SENATE AMENDED

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY PAYNE, HESS, GABLER, MARSHALL, MUNDY, SCHMOTZER, FLECK, GEIST AND MILLER, JUNE 18, 2012

SENATOR D. WHITE, BANKING AND INSURANCE, IN SENATE, AS AMENDED, OCTOBER 2, 2012   

AN ACT

Amending the act of November 30, 1965 (P.L.847, No.356),

entitled "An act relating to and regulating the business of

banking and the exercise by corporations of fiduciary powers;

affecting persons engaged in the business of banking and

corporations exercising fiduciary powers and affiliates of

such persons; affecting the shareholders of such persons and

the directors, trustees, officers, attorneys and employes of

such persons and of the affiliates of such persons; affecting

national banks located in the Commonwealth; affecting persons

dealing with persons engaged in the business of banking,

corporations exercising fiduciary powers and national banks;

conferring powers and imposing duties on the Banking Board,

on certain departments and officers of the Commonwealth and

on courts, prothonotaries, clerks and recorders of deeds;

providing penalties; and repealing certain acts and parts of

acts," further providing for definitions, for persons

authorized to engage in business of receiving deposits and

money for transmission, for corporations authorized to act as

fiduciary, for retention of records and admissibility of

copies in evidence, for emergency powers and for

acquisitions, and offers to acquire, shares of banks, bank

and trust companies, trust companies and national banks;

repealing provisions relating to prohibition against certain

acquisitions, to legal holidays and to limitation on deposit

of Commonwealth funds; further providing for additional

powers of incorporated institutions related to conduct of

business, for persons bound by bylaws and execution of

instruments, for general lending powers, for direct leasing

of personal property and for limits on indebtedness of one

customer including purchased paper; repealing provisions

relating to installment loans including revolving credit

plans, to real estate loans, to authorizing certain loans for

commercial, business, professional, agricultural or nonprofit

purposes including revolving credit plans, to authorizing

monthly interest loans for individuals, partnerships and

other unincorporated entities, to alternate basis for

interest charges by institutions, to charging interest at

rates permitted competing lenders, to notice of annual fees

and refunds on credit cards of affiliate banks, to

authorization of fees for revolving credit plans and to

extensions of credit to individuals, partnerships and

unincorporated associations; further providing for

application of chapter, for actions required, permitted or

prohibited in fiduciary capacity, for transfer of fiduciary

accounts and for investments; repealing provisions relating

to real estate loans; further providing for lending powers

and direct leasing of personal property; repealing provisions

relating to conditional powers of savings banks; providing

for pledges for deposits, limits on indebtedness of one

customer including purchased paper; further providing for

tentative trusts, for authorized offices, for authorization

of new branches, for approval of branch by department and for

branches outside Pennsylvania; repealing provisions relating

to branches acquired from the receiver of a closed

institution or from an institution in danger of closing;

further providing for articles of incorporation and for

certificate of authorization to do business; providing for

organization as a limited liability company; further

providing for minimum capital, for classes of shares, for

share certificates, for cash dividends, for redemption and

acquisition of redeemable shares and statement of reduction

of authorized shares, for number, qualifications and

eligibility of directors or trustees, for audits and reports

by directors or trustees, accountants and internal auditors

and for prohibitions applicable to directors, trustees,

officers, employees and attorneys; repealing provisions

relating to indemnity and immunity of certain directors;

providing for standard of care and justifiable reliance;

further providing for articles of amendment, for authority to

merge or consolidate, for requirements for a merger or

consolidation, for mergers, consolidations and conversions of

savings banks, for right of shareholders to receive payment

for shares following a control transaction, for articles of

conversion, for voluntary dissolution prior to commencement

of business, for certificate of election for voluntary

dissolution and for articles of dissolution; repealing

provisions relating to examinations and reports, to

examination of affiliates and persons performing bank

services, to relationship of institutions and their personnel

with officials and employees of department and to additional

powers of the Department of Banking; and further providing

for penalties and criminal provisions applicable to

directors, trustees, officers, employees and attorneys of

institutions and for penalties applicable to persons subject

to this act.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 102(h), (p), (q), (z.1) and (bb.1) of the

act of November 30, 1965 (P.L.847, No.356), known as the Banking

Code of 1965, amended or added July 23, 1970 (P.L.597, No.199),

June 16, 1994 (P.L.346, No.51) and July 6, 1995 (P.L.271,

No.39), are amended to read:

Section 102.  Definitions

Subject to additional definitions contained in subsequent

chapters of this act which are applicable to specific chapters

or sections thereof, the following words and phrases when used

in this act shall have, unless the context clearly indicates

otherwise, the meanings given to them in this section:

* * *

(h)  "Branch"--an office or other place of business, other

than the principal place of business, of an institution for the

transaction of any business of the institution, except any of

the following conducted or maintained with the approval of the

department:

(i)  a temporary agency,

(ii)  a school at which deposits are accepted by an

officer, employe or agent of the institution,

(iii)  an office used solely for internal operations of

the institution to which the public is not admitted for the

conduct of banking business,

(iv)  an automated teller machine,

(v)  a [loan production] limited purpose banking office,

or

(vi)  any other office which the department may determine

by rule or regulation.

* * *

(p)  "Fiduciary"--an executor, administrator, guardian,

[committee,] receiver, trustee, assignee for the benefit of

creditors or one acting in a similar capacity.

(q)  "Incorporated institution"--a bank, a bank and trust

company, a trust company or a savings bank. The term includes a

bank, a bank and trust company, a trust company or a savings

bank that is organized as a limited liability company.

