Interim Joint Committee on Banking and Insurance


Minutes of the<MeetNo1> 3rd Meeting

of the 2010 Interim


<MeetMDY1> October 26, 2010


Call to Order and Roll Call

The<MeetNo2> 3rd meeting of the Interim Joint Committee on Banking and Insurance was held on<Day> Tuesday,<MeetMDY2> October 26, 2010, at<MeetTime> 10:00 AM, in<Room> Room 149 of the Capitol Annex. Senator Tom Buford, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Tom Buford, Co-Chair; Representative Jeff Greer, Co-Chair; Senators Julian M. Carroll, David Givens, Gerald A. Neal, Dorsey Ridley, and Dan "Malano" Seum,; Representatives James R. Comer Jr., Ron Crimm, Robert R. Damron, Ted Edmonds, Joseph M. Fischer, Danny Ford, Jim Gooch Jr., Mike Harmon, Dennis Horlander, Dennis Keene, Adam Koenig, Brad Montell, Sannie Overly, Jody Richards, Wilson Stone, and John Tilley.


Guests:  Ballard Cassady, President and CEO, Debra Stamper, General Counsel, Kentucky Banker’s Association, Charles Vice, Commissioner, Department of Financial Institutions, and Thad Vann, Executive Director, Kentucky Manufactured Housing Institute.


LRC Staff:  Rhonda Franklin, Emily Bottoms, Jens Fugal and Jamie Griffin



There was a motion made by Representative Montell, seconded by Representative Richards to approve the minutes of the September 29, 2010, meeting minutes.


Discussion regarding the Dodd-Frank Regulatory Reform Act


Ballard Cassady, President, Kentucky Bankers Association, stated that he was appearing before the committee on behalf of the association as well as the community banking industry in the Commonwealth of Kentucky.  He stated that he provided the committee members with an executive summary of the federal Dodd-Frank Regulatory Reform Act and could provide a more substantial summary if needed.  He stated that the Kentucky Bankers Association urges the General Assembly to safeguard Kentucky’s banking industry, just as the General Assembly has done in the past.  He asked that the General Assembly tread carefully and thoughtfully when considering the barrage of federal legislation that is likely to be introduced in the next few years by those who are misinformed or misled as to the effect of financial reform on community banking states like Kentucky.  He stated it was, and still is, necessary to regulate the unregulated, to put an end to “too big to fail” institutions, and to ensure that exotic investments are not so complex that even regulators cannot understand their terms.  The Kentucky Bankers Association agrees with appropriate regulation of banking, but object to the new federal law because it does not problems that resulted in the ongoing financial crisis, and because it penalizes the only segment of the financial services industry that performed the way it was supposed to during the crisis, the traditional community banking system including Kentucky’s state banks.


In response to a question from Representative Fischer asking if the Dodd-Frank Regulatory Reform Act has been challenged in court and what the Kentucky General Assembly can do to help.  Mr. Cassady replied that the Act has not been challenged at this time, and it is the Kentucky Bankers Association’s hope that the Department of Financial Institutions will stand strong and support Kentucky’s community banks when there is a disagreement.  He said that maintaining consistency is the best way for the General Assembly to help.


Report on the Deferred Deposit Transaction Database created by 09 RS HB 444

Charles Vice, Commissioner, Department of Financial Institutions, gave the committee an update on the Deferred Deposit Transaction Database established pursuant to 2009 RS House Bill 444.   House Bill 444 amended Subtitle 9 of KRS Chapter 286, which was established in the 1992 Regular Session to authorize and regulate deferred deposit transactions referred to as “payday lending”. House Bill 444 limits customers to two transaction at a time totaling $500, set the term of the loan to between 14-60 days and reduced the fee to $15 per $100 borrowed.  It also provided additional enforcement tools, made internet payday lending illegal, prohibited the collection of both principal and interest on payday loans, and mandated the creation of a database which was implemented on April 30, 2010.   The database is a secure, real-time database that will not approve a payday loan in excess of statutory limits.  Commissioner Vice stated that as of September, 2010, there were 1.56 million transactions, with the average advance amount of $310.68, with an average fee of $51.16, and 182,159 total number of borrowers.  House Bill 444 also increased the authority for the Department of Financial Institutions to order restitution, impose probation, levy fines, and enter into consent orders.  He stated that to date the Department of Financial Institutions has assessed six fines, one of which has been paid, with five pending appeal.


In response to a question from Senator Buford regarding the cost of the license fee for payday lenders and the total number of state licenses.  Commissioner Vice stated that the license fee is $500 and there are 657 payday lenders licensed to business in the state.


Representative Jeff Greer stated that Representative Johnny Bell worked diligently to ensure House Bill 444 and wished he could have been able to attend today’s meeting to hear the presentation regarding the progress of the database.


In response to a question from Representative Dennis Horlander regarding the amount of the fines imposed on the payday lenders.  Commissioner Vice stated that fines ranged from $1000 to $5000 per violation.


Discussion of the SAFE Act and the impact on the manufactured housing industry in Kentucky


Thad Vann, Executive Director of the Kentucky Manufactured Housing Association (KMHI), testified that the association had concerns about the potential for their members to be required to register as mortgage brokers under the terms of the SAFE Act when providing information to customers regarding financing of a manufactured home.  However, after multiple discussions with the Department of Financial Institutions, Mr. Vann stated that the issue had been resolved.


The meeting adjourned at 12:00 noon.