities. Requires notification to Secretary of State within 30 days following change of name or change of business address to avoid lapse of Notary Public commission. Makes other changes regarding violations that may result in suspension or revocation of Notary Public commission by the Secretary of State. [ effective date: January 1, 2019]
Public Act 100-854: Amends Section 8-1-3.1 of the Illinois Municipal Code to expand the definition of “financial institutions” that may make promissory note loans to a municipality (including national banks and credit unions); deletes references to now-extinct savings and loan associations. [ effective date: August 14, 2018]
Public Act 100-877: Amends the Smoke Free Illinois Act to add the Department of State Police to the agencies authorized to enforce the Act; makes other meaningless, technical changes (such as replacing “fine” with “civil penalty”). [ effective date: January 1, 2019]
Public Act 100-888: Amends Section 18 of the Illinois Banking Act regarding a change of control of a state-chartered bank or purchase and assumption of all of its assets and liabilities to add as a condition of approval by the IDFPR Division of Banking that the prospects for financial stability and interests of depositors will not be threatened. Amends Section 48.1 of the Illinois Banking Act to remove the limitation on a bank seeking recovery of costs for search, retrieval, copying and delivery of bank records only if the request is for records of “a customer.” Amends Section 48.3 to allow a bank to share “confidential supervisory information” (bank examinations and regulatory documents pertaining to an examination) with an “attorney, accountant, consultant or other professional” who might assist in the bank’s action and/or compliance related to the confidential supervisory information. Amends Sections 8015 and 9012 of Illinois’ Savings Bank Act to make the same change of control and confidential supervisory information changes that were made to the Illinois Banking Act. [ effective date: August 14, 2018]
Public Act 100-905: Amends Section 16.5 of the State Treasurer Act regarding the Treasurer’s College Savings Pool to allow trusts to own a college savings account and to eliminate the formula for the proportion of account funds that may have (at the Treasurer’s discretion) been placed in the originating bank by the Treasurer. [ effective date: August 17, 2018]
Public Act 100-922: Amends Section 12-1001 of Illinois’ Code of Civil Procedure to exempt from judgment and attachment any ABLE funds in an account. [ effective date: January 1, 2019]
Public Act 100-969: Amends the State Treasurer Act, to, among other things relating to veterans-owned, women-owned and minority-owned business preferences, to require the Treasurer to use a bank’s federal CRA record “and current level of financial commitment to the community” as a factor before selecting the bank to do business with the State. [ effective date: August 19, 2018]
Public Act 100-1044: Enacts the Uniform Powers of Appointment Act, which codifies accepted practices for appointment of a party for future distribution of property in the estate planning context. Prior to this Uniform Law, estate planning appointments were governed only by common law precedents. This Uniform Act was necessary to uniformly codify in statutes definitions such as: “Impermissible appointee” means a person that is not a “permissible appointee.” [ effective date: January 1, 2019]
Public Act 100-1048: Amends Section 2-201 of Illinois’ Code of Civil Procedure to add subsection (c) which protects a plaintiff (e.g., a bank in a foreclosure case) from having a favorable judgment reversed on the ground that there was an immaterial, technical defect in the summons that was served, provided that the summons was otherwise properly served under the procedures of the Act. This legislation was a response to what has become known as the “Arch Bay” case, where a foreclosure sale had been judicially confirmed and the real estate had been purchased and owned by a third party was retroactively invalidated because, although the mortgagor wife’s name was on the front page of the summons, the mortgagor husband’s name appeared on a second page. A corresponding amendment to Section 2-1401(b) of the Code of Civil Procedure requires that any petition to reopen a foreclosure judgment must include all of the parties to the original foreclosure litigation “in addition to the current record title holders…current occupants, and any individual or entity that had a recorded interest in the property” when the petition to reopen the case was filed. [ effective date: August 23, 2018; however, the “Arch Bay” cure regarding summons defect was legislated as “declarative of existing law”]
Public Act 100-1059: Amends Section 4a-5 of The Probate Act of 1975 to include “civil union partners” within the definition of “family” and to include a ‘transfer on death instrument” within the definition of “Transfer instrument.” Amends Section 4a-10 of the Probate Act by adding subsection (c) to specify that if a transfer is invalidated because of a caretaker’s self-serving undue influence on the transferor, a bona fide purchaser of the property owns the property free and clear of the invalidation if the bona fide purchase was made prior to any lis pendens filing that relates to the invalidation cause. Adds subsection (d) to protect a bank from liability if it releases the bona fide purchaser’s funds prior to any freeze or restraint on disbursement of those funds. [ effective date: August 24, 2018]
Public Act 100-1094: Adds Section 9.5 to Illinois’ Wage Payment and Collection Act, requiring employers to reimburse employees for any expense(s) incurred by the employee while in the scope of her/his employment. Employee must submit compensation request, accompanied by “appropriate supporting documentation” within 30 days of incurring the expense. Employer is not liable for the expense compensation unless (s)he/it authorized the expenditure or assigned the employee to the task at which the expenditure was reasonably necessary. Employee is not entitled to reimbursement if employer has a written expense reimbursement policy and employee failed to comply with the policy. If employer’s written expense reimbursement policy specifies cost guidelines, employer is not liable to the extent that requested reimbursement exceeds those specifications, provided that the specifications are not de minimis. [ effective date: January 1, 2019]