HD28 - The Revision of the Interest Rate Laws of the Commonwealth and Monitoring the Savings and Loan Laws and the Interstate Banking and Savings and Loan Laws of the Commonwealth

  • Published: 1986
  • Author: General Assembly. Joint Subcommittee
  • Enabling Authority: House Joint Resolution 217 (Regular Session, 1985)

Executive Summary:
INTRODUCTION

The joint subcommittee studying the revision of the interest rate laws of the Commonwealth and the savings and loan laws and the interstate issue was established pursuant to House Joint Resolution No. 30 of the 1984 Session of the General Assembly. During the 1984 interim the subcommittee studied all three issues and recommended legislation to revise the savings and loan laws and to enact statutes regulating interstate banking and the interstate activities of savings and loan associations. Both of those bills were passed by the 1985 Session of the General Assembly and enacted into law. House Document No. 20 printed, January, 1985, is the report of the subcommittee on its work during the 1984 interim. The subcommittee recommended in that report that a resolution be passed by the 1985 General Assembly to continue the study of the subcommittee in order that it may further deliberate and consider the revision of the interest rate laws of the Commonwealth and to monitor the interstate activities of the banks and savings and loans in Virginia and to monitor the newly revised savings and loan statutes. The 1985 General Assembly passed House Joint Resolution No. 217 to continue the study and that resolution reads as follows:

HOUSE JOINT RESOLUTION NO. 217

Continuing the joint subcommittee study, established under House Joint Resolution No. 30 of 1984, to review the savings and loan laws, the interest rate laws of the Commonwealth and interstate banking.

WHEREAS, pursuant to House Joint Resolution No. 30 of the 1984 Session of the General Assembly, a joint subcommittee was established to study the issue of interstate banking, the revision of the savings and loan laws and the revision of the interest rate laws of the Commonwealth; and

WHEREAS, the full joint subcommittee that was established was able for the most part to complete its work on the interstate banking issue and the revision of the savings and loan laws in order to introduce legislation but needs to continue to monitor federal activity in these areas; and

WHEREAS, the interest rate subcommittee of the full joint subcommittee was diligent in its efforts to complete its work but was unable, due to time constraints, to draft a final bill that it felt was satisfactory and, therefore, needs to continue its study; and

WHEREAS, there remains a need to revise the interest rate laws and to state them in a clear manner for the benefit of the citizens of the Commonwealth; now, therefore, be it

RESOLVED by the House of Delegates, the Senate concurring, That the joint subcommittee established pursuant to House Joint Resolution No. 30 of the 1984 General Assembly, is requested to continue its study of the interest rate laws of the Commonwealth, in order to clarify and consolidate them and to continue to monitor the federal government's activity in the areas of savings and loan laws and interstate banking.

The membership of the joint subcommittee shall remain the same. In the event a vacancy should occur in the membership, the vacancy shall be filled by the same person or committee as provided in the House Joint Resolution No. 30 of 1984.

All agencies of the Commonwealth shall assist the joint subcommittee in its study.

The joint subcommittee shall complete its work in time to submit recommendations to the 1986 Session of the General Assembly.

All direct and indirect costs of conducting this study are estimated to be $19,000.

Delegate George H. Heilig, Jr., of Norfolk remained the Chairman of the subcommittee. The other members of the House of Delegates appointed under House Joint Resolution No. 30 of the 1984 Session continued to serve under House Joint Resolution No.. 217 of 1985 and they were: William T. Wilson, of Covington, Alson H. Smith of Winchester, Franklin P. Hall of Richmond and Vincent F. Callahan, Jr., of McLean. Senator William F. Parkerson, Jr. of Henrico remained the Vice-chairman of the subcommittee. The other senate members appointed under House Joint Resolution No. 30 of 1984 continued to serve on the joint subcommittee under House Joint Resolution No. 217 and they were: Edward E. Willey of Richmond, Peter K. Babalas of Norfolk and Richard J. Holland of Windsor. The two citizen members who were appointed pursuant to House Joint Resolution No. 30 of the 1984 Session continued to serve under House Joint Resolution No. 217 of 1985 General Assembly and they were John B. Bernhardt, Vice-Chairman of the Board of Sovran Bank and Edwin B. Brooks, President of Virginia Federal Savings and Loan Association.

C. William Crammé, III, Senior Attorney and Terry Mapp Barrett, Research Associate of the Division of Legislative Services served as legal and research staff for the subcommittee. Barbara Hanback and Ann Howard of the House Clerk's office provided administrative and clerical staff assistance for the subcommittee.