* * *

[(z.1)  "Special institution"--any of the following:

(i)  A State-chartered bank which meets all of the

following criteria:

(A)  Has previously assumed or may assume deposit

liabilities of an entity which was subject to the

supervision of the department under the act of May 15,

1933 (P.L.565, No.111), known as the "Department of

Banking Code," the act of December 14, 1967 (P.L.746,

No.345), known as the "Savings Association Code of 1967,"

or this act and whose deposits were not insured by the

Federal Deposit Insurance Corporation or any other

Federal agency authorized by law to insure deposits.

(B)  Is wholly owned directly or indirectly by an

agency or instrumentality of the Commonwealth, including

specifically, the State Workmen's Insurance Fund.

(C)  Has deposits that are insured by the Federal

Deposit Insurance Corporation or any other Federal agency

authorized by law to insure deposits.

(ii)  The nonprofit corporation created by the act of

April 6, 1979 (P.L.17, No.5), referred to as the Pennsylvania

Savings Association Insurance Corporation Act.]

* * *

[(bb.1)  "Subsidiary"--a corporation controlled by an

institution which owns at least a majority of its shares.]

* * *

Section 2.  Section 105(b) of the act is amended to read:

Section 105.  Persons Authorized to Engage in Business of

Receiving Deposits and Money for Transmission

* * *

(b)  Exceptions--None of the following shall be deemed to be

engaged in the business of receiving money for deposit or

transmission within the meaning of subsection (a) of this

section:

(i)  a club or hotel to the extent it receives money from

members or guests for temporary safekeeping,

(ii)  an express, steamship or telegraph company to the

extent it receives money for transmission,

(iii)  an attorney-at-law, real estate agent, fiscal

agent or attorney-in-fact to the extent he receives and

transmits money solely as an incident of his general business

or profession, [or]

(iv)  a broker who is licensed under the laws of this

Commonwealth to the extent he engages in such activities

solely as an incident of the conduct of the brokerage

business[.], or

(v)  a person licensed under the act of September 2, 1965

(P.L.490, No.249), referred to as the Money Transmission

Business Licensing Law, to the extent such person engages in

the transmission of money by means of a transmittal

instrument for a fee or other consideration.

* * *

Section 3.  Section 106(b) and (c) of the act, amended

November 22, 2000 (P.L.660, No.89), are amended to read:

Section 106.  Corporations Authorized to Act as Fiduciary

* * *

(b)  Foreign fiduciaries--No corporation or other legal

entity existing under the laws of a state other than this

Commonwealth may act in this Commonwealth as fiduciary, except

that an incorporated institution possessing fiduciary powers

pursuant to the laws of another state shall have the same power

to engage in fiduciary activities within this Commonwealth as a

national banking association acting pursuant to 12 U.S.C. § 92a

or a Federal savings association 12 U.S.C. § 1464(n), provided

that:

(i)  the state laws pursuant to which the incorporated

institution is operating provide equivalent privileges to an

incorporated institution chartered by the Commonwealth,

(ii)  the incorporated institution complies with the

minimum capital requirements of section 1102, and

(iii)  the incorporated institution provides written

notice to the department at least thirty days prior to the

commencement of fiduciary activities, which notice shall be

accompanied by documentation of its authorization to conduct

fiduciary activities issued by the appropriate regulatory

authority of the jurisdiction in which the institution is

chartered or organized, acknowledgment by the appropriate

regulatory authority of the jurisdiction in which the

institution is chartered or organized that equivalent

privileges are provided to incorporated institutions

chartered within this Commonwealth, proof the institution

complies with the minimum capital requirements of section

1102 and a certificate of authority to do business in this

Commonwealth issued by the Department of State pursuant to 15

Pa.C.S. Ch. 41 (relating to foreign business corporations).

(c)  National banks and Federal savings banks--A national

bank or Federal savings bank located in this Commonwealth which

has authority under the laws of the United States to act as

fiduciary may act as fiduciary in this Commonwealth.

* * *

Section 4.  Section 108(a) of the act is amended to read:

Section 108.  Retention of Records and Admissibility of Copies

in Evidence

(a) Requirement of retention--Every institution [and every

national bank located in this Commonwealth] shall retain in such

form and manner that they may be readily produced upon proper

demand each record of original or final entry, and each deposit

or withdrawal slip or ticket, for a period of seven years from

the date of the making of the last entry thereon, except that

coupons accompanying deposits in a club account, such as a

Christmas club or a vacation club, need not be so retained for

more than two years from the date of closing of such account.

* * *

Section 5.  Section 111(b) of the act, amended July 23, 1970

(P.L.597, No.199), is amended to read:

Section 111.  Emergency Powers

* * *

(b)  Whenever the Secretary of Banking is of the opinion that

circumstances or an emergency exists affecting all institutions

[and national banks] in the Commonwealth or in any parts

thereof, he may authorize by public announcement in such manner

as he shall determine institutions located in the area or areas

affected to close any or all of their offices. In addition, if

the secretary is of the opinion that only a particular

institution is affected but not those located in the area

generally, he may authorize the particular institution to close

its office or offices so affected.

As used in this subsection, the phrase "circumstances or an

emergency" shall include but not be limited to any condition

which may interfere with the conduct of the normal operations of

an institution, poses a threat to the safety and security of the

personnel or property of the institution, interrupts

transportation or power facilities, involves war, riots, civil

commotion or other acts of lawlessness or violence, or is a

national or State occurrence of such magnitude as to justify

authorization of a bank closing. Any closing made pursuant to

this subsection shall be effective until the next business day

or for such longer period as may be authorized by the secretary

in his public announcement.

