STAND. COM. REP. NO. 572

 

Honolulu, Hawaii

                  

 

RE:    S.B. No. 887

       S.D. 1

 

 

 

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fifth State Legislature

Regular Session of 2009

State of Hawaii

 

Madam:

 

     Your Committee on Commerce and Consumer Protection, to which was referred S.B. No. 887 entitled:

 

"A BILL FOR AN ACT RELATING TO ESCROW DEPOSITORIES,"

 

begs leave to report as follows:

 

     The purpose of this measure is to update and clarify the existing law governing licensure and regulation of escrow depositories to reflect the growth and the changing practices of the industry over the more than three decades that have passed since the law was enacted. 

 

     Your Committee received testimony in support of this measure from the Department of Commerce and Consumer Affairs.  Written testimony presented to the Committee may be reviewed on the Legislature's website.

 

     Your Committee finds that the current law governing the licensure and registration of escrow depositories has not been updated in thirty-six years. In that time, the transactions routinely handled by Hawaii's escrow depositories have grown in both number and size so that many escrow depositories may currently be undercapitalized although they are compliant with the current law.  The current law does not provide adequate protections to consumers and does not provide consumers or escrow depositories with a contemporary framework for the conduct of escrow transactions. 

 

     Your Committee notes that the issue of statutorily requiring arbitration to resolve disputes involving escrow depositories was raised at the hearing on this measure.  Your Committee finds that an arbitration mandate is more appropriately addressed in an individual escrow contract than in statute.  Therefore, your Committee has excluded an arbitration requirement from this measure and recommends that such a requirement not be inserted at a later stage in the legislative process. 

 

     Your Committee has amended this measure by:

 

     (1)  Specifying that an emergency situation that may compel closure of an escrow depository includes a flood;

 

     (2)  Adding a new section to direct associations of escrow companies to provide their members with updated educational materials on a regular basis;

 

     (3)  Adding a definition of "tangible net capital";

 

     (4)  Clarifying that the tangible net capital requirements of this measure apply equally to all escrow depositories regardless of their status as a corporation, partnership, limited liability corporation, limited liability partnership, or other corporate status;

 

     (5)  Deferring the effective date of this measure to encourage further discussion; and

 

     (6)  Making technical, nonsubstantive changes for the purpose of clarity and accuracy in the language of this measure. 

 

     As affirmed by the record of votes of the members of your Committee on Commerce and Consumer Protection that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 887, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 887, S.D. 1, and be placed on the calendar for Third Reading.

 


Respectfully submitted on behalf of the members of the Committee on Commerce and Consumer Protection,

 

 

 

____________________________

ROSALYN H. BAKER, Chair