WORK OF THE SUBCOMMITTEE

The subcommittee's first meeting held on June 17 was an organizational meeting. Representatives of the various financial institutions had been asked by the Chairman of the subcommittee to update and make comments on the newly enacted savings and loan laws and interstate laws passed by the 1985 General Assembly. The meeting was also held to informally discuss the method by which the subcommittee would study the interest rate laws.

At that meeting the Virginia Bankers Association updated the committee on the interstate banking legislation that was passed in 1985. Representatives of the Association observed that a week prior to the meeting the United States Supreme Court had upheld the principle of regional interstate banking in the case of "Northeast Bancorp, Inc., et al v. Board of Governor's of the Federal Reserve System," et al 105 S. Ct. 245(1985). The Association noted that the Supreme Court's decision was a broad decision and stated that the regional interstate banking principle did not violate the Douglas Amendment, the Commerce Clause, the Compact Clause or the Equal Protection Clause, and thereby answered all major constitutional questions as to the principle of regional interstate banking. The Association advised the subcommittee that since the passage of the interstate banking legislation there had been certain activities among the larger banks toward interstate acquisitions. Thirdly, the Association pointed out that the federal courts were beginning to come to grips with the issue of nonbank banks and whether the Federal Reserve Board had power to limit the growth of the nonbank banks. They stated that should the United States Supreme Court rule favorably for nonbank banks, it would take congressional action in order to subject them to regulation. Finally, the Association told the subcommittee that some technical amendments would be needed to the interstate banking legislation but that they would wait to offer them at a later meeting in order that federal activity in this area could be monitored and considered.

Representatives from the Virginia League of Savings Institutions told the subcommittee that they had received positive feedback on the 1985 legislation which revised the savings and loan laws in Virginia. They advised the subcommittee that there would be need of some technical amendments to the 1985 Act but that they would offer them at a later meeting.

Representatives from the Virginia Credit Union League advised the subcommittee that the credit union law changes suggested by the subcommittee in its 1985 report and that were enacted into law by the 1985 General Assembly were working well and favorably accepted.

With regard to the interest rate portion of the study, Delegate Heilig stated that he intended to form an interest rate subcommittee composed of members of the full committee which would review and consider throughout the Summer and Fall changes to the interest rate statutes. He stated that he would chair the subcommittee and would expect it to meet four or five times during the interim. In addition to the representatives of the financial institutions, representatives from the Virginia Poverty Law Center, the Charlottesville-Legal Aid Society, the Blue Ridge Legal Services, the Virginia Mortgage Bankers and the newly formed Virginia Mortgage Association offered their assistance to the interest rate subcommittee in its deliberations during the interim. Mr. Will Robertson representing the Virginia Mortgage Association stated that his association is an organization made up of unregulated lenders in order to provide educational information to its members, to promote ethical business practices and to organize a legislative presence to represent the unregulated lenders. He offered to the subcommittee his association's assistance and stated that his association would like to submit draft legislation that would reorganize the interest rate laws in Virginia. He advised the subcommittee that his association had retained the services of the law firm of McGuire, Woods and Battle to prepare the draft and act as their counsel.

After the June 17th meeting, Delegate Heilig appointed members to serve on the interest rate subcommittee. He decided to chair the interest rate subcommittee and appointed the following members to serve with him: Senator William F. Parkerson, Jr., Delegate Franklin P. Hall, Delegate Vincent F. Callahan, Jr., and Senator Richard J. Holland. During the interim that subcommittee met on September 16, October 21, November 18, December 16 and January 8. At all five of those meetings, draft legislation was discussed section by section and many changes were recommended to the drafts. All of those meetings were public hearings and representatives of the following industries and associations offered testimony and assistance to the subcommittee: the Virginia Bankers Association, the Virginia League of Savings Institutions, the Virginia Independent Bankers' Association, the Bureau of Financial Institutions, the Virginia Mortgage Association, the Virginia Mortgage Bankers, the Virginia Poverty Law Center, the Charlottesville-Albemarle Legal Aid Society, Blue Ridge Legal Services, the Virginia Credit Union League, the Virginia Consumer Finance Association, the law firm of Mays, Valentine, Davenport and Moore, the law firm of McGuire, Woods and Battle, the Virginia Retail Merchants Association, Beneficial Management Association, Household International, Virginia Association of Realtors, Virginia Industrial Loan Associations and several businesses and companies representing themselves. Also, several private citizens attended the meetings and offered testimony and advice to the subcommittee. Having heard testimony from all the interested parties, the subcommittee thoroughly discussed and carefully considered which recommendations to make to the 1986 General Assembly. At its January 8th meeting, the Subcommittee announced those recommendations. Some of the recommendations were made with the condition that further testimony should be heard on various items within the particular recommendation.