Section 6.  Section 112 heading and (a)(iii) and (i)(ii) of

the act, amended May 18, 1988 (P.L.399, No.65), are amended to

read:

Section 112.  Acquisitions, and Offers to Acquire, Shares of

Banks, Bank and Trust Companies[,] and Trust

Companies [and National Banks]

(a)  Definitions for purpose of section--The following words

and phrases when used in this section shall have, unless the

context clearly indicates otherwise, the following meanings:

* * *

(iii)  "Institution"--a bank, bank and trust company,

trust company[, national bank] or stock savings bank [located

in Pennsylvania].

* * *

(i)  Exemptions--No approval under this section shall be

required for an acquisition or proposal to acquire shares in the

case of either:

* * *

(ii)  a merger or consolidation which requires the

approval of the department [or the Comptroller of the

Currency of the United States];

* * *

Section 7.  Section 112.1 of the act, added December 18, 1986

(P.L.1702, No.205), is repealed:

[Section 112.1.  Prohibition Against Certain Acquisitions

(a)  Certain acquisitions unlawful--Except as provided in

section 117, it shall be unlawful for a commercial bank, a bank

holding company, a thrift institution or a thrift institution

holding company to acquire a savings bank unless the acquiring

entity, and any savings and loan holding company or bank holding

company which directly or indirectly owns or controls the power

to vote five percent or more of its shares, is located in

Pennsylvania.

(b)  Definitions--The terms in subsection (a) shall have the

same meaning as those terms have in section 117.

(c)  Prior acquisitions--The prohibition in subsection (a)

shall not affect any acquisition effected prior to the effective

date of this act.]

Section 8.  Sections 113(e) and 114 of the act, amended or

added March 4, 1982 (P.L.135, No.44), are repealed:

Section 113.  Legal Holidays

* * *

[(e)  National banks--This section shall apply to offices of

national banks located in Pennsylvania except to the extent that

Federal law specifically provides otherwise.

Section 114.  Limitation on Deposit of Commonwealth Funds

The Treasury Department shall not deposit any Commonwealth

Funds in a financial institution subject to this act that

unlawfully does not conform to the finance charge limitations in

the act of October 28, 1966 (1st Sp.Sess. P.L.55, No.7), known

as the "Goods and Services Installment Sales Act," provided that

there are other financial institutions in the Commonwealth

properly approved by the Board of Finance and Revenue which can

adequately collateralize and service Commonwealth Funds and

instruments.]

Section 9.  Section 202(e) of the act, amended April 8, 1982

(P.L.262, No.79), is amended to read:

Section 202.  Additional Powers of Incorporated Institutions

Related to Conduct of Business

An incorporated institution shall have in addition to other

powers granted by this act or its articles and subject to the

limitations and restrictions contained in this act or in its

articles:

* * *

(e)  Ownership of real property--the power to acquire and

hold such real property as it:

(i)  occupies or intends to occupy for the transaction of

its business or partly so occupies and partly leases,

(ii)  acquires for the purpose of providing parking

facilities for the use of its customers, officers and

employes, or

(iii)  acquires solely or jointly with others for the

purpose of providing data processing facilities for the

institution or for the institution and others subject to the

limitation that the book value of all such real property, of

all furniture, fixtures and equipment acquired in connection

with any real property owned or leased by the institution, of

all alterations of buildings on real property owned or leased

by the institution, of all shares of stock or corporations

acquired under subsection (d) of this section, and

investments in obligations of or for the benefit of

corporations described in subsection (d) of this section or

loans upon the security of the stock of such corporations

shall not exceed [twenty-five] one hundred percent of the

aggregate of surplus, unallocated reserves, undivided profits

and subordinated securities in the case of a mutual savings

bank, or [twenty-five] one hundred percent of the aggregate

of capital, surplus, undivided profits and capital securities

in the case of any other institution, or such larger amount

as may be approved by the department, and subject to the

requirement that estimates of costs of any building on real

property owned or leased by the institution shall be

submitted to the department for its approval prior to the

erection thereof;

* * *

Section 10.  Sections 205(b), 303 and 304 of the act are

amended to read:

Section 205.  Persons Bound by By-Laws; Execution of Instruments

* * *

(b)  Without regard to any other form of execution provided

in the by-laws, an instrument in writing, or any assignment or

endorsement thereof, executed or entered into between an

incorporated institution and any person and signed by the

president and by the cashier or treasurer of the institution,

shall be held to have been properly executed for and in behalf

of the institution. [Except as otherwise required by statute,

the affixation of the corporate seal shall not be necessary to

the valid execution, assignment or endorsement by an institution

of any instrument in writing.]

Section 303.  General Lending Powers

(a)  Definitions--As used in this section, the following

words and phrases shall have the meanings given to them in this

subsection:

"Credit device"--any card, check, identification code or

other means of identification contemplated by the agreement

governing a plan.

"Leasehold"--the interest, which is security for a loan, of a

lessee of real estate under a lease which on the date of the

loan has an unexpired term extending at least five years beyond

the maturity of the loan, or contains a right of renewal, which

may be exercised by the institution, extending at least five

years beyond the maturity of the loan.

"Loan"--a cash advance or loan to be paid to or for the

account of the customer.

