LEGISLATIVE UPDATE

TO:  CEOs, Presidents & Legislative Contacts

FROM:      Charles M. Miller, SVP / Director of Legislation & Regulation

DATE:        January 23, 2009

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Important: If you are a Visa Member bank please remember that your agreement with Visa requires you to honor the U.S. Bank ReliaCard.  This program was introduced several months ago as a way for the Arkansas Department of Workforce Services to disburse unemployment benefits.  Please see the enclosures for more information.  It is most important that every Visa bank follow the requirements of your Visa contract regarding this issue because State Rep. Jim Nickels, D-Sherwood has drafted (not yet introduced) a bill that would significantly penalize any bank that does not honor these cards to the full extent of their Visa Agreement.  A copy of the draft bill is also enclosed for your review.  In the mean time we will continue to try and persuade Rep. Nickels not to file his legislation.

The Arkansas Court of Appeals ruled Wednesday on a case we have been watching since last spring.  A Washington County Circuit Court and now the appeals court both ruled against the lender in a case where a forged document was used to release a legitimate lien and have a clean duplicate title issued which caused the original lien holder to forfeit their security interest in the vehicle.  Although the Court of Appeals did not overturn the circuit court, one appellate judge did state “The task of equally protecting the legitimate interests of both buyer and sellers of used motor vehicles is a legislative function.”  We are most concerned that this newly established case law could reach beyond the buying and selling of automobiles and impact all types of lending.  We are already scheduled to meet with DF&A on Monday to discuss how the legislature should address this problem.

The State Bank Department Appropriation bill (HB1137) was introduced this week by the Joint Budget Committee and we will watch this legislation closely.  As in past sessions, we will support the bank commissioner however and whenever we can.

Regarding funding for the Bank Department, a bill of great concern, SB 10, has been introduced by Senator Denny Altes, R-Fort Smith.  His legislation would convert all special revenue to general revenue.  This means that the assessments paid by state chartered banks would become general revenue and would no longer be designated only for the regulation of Arkansas banks.  We have opposed such legislation in past sessions and will strongly oppose SB 10 this session.  It has always been the position of the Arkansas Bankers Association that assessments paid to the Bank Department should be use to regulate our institutions and for no other purpose.

Please review the enclosures and let me know if you have any questions.