REPORT TITLE:
Escrow Depositories


DESCRIPTION:
Makes amendments to the escrow depository law authorizing the
Commissioner of Financial Institutions to protect the
confidentiality of certain depository information, and waive
fees.  The Commissioner is also authorized to set fees for the
establishment, relocation, and voluntary termination of
depositories, and for requested searches, reviews, or segregation
of agency records.  Revises and standardizes procedures for
voluntary termination of escrow depository operations.  (HB2466
HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2466
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO ESCROW DEPOSITORIES.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Chapter 449, Hawaii Revised Statutes, is amended
 
 2 by adding three new sections to be appropriately designated and
 
 3 to read as follows:
 
 4      "449-    Confidential portion of application or records.
 
 5 No material contained in any application or record shall be made
 
 6 available to the public if it is determined by the commissioner
 
 7 to be confidential.  Information that may be considered
 
 8 confidential includes the following:
 
 9      (1)  Commercial or financial information, the disclosure of
 
10           which would, or would be likely to, result in
 
11           substantial competitive harm to the applicant or escrow
 
12           depository;
 
13      (2)  Information, the disclosure of which could seriously
 
14           affect the financial condition of the applicant or
 
15           escrow depository; or
 
16      (3)  Personal information, the release of which would, or
 
17           would be likely to, constitute an unwarranted invasion
 
18           of privacy.
 
19      449-    Termination of escrow depository operations.  (a)
 
20 A solvent escrow depository whose capital is not impaired and
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1 which has not received a notice of charges and proposed
 
 2 suspension or revocation order pursuant to section 449-17 may
 
 3 cease its business and surrender its license in the following
 
 4 manner:
 
 5      (1)  The board of directors shall adopt a resolution
 
 6           approving a plan to cease activity for which a license
 
 7           to operate as an escrow depository is required.  If
 
 8           applicable, the plan shall include but not be limited
 
 9           to provisions for the sale, exchange, or disposition of
 
10           all outstanding escrow accounts or other business for
 
11           which an escrow depository license is required by this
 
12           chapter;
 
13      (2)  The escrow depository shall notify in writing all
 
14           buyers and sellers whose accounts contain outstanding
 
15           balances, of the termination of the escrow depository's
 
16           operations and the specific arrangements made to handle
 
17           the particular transaction.  The escrow depository
 
18           shall also employ a contact person to respond to
 
19           questions and provide documents on closed accounts.
 
20           The contact person or person's successor shall perform
 
21           these duties until the applicable statutes of
 
22           limitations have lapsed.  The written notice under this
 
23           paragraph shall include sufficient information to
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1           identify the contact person and the person's duties,
 
 2           and to allow interested parties to contact the person;
 
 3      (3)  The escrow depository shall file an application with
 
 4           the commissioner in the prescribed form for approval to
 
 5           cease activity for which a license to operate as an
 
 6           escrow depository is required.  The application shall
 
 7           be accompanied by:
 
 8           (A)  A copy of the plan to cease activity for which a
 
 9                license to operate as an escrow depository is
 
10                required, certified by two executive officers of
 
11                the escrow depository, to have been duly adopted
 
12                by the board;
 
13           (B)  Any application required by section 449-8.6, if
 
14                applicable;
 
15           (C)  A copy of the notice sent by the escrow depository
 
16                to all buyers and sellers whose accounts contain
 
17                outstanding balances; and
 
18           (D)  Any other information that the commissioner may
 
19                require;
 
20      (4)  The commissioner shall approve the application to cease
 
21           activity for which a license to operate as an escrow
 
22           depository is required if:
 
23           (A)  The commissioner is satisfied with the plan;
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1           (B)  The conditions for approval under section 449-8.6,
 
 2                if applicable, have been met; and
 
 3           (C)  No other reason exists to deny the application;
 
 4                provided that the commissioner may impose any
 
 5                restrictions and conditions as the commissioner
 
 6                deems appropriate; and
 
 7      (5)  Upon receipt of the commissioner's approval:
 
 8           (A)  An escrow depository that has filed a plan
 
 9                attesting that the company does not retain any
 
10                outstanding escrow accounts or other business for
 
11                which an escrow depository license is required by
 
12                this chapter, shall forthwith surrender to the
 
13                commissioner all of its escrow depository
 
14                licenses; and
 
15           (B)  An escrow depository that has filed a plan that
 
16                includes provisions for the sale, exchange, or
 
17                disposition of outstanding escrow accounts or
 
18                other business, upon receipt of the commissioner's
 
19                approval, shall proceed with its plan to cease
 
20                activity for which a license to operate as an
 
21                escrow depository is required.
 
22           Upon completion of its plan, the escrow depository
 
23           shall file a written notification with the
 

 
Page 5                                                     2466
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1           commissioner, signed by its president and secretary,
 
 2           certifying that there are no outstanding escrow
 
 3           liabilities.  Should circumstances warrant such action,
 
 4           the commissioner may require that an audit report
 
 5           showing the final accounting of the company's
 
 6           operations and prepared by a certified public
 
 7           accountant at the expense of the escrow depository, be
 
 8           submitted.  The written notification shall be
 
 9           accompanied by the surrender of all of the escrow
 
10           depository's escrow depository licenses.
 
11      (b)  Nothing in this section shall preclude the commissioner
 
12 at any time from seeking any relief or sanction from the courts
 
13 that may otherwise be permitted by law.
 
14      449-    Waiver of fees.  Notwithstanding any law to the
 
15 contrary, the commissioner, for good cause, may waive any fee
 
16 imposed pursuant to this chapter.  The waiver of a fee shall be
 
17 entirely within the discretion of the commissioner."
 