"Plan" or "open-end credit plan"--a plan contemplating the

extension of credit under an account governed by an agreement

between an institution and a customer pursuant to which:

(i)  the institution permits the customer and, if the

agreement governing the plan so provides, persons acting on

behalf of or with authorization from the customer from time

to time to make purchases or to obtain loans or both by use

of a credit device,

(ii)  the amounts of purchases made and loans obtained

are charged to the customer's account under the plan,

(iii)  the customer is required to pay the institution

the amounts of all purchases and loans charged to the

customer's account under the plan but has the privilege of

paying the amounts outstanding from time to time in full or

in installments, and

(iv)  interest may be charged and collected by the

institution from time to time on the outstanding unpaid

indebtedness under the plan.

"Purchases"--payments for property of whatever nature, real

or personal, tangible or intangible, and payments for services,

licenses, taxes, official fees, fines, private or governmental

obligations or any other thing of value.

"Truth in Lending"--the Truth in Lending Act (Public Law

90-321, 15 U.S.C. § 1601 et seq.) and regulations promulgated

thereunder as in effect from time to time. The terms "finance

charge," "annual percentage rate," "credit card," "open-end

credit" and "closed-end credit" have the same coverage and

meanings as the definitions of those terms under Truth in

Lending.

(b)  General rule--

(i)  An institution may, subject to any applicable

restriction under other provisions of this act, lend money,

extend credit and discount or purchase evidences of

indebtedness and agreements for the payment of money[.] at

such interest, finance charge, rate or terms authorized under

this section or at any interest, finance charge, rate or

terms permitted for any other financial institution or any

other lender regulated by any Federal or State supervisory

authority on the specified class of loan.

(ii)  This section shall govern all direct and indirect

extensions of credit by an institution for personal, family,

household, business or agricultural purposes to an

individual, a partnership, a limited liability company or an

unincorporated association, whether as closed-end credit or

open-end credit.

(c)  Disclosures--In connection with any loan or extension of

credit, an institution shall make disclosures required by

applicable Federal law, including the Real Estate Settlement

Procedures Act of 1974 (Public Law 93-533, 88 Stat. 1724), the

Truth in Lending Act and the Equal Credit Opportunity Act

(Public Law 93-495, 15 U.S.C. § 1691 et seq.), in lieu of any

disclosure requirement that may be imposed under Pennsylvania

law.

(d)  Agreements for extension of credit--An institution may

make a loan or extend credit pursuant to this section on the

basis of a written agreement. An agreement shall be fully

completed prior to signature by the customer. A completed copy

of the agreement, including related statements, notices and

documents, shall be given to the customer. An agreement shall

provide, if applicable:

(i)  the amounts of the loan or available credit and the

procedure or means by which it may be obtained,

(ii)  maturity provisions, installment payment

requirements, prepayment privileges and rebates of unearned

interest upon prepayment,

(iii)  either the amounts or rates of interest, which may

be fixed or variable rates, or the basis for determining such

amounts or rates, which basis in the case of variable rates

must be an objectively determinable basis other than a basis

determined solely by the institution,

(iv)  the method of determining balances of unpaid

indebtedness to which periodic rates of interest are

applicable which, in the case of an open-end credit plan,

may, if the agreement governing the plan so provides, include

the amount of any interest and other charges, including

delinquency charges, which have accrued in the account,

(v)  charges that may be imposed in addition to interest,

in such amounts as the agreement provides, or as established

in the manner the agreement provides, such as, but not

limited to, minimum charges, check charges and maintenance

charges related to extensions of credit pursuant to overdraft

check plans, a delinquency charge which may be assessed if

the loan or extension of credit is in default for more than

fifteen days and fees, extension charges and actual charges

that may be incurred on default, including, but not limited

to, court and other collection costs and reasonable attorney

fees. The additional charges may include a daily, weekly,

monthly, annual or other periodic charge for the privileges

made available to the customer under an open-end credit plan,

transaction charges for each separate purchase or loan under

the plan and a minimum charge for each scheduled billing

period under the plan, during any portion of which there is

an outstanding unpaid indebtedness under the plan,

(vi)  collateral security and provisions relating to

collateral security, except that there may not be any

authorization for entry of judgment by confession nor any

acceleration of a loan or repossession of collateral unless

there is a default pursuant to the agreement, and

(vii)  insurance coverages and premiums for insurance

coverages.

Such agreements shall be valid and enforceable, and an

institution may impose and collect the interest and other

charges provided in the agreement.

(e)  Computation of interest--A fixed rate of interest

included in a finance charge shall be computed either on a

simple interest basis by a generally accepted actuarial method,

including a method permitted for determination of an annual

percentage rate under Truth in Lending or, as to an extension of

credit with an initial maturity of not more than sixty months,

which is made within two years after the effective date of this

subsection, on an add-on or discount basis. The maximum amount

that may be charged on the basis of a variable rate of interest

shall be computed in accordance with or with reference to a

schedule or formula at the times and for the periods provided in

the agreement. The periodic rate of interest, as so varied, will

be applicable to all outstanding unpaid indebtedness under the

agreement from the effective date of the variation if so

provided in the agreement.

(f)  Changes in terms--An institution may change the terms of

the agreement if:

(i)  the agreement so provides,

(ii)  there is compliance with applicable notice

requirements of Truth in Lending prior to the effective date

of the change,

(iii)  the notice states that a customer for whose

account a change in terms does not become effective may pay

all outstanding amounts pursuant to the agreement as in

effect prior to the notice, and

(iv)  in the case of an increase in a fixed rate of

interest or other charges payable by the customer under an

open-end credit plan, the customer incurs additional

indebtedness after the effective date of the change of terms.

