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Notice of Secured Interest in Crops Must Specify Counties

On February 22nd, the Illinois Supreme Court published its opinion resolving the case of State Bank of Cherry vs. CGB Enterprises. The case involved a grain elevator that paid a farmer for crops without honoring the bank’s security interest in the crops by at least naming the bank as a dual payee on the check from the grain elevator. There was no doubt that the grain elevator had received timely notice of the bank’s secured interest in the growing crops, but the question was whether the bank’s notice was legally defective (and therefore not binding on the grain elevator), because the bank’s notice of its secured interest did not explicitly identify the county or counties in which the crops were growing. Illinois’ Third District Appellate Court had ruled in January of 2012 that the federal Food Security Act of 1985 was the controlling law and required strict compliance with its mandate that notice to prospective buyers of crops of a secured interest in crops must identify the county or counties in which the crops were growing.

Because State Bank of Cherry had relied on language such as “all crops wherever growing” instead of explicitly naming the counties in which its borrower had crops, the Appellate Court had ruled that the grain elevator was not liable to the bank for paying the farmer-borrower without honoring the bank’s secured interest. The bank appealed that decision to the Illinois Supreme Court, but on February 22nd the Supreme Court upheld the Appellate Court’s decision and reasoning, thereby conclusively putting Illinois lenders with secured interests in growing crops on notice that they must specifically name the county or counties in which crops are growing when delivering a notice of secured interest to a prospective buyer (e.g., a grain elevator) of the borrower’s crops.

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Notice of Secured Interest in Crops Must Specify Counties

The Illinois Supreme Court has upheld an Appellate Court’s decision that a bank’s notice of secured interest in growing crops must explicitly name the county or counties in which the crops are growing in order for the bank’s notice to be binding on a purchaser of the crops (e.g., a grain elevator), even though the purchaser had received timely notice from the secured bank in advance of the purchase of the crops. For more information, please click here.

If you have any questions pertaining to the Court’s decision or if you would like to receive a copy of the Supreme Court’s opinion, please feel free to contact CBAI General Counsel Jerry Cavanaugh at (800)736-2224 or via e-mail at jerryc@cbai.com.

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State Department of Revenue Issues Tax Refund VISA Debit Card

February 6, 2013 -- The Community Bankers Association of Illinois is aware that the Illinois Department of Revenue (“Revenue”) has circulated a one page information sheet (“notification”), informing financial institutions that Revenue has issued VISA prepaid debit cards for State tax refund payments in lieu of drawing paper checks for tax refunds. The Revenue notification states that tax refund cardholders can receive cash draws from any bank, regardless of whether the cardholder has an account relationship with that bank. The notification also states that the cash draw shall be provided “without surcharge or other cardholder fees” and the notification is titled “NO FEE MANUAL CASH DISBURSEMENTS.”

Unlike the Illinois Department of Public Aid’s cooperative efforts several years ago to work with Illinois financial institution trade associations before finalizing Public Aid’s data match program pertaining to accountholders with delinquent child support obligations, Revenue adopted the VISA tax refund debit card program and circulated the notification to financial institutions without prior discussion with CBAI or other financial institution trade associations.

CBAI will pursue discussions with Revenue in an effort to reach an understanding that will minimize the financial and operational burdens that Revenue’s notification might present to CBAI Members and CBAI will apprise our membership of all relevant information that we gather related to this issue.

In the interim, if you have concerns, questions or comments regarding the impact of Revenue’s notification on your bank, please contact CBAI General Counsel Jerry Cavanaugh by e-mail at jerryc@cbai.com.

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CBAI Supports Dallas FRB Plan for "Too-Big-To-Fail"

January 22, 2013

The Federal Reserve Bank of Dallas recently published a proposal titled Financial Stability: Traditional Banks Pave the Way. CBAI subsequently wrote Richard W. Fisher, Dallas Federal Reserve Bank President and CEO, in strong support of his prescription to end "too-big-to-fail." READ PROPOSAL.

CBAI has long advocated downsizing the mega banks that have become unmanageable and unregulatable but receive government bailouts when they fail. Fisher’s important proposal states, “For a prosperous future, the nation must find lasting financial stability … but where? Not in the big financial institutions at the center of the recent crisis. Not in the misplaced hope of restraining these powerful organizations via regulation. Instead, stability is to be found in a surprising place – all around us. America’s numerous community banks, small and traditionally oriented, demonstrated stability during the crisis and its aftermath. Imparting their virtues to the financial system as a whole will require the end of financial institutions that are too-big-to-fail.”

Fisher recommends that these overly complex TBTFs should be restructured into multiple business line entities and only the commercial banking operations should benefit from deposit insurance and access to the Fed’s Discount Window. He cites the significant differences between the 12 financial behemoths that have amassed 69% of the banking industry assets and the 5,500 community banks that represent just 12% of the banking assets.

In a speech delivered on January 16th, 2013, Fisher said, “The approach of the Dallas Fed neither expands the reach of government nor further handicaps the 99.8% of community and regional banks. Nor does it fight [the] complexity [of TBTF banks and financial firms] with complexity [Dodd-Frank].”

Fisher concluded, “There should be more than two present solutions: bailout or the end-of-the-economic-world-as-we-know-it. Both choices are unacceptable. The next financial crisis could cost more than two years of economic output, borne by millions of U.S. taxpayers. … End TBTF by introducing market forces instead of complex rules, and in so doing, level the playing field for all banking institutions.” READ SPEECH.

CBAI, in cooperation with the ICBA, will actively advocate the adoption of the plan during this session of Congress.

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CBAI Applauds GAO Study of "Too-Big-To-Fail"

January 15, 2013

CBAI applauds the decision by the Government Accountability Office to study the economic benefits received by the “too-big-to-fail” megabanks as a result of actual or implied government bailouts. In the waning days of the 112th Congress U.S. Senators David Vitter (R-LA) and Sherrod Brown (D-OH) introduced legislation requiring the GAO to conduct this study (Vitter-Brown GAO Study on Government Subsidies of Megabanks). While this bill passed the Senate by unanimous consent it was not taken up in the Republican-controlled House. In January Senators Vitter and Brown wrote the GAO to encourage this study, and last week the GAO announced they will conduct a study. READ LETTER In the letter to GAO Comptroller General Dorado the Senators said the government has not done enough to prevent future bailouts. “There is broad bipartisan support for the position that we must end “too-big-to-fail” government policies, whereby the U.S. government provided financial support to large financial institutions to protect them from failures of their own making.” “We should all want free-market principles to apply across the financial system and do everything possible to ferret out any market distortions fostered by government involvement and subsidies to the largest megabanks.” In a separate statement the Senators said, “After the financial crisis of 2008, policymakers should seek all available data to unwind too-big-to-fail market distortions.” CBAI thanked Senators Vitter and Brown and also the GAO. We look forward to the results of this important study and vigorously support legislation to downsize "too-big-to-fail" banks.