18      SECTION 2.  Section 449-1, Hawaii Revised Statutes, is
 
19 amended by adding a new definition to be appropriately inserted
 
20 and to read as follows:
 
21      ""Division" means the division of financial institutions of
 
22 the department of commerce and consumer affairs."
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1      SECTION 3.  Section 449-11, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "449-11  Fidelity bonds; deposit.  A licensed escrow
 
 4 depository [shall] at all times, and for each director, officer,
 
 5 and employee who has access to, or possession or control of money
 
 6 or negotiable securities, shall either:
 
 7      (1)  Maintain a fidelity bond executed by a surety insurer
 
 8           authorized to do business in the State in an amount not
 
 9           less than $25,000; provided that[,] any bond [which]
 
10           that is subject to a deductible thereunder, in excess
 
11           of $5,000 per occurrence, shall require the prior
 
12           approval of the commissioner, who may take into
 
13           consideration, among other factors, the amount of the
 
14           proposed bond; or
 
15      (2)  Deposit an equivalent amount of cash or securities
 
16           under such terms and conditions as are acceptable to
 
17           the commissioner[,].
 
18 [upon all of its officers and employees who have access to money
 
19 or negotiable securities or instruments in its possession or
 
20 under its control.]  Notwithstanding the above provision, the
 
21 escrow depository may carry bonds or deposit cash or securities
 
22 above the amounts required by the commissioner."
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1      SECTION 4.  Section 449-14, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "449-14  Fees.  (a)  The following fees shall be paid by
 
 4 licensed escrow depositories to the commissioner and, together
 
 5 with any administrative penalty or other charge assessed under
 
 6 this chapter, shall be deposited into the compliance resolution
 
 7 fund established pursuant to [[]section[]] 26-9(o):
 
 8      (1)  For filing and investigation of an escrow depository's
 
 9           application for license, $2,000[;], or such other
 
10           amount as the commissioner shall establish by rule;
 
11      (2)  For an application for approval to establish a branch
 
12           office, a fee in such amount as the commissioner shall
 
13           establish by rule;
 
14      (3)  For an application for approval to relocate an existing
 
15           office or branch, a fee in such amount as the
 
16           commissioner shall establish by rule;
 
17     [(2)] (4)  For initial issuance and annual renewal of an
 
18           escrow depository's license, $100[;], or such other
 
19           amount as the commissioner shall establish by rule;
 
20     [(3)] (5)  For initial issuance and annual renewal of a
 
21           branch office license, $50[; and], or such other amount
 
22           as the commissioner shall establish by rule;
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1     [(4)] (6)  For reissuance of a license [or endorsement on the
 
 2           license] for the change in the business address of its
 
 3           office, $25[.], or such other amount as the
 
 4           commissioner shall establish by rule; and
 
 5      (7)  For an application for approval to cease business as an
 
 6           escrow depository, a fee in such amount as the
 
 7           commissioner shall establish by rule.
 
 8      (b)  The commissioner may charge an examination fee based
 
 9 upon the cost per hour per examiner for all escrow depositories
 
10 examined by the commissioner or the commissioner's staff.  The
 
11 hourly fee shall be $40; however, the commissioner may when
 
12 necessary by rule establish, increase, decrease, or repeal the
 
13 hourly fee.
 
14      (c)  In addition to the examination fee, the commissioner
 
15 may charge any escrow depository examined or investigated by the
 
16 commissioner or the commissioner's staff, additional amounts for
 
17 travel, per diem, mileage, and other reasonable expenses incurred
 
18 in connection with the examination.
 
19      (d)  The commissioner shall bill the affected escrow
 
20 depository for examination fees and expenses as soon as feasible
 
21 after the close of the examination or investigation.  The
 
22 affected escrow depository shall pay the division within thirty
 
23 days following the billing.  All payments made pursuant to this
 

 
Page 9                                                     2466
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1 section shall be deposited into the compliance resolution fund
 
 2 established pursuant to section 26-9(o).  Any dispute by the
 
 3 affected escrow depository relating to these billings shall be
 
 4 reviewed by the commissioner who may modify, waive, or suspend
 
 5 any billing.
 
 6      (e)  The fee for a request by any person to search, review,
 
 7 or segregate the records of the division shall include the
 
 8 following charges:
 
 9      (1)  Actual time expended by examiners or other staff of the
 
10           division to search, review, or segregate the records of
 
11           the division shall be charged at the then-prevailing
 
12           hourly examiner fee as established by rule, and shall
 
13           be billed at that hourly fee prorated in increments of
 
14           fifteen minutes, including any fraction thereof; and
 
15      (2)  If applicable, the actual rate of charge, based upon
 
16           time expended, that is charged to the division by a
 
17           person other than the division for services to assist
 
18           the division in the search for, review, or segregation
 
19           of a record.
 
20 Unless otherwise provided by statute, a fee imposed under this
 
21 subsection shall be required to recover the actual costs incurred
 
22 by the division in response to a request to search, review, or
 
23 segregate its records, and shall be deposited into the compliance
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1 resolution fund established pursuant to section 26-9(o).  The
 
 2 division may waive any of the fees contemplated by this
 
 3 subsection for any agency of any state, federal, or foreign
 
 4 government entity duly entitled to request access to a record of
 
 5 the division.
 
 6      (f)  An escrow depository that fails to make a payment
 
 7 required by this section shall be subject to an administrative
 
 8 penalty of not more than $200 per day for each day it is in
 
 9 violation of this section."
 
10      SECTION 5.  Statutory material to be repealed is bracketed.
 
11 New statutory material is underscored.
 
12      SECTION 6.  This Act shall take effect upon its approval.