If the agreement governing the plan so provides, a change of

terms pursuant to this subsection may, on and after the date it

becomes effective as to an account, apply to all then

outstanding unpaid indebtedness. A change in the amount of

interest imposed in accordance with or with reference to a

schedule or formula for a variable rate of interest shall not be

deemed to be a change in terms, but a change in such schedule or

formula shall be deemed to be a change in terms. No change may

be made in a fixed rate of interest or other charges payable

with respect to the outstanding balance of indebtedness or in

the amount or due dates of required installment payments on

closed-end credit unless there is written consent of the

customer at the time of the change except for an extension of

any due date or an option granted by the institution to the

customer to omit payments and except as may be otherwise

provided in an agreement for an extension of credit which is not

for personal, family or household purposes.

(g)  Prepayment--

(i)  A borrower or buyer may prepay an extension of

credit in full at any time.

(ii)  If interest has been precomputed, then, in the

event of prepayment of an extension of credit, the

institution shall refund to the customer the unearned portion

of the precomputed interest. The refund shall be in an amount

not less than the amount of the unearned precomputed interest

calculated in accordance with a generally accepted actuarial

method, including a method permitted for determination of an

annual percentage rate under Truth in Lending, except that

the amount of the unearned interest on an extension of credit

with an initial maturity of not more than sixty months which

is made within two years after the effective date of this

section for which interest is computed on an add-on or

discount basis as permitted by subsection (e) may be

calculated in accordance with the "sum of the balances"

method and except that the customer shall not be entitled to

a refund which results in a net minimum charge of less than

an amount equal to the interest that would accrue in the

first month the extension of credit was scheduled to be

outstanding. The institution shall not be required to refund

the unearned portion of the interest if such amount is less

than one dollar ($1).

(iii)  The amount of a refund under the "sum of the

balances" method is determined by multiplying the precomputed

interest by a fraction, the numerator of which is the sum of

the balances, including interest, of the extension of credit

scheduled to be outstanding after deducting the first of the

payments scheduled to be made on or after the date of

prepayment and the denominator of which is the sum of all the

unpaid balances, including interest, of the extension of

credit scheduled to be outstanding from its inception to and

including the maturity of the final installment. Intervals

between scheduled payments must be regular periods of one

month or less except that the interval between the inception

of an extension of credit and the due date of the first

scheduled payment may be:

(A)  one month and fifteen days when the regular

payment interval is a month,

(B)  one month when the regular payment interval is

less than a month but more than a week, or

(C)  eleven days when the regular payment interval is

a week or less.

(h)  Insurance--The agreement may provide for life, health,

accident, loss-of-income or other permissible insurance related

to an extension of credit under a group or individual policy

subject to the option of the customer to furnish required

insurance through an authorized insurer of the customer's choice

as provided in section 11 of the act of September 2, 1961

(P.L.1232, No.540), known as the "Model Act for the Regulation

of Credit Life Insurance and Credit Accident and Health

Insurance," and, if premiums for the insurance are paid to the

institution, provisions shall be made for rebates of unearned

premiums, if any, upon prepayment. An institution may require

that insurance be maintained, from an insurer acceptable to the

institution, against loss or damage to property which is

collateral security for the extension of credit and against

liability arising out of the ownership or use of such property.

An institution may grant an extension of credit to finance the

premiums for the insurance.

(i)  Extensions of credit through intermediaries--An

extension of credit to finance a sale of a motor vehicle, other

than through an open-end credit plan, may be made by an

institution through a seller licensed as an installment seller

under the act of June 28, 1947 (P.L.1110, No.476), known as the

"Motor Vehicle Sales Finance Act," as an intermediary if:

(i)  the agreement governing the extension of credit

conspicuously provides that the extension of credit is made

by the institution to the buyer and is subject to the

provisions of this section, and

(ii)  either the institution has made a commitment to

make the extension of credit or the agreement is subject to

acceptance by the institution within two business days after

the date of the agreement and the institution upon such

acceptance sends written notice to the buyer. The terms and

conditions under which the seller acts as an intermediary

between the institution and the buyer shall be determined by

written agreement between the institution and the seller.

An extension of credit made through an intermediary pursuant to

this section shall be subject to this act and other acts

governing transactions between banks and their customers and

shall not be subject to the provisions or requirements of any

other regulatory statute, rule or regulation. Neither a seller

who acts as an intermediary for an institution with respect to

an extension of credit nor an institution that makes an

extension of credit through a seller as an intermediary shall be

deemed to be in violation of licensing or other requirements of

any other regulatory statute, rule or regulation that would be

applicable to extensions of credits by such a seller or

contractor to its customers.

(j)  Right of rescission--A person whose ownership interest

in that person's principal dwelling is subject to a lien or

security interest as collateral security for an extension of

credit subject to this section shall have a right of rescission

for the same types of transactions on the same terms and

conditions and for the same time periods as those provided for

the right of rescission under Truth in Lending.

(k)  Statement of account--Upon the written request of the

customer, an institution shall provide, within ninety days after

the end of each calendar year, a statement of the customer's

account showing payments made during that year, the amount

applied to interest and the balance of the account at the end of

that year.

(l)  Waiver of provisions--No provision of this section which

confers rights on the customer or any other person may be waived

or modified except to the extent and in the circumstances in

which Truth in Lending permits a consumer to waive or modify the

right of rescission.

