Important Takeaways for Financial Institutions from the 2023 Iowa Legislature Session
The Iowa Legislature had an active session this spring which, at times, caused several newsworthy events. Fortunately (or perhaps unfortunately) for financial institutions, the Legislature took little action on commercial and banking matters. Chris Loftus, a partner with SPMB’s banking group, serves on the Legislative Committee for the Iowa Bar Association’s Commercial and Bankruptcy Law Section. Mr. Loftus, with the assistance of SPMB’s summer law clerk, Sydney Erickson, has prepared a summary of the more noteworthy legislative actions in which financial institutions should take note.
HR 133 – Motor Vehicle Debt Cancellation
On March 22, 2023, Governor Reynolds signed HR 133 into law amending Iowa Code § 537.2510, which pertains, in part, to the rebates paid to consumers upon the prepayment of a retail installment contract with voluntary debt cancellation
coverage. Under the new law, if a financial institution purchases a retail installment contract with voluntary debt cancellation coverage, the only obligation the creditor has upon prepayment- in-full is to notify the motor vehicle dealer within thirty (30) days of the prepayment. The motor vehicle dealer must then promptly determine whether the borrower is eligible for a refund of any voluntary debt cancellation coverage and shall issue the refund to the borrower within sixty (60) days of the dealer’s receipt of the prepayment notice.
HR 133 went into effect on July 1, 2023.
HR 247 – Methods of Communication for Unclaimed Property
On June 1, 2023, Governor Reynolds signed HR 247 into law, which made several amendments to Iowa Code § 556.1, the Iowa Unclaimed Property statute, to allow financial institutions to communicate more efficiently with their customers. Under the prior version of the statute, financial institutions were required to send their unclaimed property notice to their customers via certified mail if the financial institution did not have any communication with the customer for more than three (3) years. Under the new law, financial institutions may now send their unclaimed property notices via “electronic messaging” or regular U.S. Mail.
In addition, receiving communication from the customer via “electronic messaging” now constitutes valid communication for purposes of calculating the unclaimed property time period. “Electronic messaging” is defined to include communication conducted by “electronic mail, text message, or other electronic means, including but not limited to an online banking website application.”
HR 247 went into effect on July 1, 2023.
HR 609 – Mortgage Banker Fees
On May 11, 2023, Governor Reynolds signed HR 609 into law, which allows non-bank mortgage brokers to have the same fees as bank mortgage brokers. HR 609 amends Iowa Code § 535.8, subsection 2. A loan may be made by a licensed or registered mortgage banker under Code Chapter 535B making a loan where the points and fees the borrower is charged cumulatively do not exceed the amounts specified in 12 CFR 1026.43(e). This amendment allows both licensed mortgage bankers and non-mortgage bankers to charge the same fees, encouraging transparency and uniformity in the field.
HR 609 went into effect on July 1, 2023.
HR 675 – Money Transmission Services
Governor Reynolds signed HR 675 into law on May 11, 2023. HR 675 relates to bank transmission services by amending
the Uniform Money Services Act to become the Uniform Money Transmission Modernization Act.
The expansive bill includes updates to the licensing processes for money transmission services seeking to do business in
the state and encourages the superintendent of banking to collaborate with multistate licensing processes. Notably, for
financial institutions, the licensing requirements expressly exempt federally-insured financial institutions. The bill also
permits uniform requirements for licensing across states to ensure multi-state compliance for a money transmission
services business. By bringing the licensing requirements into uniformity with other states, HR 675 is improving consistency and ease of compliance across state lines.
HR 675 went into effect on July 1, 2023.
Uniform Commercial Code Update – Article 14 Controllable Electronic Records
HF 618/SF 540 would amend Article 14 (Controllable Electronic Records) of Iowa’s Uniform Commercial Code to conform to the final version of the Uniform Law Commission’s (“ULC”) provisions on controllable electronic records, otherwise known as digital assets.
This legislation would have amended Iowa’s UCC Article 14, and portions of Article 1 and Article 9, to establish new rules
for the perfection and priority of security interest in “controllable electronic records” and the transfer of interests in digital
assets. “Controllable electronic records” is defined to mean a “record stored in an electronic medium that can be subjected to control.”
Generally speaking, the amendments to Article 14 will provide clarity as to the process lenders must follow in order to take a security interest in digital assets (e.g. bitcoin and other cryptocurrencies).
While HF 618/SF 540 did not pass during this legislative session, the bills were placed on the House and Senate “Unfinished Business Calendars” and will likely be revisited during next year’s legislative session.
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Simmons Perrine Moyer Bergman PLC is a full service law firm with locations in Cedar Rapids and Coralville, Iowa. For more information, visit spmblaw.com.
Disclaimer: This information is intended for general information purposes only and is not intended, nor should it be construed or relied on, as legal advice. Please consult your attorney if specific legal information is desired.