(m)  Balloon payments--No agreement for a loan or extension

of credit under this section containing terms of which principal

is repayable in installments may provide for a final payment

which is more than double the regularly scheduled payment

exclusive of overdue or extended payments, except in the case of

automobile financing transactions and real estate loans.

(n)  Real estate loans--

(i)  An institution may, subject to the requirements of

this section, make or acquire a loan secured by a lien on

real estate, including a lease-hold, located in any state or

the District of Columbia, in a dependency or insular

possession of the United States or in the Commonwealth of

Puerto Rico for a term not to exceed forty years and in an

amount not to exceed ninety percent of the value of the loan

except that if the amount of the loan does not exceed one

hundred thousand dollars ($100,000) or is made in reliance

upon a private mortgage insurance or guarantee acceptable to

the department regardless of the amount of the loan, then one

hundred percent of the value of the loan, unless otherwise

subject to the supervisory loan-to-value limits established

by the Federal Deposit Insurance Corporation in 12 CFR Pt.

365, Subpt. A, Appendix A (relating to interagency guidelines

for real estate lending policies).

(ii)  The requirements for a loan subject to this

subsection shall be:

(A)  the loan shall be evidenced by a bond, note or

other obligation, and the lien securing the loan shall be

obtained by a mortgage, deed of trust or judgment,

(B)  the value of the real estate shall be determined

by a real estate appraiser qualified in the state where

the real estate is located who shall inspect the real

estate and state its value to the best of the appraiser's

judgment in a written report signed by the appraiser that

must be preserved in the records of the institution,

(C)  insurance, as evidenced by a policy or binder or

a copy of either, against loss from fire on all buildings

on the real estate which are included in the appraised

value, issued by insurers acceptable to the institution

and authorized to do business where the real estate is

located and in form and amount satisfactory to the

institution, shall be maintained during the term of the

loan by or at the expense of the borrower, except that

the institution may at its own expense maintain such

insurance covering only its interest as lender,

(D)  the borrower shall pay all expenses in

connection with the loan for title insurance, searches

and certificates, appraisal fees and fees for preparation

and recording of documents, and

(E)  an institution may make a single delinquency

charge for each payment in arrears for a period of more

than fifteen days other than by reason of acceleration or

by reason of a delinquency on a prior payment.

(iii)  The restrictions and requirements of this

subsection shall not apply to:

(A)  a loan guaranteed at least to the extent of

twenty percent of the loan, or for which a written

commitment for the guarantee has been issued, by the

Veterans Administration pursuant to 38 U.S.C. (relating

to veterans' benefits),

(B)  a loan insured, or for which a written

commitment to insure has been issued, pursuant to

national housing legislation,

(C)  a loan insured, or for which a written

commitment to insure has been issued, by the Farmers Home

Administration pursuant to the Consolidated Farm and

Rural Development Act (Public Law 87-128, 75 Stat. 307),

(D)  a loan made pursuant to the Small Business Act

(Public Law 85-536, 15 U.S.C. § 631 et seq.),

(E)  an investment security acquired pursuant to

section 307,

(F)  a loan in connection with which the institution

takes a real estate lien as security in the exercise of

banking prudence but as to which it is relying for

repayment on:

(1)  the general credit of the obligor or of an

installment buyer or of a lessee of the real estate,

(2)  collateral other than the real estate lien,

(3)  a guaranty, or an agreement to take over or

purchase the loan in the event of default, by a

financially responsible person other than a person

engaged in the business of guaranteeing real estate

loans, or

(4)  an agreement by a financially responsible

person to take over or purchase the loan, or to

provide funds for payment of the loan, within a

period of five years from the date of the loan

and there is a certificate of reliance setting forth the

applicable facts, or

(G)  a residential mortgage loan secured by real

estate located in a low-income to moderate-income area.

(iv)  The restriction of this subsection on the location

of real estate shall not apply in the case of a loan acquired

from a corporation or association of which the institution

owns more than fifty percent of the outstanding shares of

capital under section 311(d)(ii)(C), if such loan:

(A)  is secured by a first lien on improved real

estate, including farm land,

(B)  satisfies all requirements of this section other

than the restriction on location of real estate, and

(C)  is serviced by the corporation or association

from which it is acquired.

Section 304.  Direct Leasing of Personal Property

An institution may[, subject to regulation by the

department,] acquire and lease personal property pursuant to a

binding arrangement for the leasing of such property to a

customer upon terms requiring payment to the institution, during

the minimum period of the lease, of rentals which in the

aggregate will exceed the total expenditures by the institution

for or in connection with the acquisition, ownership,

maintenance and protection of the property.

Section 11.  Section 306(b) and (e) of the act, amended July

6, 1984 (P.L.621, No.128), are amended to read:

Section 306.  Limits on Indebtedness of One Customer (Including

Purchased Paper)

* * *

(b)  Indebtedness included--There shall be included in the

indebtedness of one customer to which the fifteen percent

limitation of this section applies:

(i)  the aggregate rentals payable by the customer under

leases of personal property by the institution;

(ii)  to the extent that they exceed fifteen percent of

the capital accounts of the institution, the aggregate

balances payable on all installment paper acquired by the

institution from the customer, irrespective of the legal

liability of the customer or absence of such liability;

(iii)  to the extent that they exceed fifteen percent of

the capital accounts of the institution, obligations of the

customer as indorser or guarantor of notes (other than those

excluded by subsection (c)(ii) of this section) having a

maturity of not more than six months and actually owned by

the customer transferring the notes;

(iv)  obligations of the customer by reason of

acceptances by the institution of drafts or bills of exchange

(other than those excluded by subsection (c)(v) of this

section); [and]

(v)  all other liabilities, not otherwise excluded by

this section, of the customer to the institution, whether

direct or indirect, primary or secondary, under evidences of

indebtedness and agreements for the payment of money[.]; and

(vi)  any credit exposure to a person arising from a

derivative transaction, repurchase agreement, reverse

repurchase agreement, securities lending transaction or

securities borrowing transaction between the institution and

the person.

* * *

(e)  Definition--As used in this section [the term "capital

accounts" means the aggregate of capital, surplus, undivided

profits, capital securities and reserve for loan losses of the

institution. Reserve for loan losses shall mean that portion of

an institution's earnings set aside as a general reserve to

absorb possible future losses on loans as of the last complete

calendar or fiscal year, carried in an account captioned

"reserve for loan loss" or "reserve for bad debts."], the

following words and phrases shall have the meanings given to

them in this subsection:

"Capital accounts"--the aggregate of capital, surplus,

undivided profits, capital securities and reserve for loan

losses of the institution. Reserve for loan losses shall mean

that portion of an institution's earnings set aside as a general

reserve to absorb possible future losses on loans as of the last

complete calendar or fiscal year, carried in an account

captioned "reserve for loan loss" or "reserve for bad debts."

"Derivative transaction"--any transaction that is a contract,

agreement, swap, warrant, note or option that is based, in whole

or in part, on the value of, any interest in, or any

quantitative measure or the occurrence of any event relating to,

one or more commodities, securities, currencies, interest or

other rates, indices or other assets.

Section 12.  Section 309 of the act, amended July 30, 1975

(P.L.108, No.56) and May 21, 1980 (P.L.173, No.51), is repealed:

[Section 309.  Installment Loans (Including Revolving Credit

Plans)

(a)  Maximum rate--An institution may make a charge for an

installment loan which complies with the requirements of this

section, at a rate not in excess of six dollars ($6) per one

hundred dollars ($100) per annum computed on the original

principal amount for the period of the loan. If such loan is one

of a series of loans under an agreement ("revolving credit

plan") providing a maximum outstanding balance of all such loans

at any time, the institution may make a charge at a rate not in

excess of one percent per month on the actual outstanding

balance of the loan.

(b)  Disclosure of charge--The institution shall inform the

borrower in writing:

(i)  of the monthly rate of the charge under subsection

(a) of this section for a loan under a revolving credit plan,

and

(ii)  of the dollar amount of its total charge under

subsection (a) of this section for any other installment loan

by a statement in an evidence of indebtedness or agreement in

connection with the loan or by any other method that complies

with requirements established by regulation of the department.

(c)  Term--The term within which all loans which at any time

have been made under a revolving credit plan shall become due

shall be ten years from the date of the last loan made under the

plan. The term of any other installment loan shall be a period

not in excess of one hundred twenty months and fifteen days

calculated from the time of making the loan. The first

installment shall be scheduled no longer than forty-five days

after the time of making the loan. The aggregate period for

which the final maturity of any loan may be extended shall be

six months.

(d)  Maximum amount--The original principal amount of any

loan, and the total of the principal balances of all loans to

one borrower outstanding at any time, for which a charge is made

pursuant to the authorization of this section shall not be in

excess of ten thousand dollars ($10,000). For any portion of one

or more loans to one borrower in excess of such amount, the

charge which the institution may make shall be governed by law

other than this section.

(e)  Installments--The total amount payable on the loan shall

be payable in installments of substantially equal amounts at

substantially equal intervals of not more than three months

each, except that installments may be omitted, because of the

borrower's receipt of income on an intermittent basis, for a

total period which is not more than three months in each

calendar year, and except that in the case of a loan or loans

made under a revolving credit plan the amounts of installments

may be based on a percentage of the balance of all loans

outstanding under the plan.

(f)  Permissible charges--An institution may receive in

advance the charge permitted under subsection (a) of this

section and in addition may make the following charges:

(i)  premiums for insurance obtained in connection with

the loan,

(ii)  a charge for each check or order used by the

customer to obtain the proceeds of loans under a revolving

credit plan in an amount not in excess of the institution's

current charge for a check sold for use against a deposit

account commonly called a "special checking account",

(iii)  a single delinquency charge for each installment

in arrears for a period of more than fifteen days other than

by reason of acceleration or by reason of a delinquency on a

prior installment, in an amount not to exceed the lesser of

two dollars and fifty cents ($2.50) or five percent of the

amount of the installment,

(iv)  a charge for an extension in an amount not to

exceed one percent of the unpaid balance of the loan for each

month of such extension or portion thereof in excess of

fifteen days,

(v)  fees paid for filing documents in public offices in

connection with the loan, and

(vi)  actual expenditures, including reasonable

attorneys' fees, for proceedings to collect the loan.

(g)  Rebate of unearned charges--In the event of payment or

refinancing of the balance of a loan prior to maturity the

institution shall pay or credit a refund of the unearned portion

of the charge made pursuant to subsection (a) of this section in

an amount which shall be at least the amount computed, for the

unexpired period to the date of scheduled maturity, by the

accounting method known as "the sum of the digits" or "the rule

of 78" except that no such refund shall be required in an amount

less than one dollar ($1) or in any amount until the institution

has received a minimum charge of five dollars ($5) for the loan.

(h)  Advertisement--The department may prohibit the further

use by an institution of any advertisement respecting

installment loans authorized by this section if it finds that

the form or content of such advertisement might mislead the

public.

(i)  Insured loans--The requirements of this section shall

not apply to a loan insured pursuant to national housing

legislation.]

Section 13.  Section 310 of the act, amended May 21, 1980

(P.L.173, No.51), July 9, 1992 (P.L.430, No.90) and November 22,

2000 (P.L.660, No.89), is repealed:

[Section 310.  Real Estate Loans

(a)  Permissible loans; term and maximum amount--An

institution may, subject to the requirements of this section,

make or acquire a loan secured by a lien on real estate

(including a lease-hold) located in any state or the District of

Columbia, in a dependency or insular possession of the United

States or in the Commonwealth of Puerto Rico:

(i)  in the case of improved real estate, including farm

land, for a term not to exceed:

(A)  ten years, if unamortized, or

(B)  forty years, if the terms of the loan require

substantially equal payments at successive intervals of

not more than one year each and in an amount sufficient

to pay all principal of and interest on the loan within

the term of the loan, except that a loan to a commercial

or industrial borrower is exempted from the requirement

of substantially equal payments and the date of the

initial payment on a loan to such borrower may be

deferred for a period not in excess of five years from

the date of the loan; or

(ii)  in the case of unimproved real estate to be

acquired or developed with the proceeds of the loan, for a

term not to exceed five years; and

(iii)  in an amount not to exceed ninety percent of the

value of the loan except that if the amount of the loan does

not exceed one hundred thousand dollars ($100,000) or is made

in reliance upon a private mortgage insurance or guarantee

acceptable to the department regardless of the amount of the

loan, then one hundred percent of the value of the loan.

(b)  Additional term for combination of construction and

permanent loans--In a case in which a loan subject to this

section is made to finance construction of an improvement and

such loan is combined with a permanent loan to continue after

completion of construction, the term of the construction loan or

that portion of the term not in excess of three years, shall not

be counted against the maximum term for the permanent loan

permitted under subsection (a) of this section but such combined

construction loan and permanent loan shall be subject to all

other requirements of this section.

(c)  Leasehold loans--For the purpose of this section a

"leasehold" shall mean the interest, which is security for a

loan, of a lessee of real estate under a lease which on the date

of the loan has an unexpired term extending at least five years

beyond the maturity of the loan, or contains a right of renewal,

which may be exercised by the institution, extending at least

five years beyond the maturity of the loan.

(d)  Requirements in connection with loans--The requirements

for a loan subject to this section shall be:

(i)  the loan shall be evidenced by a bond, note or other

obligation and the lien securing such loan shall be obtained

by a mortgage, deed of trust or judgment;

(ii)  the lien shall be a first lien (except for a lien

of taxes, assessments or charges which are not yet due or

which are payable without penalty) unless all prior liens are

held by the institution and the aggregate of all loans by the

institution secured by liens on the real estate satisfy all

other requirements of this section pertaining to such loans;

(iii)  the value of the real estate shall be determined

either by a real estate appraiser qualified in the state

where the real estate is located who shall inspect the real

estate and state its value to the best of his judgment in a

written report signed by him which must be preserved in the

records of the institution or in the alternative by an

appraisal signed by two reputable persons who shall:

(A)  be directors of the institution or selected in a

manner authorized by the directors,

(B)  be familiar with real estate values in the

vicinity where the real estate is located, and

(C)  inspect the real estate and state its value to

the best of their judgment in a written report which must

be preserved in the records of the institution. In the

event the appraisers arrive at different conclusions as

to the value of the real estate, it shall be permissible

to use the average of their two appraisals to determine

the value of the real estate: Provided, however, That

each valuation is stated in the report;

(iv)  insurance, as evidenced by a policy or binder or a

copy of either, against loss from fire on all buildings on

the real estate which are included in the appraised value,

issued by insurers acceptable to the institution and

authorized to do business where the real estate is located

and in form and amount satisfactory to the institution, shall

be maintained during the term of the loan by or at the

expense of the borrower, except that the institution may at

its own expense maintain such insurance covering only its

interest as lender;

(v)  the borrower shall pay all expenses in connection

with the loan for title insurance, searches and certificates,

appraisal fees and fees for preparation and recording of

documents; and

(vi)  an institution may make a single delinquency charge

for each payment in arrears for a period of more than fifteen

days other than by reason of acceleration or by reason of a

delinquency on a prior payment.

(e)  Excepted loans--The restrictions and requirements of

this section shall not apply to:

(i)  a loan guaranteed at least to the extent of twenty

percent thereof, or for which a written commitment for such

guarantee has been issued, by the Veterans Administration

pursuant to the Veterans' Benefits Act:

(ii)  a loan insured, or for which a written commitment

to insure has been issued, pursuant to national housing

legislation;

(iii)  a loan insured, or for which a written commitment

to insure has been issued, by the Farmers Home Administration

pursuant to the Consolidated Farmers Home Administration Act;

(iv)  a loan made pursuant to the Small Business Act;

(v)  an investment security acquired pursuant to section

307; or

(vi)  a loan in connection with which the institution

takes a real estate lien as security in the exercise of

banking prudence but as to which it is relying for repayment

on:

(A)  the general credit of the obligor or of an

installment buyer or of a lessee of the real estate,

(B)  collateral other than the real estate lien,

(C)  a guaranty, or an agreement to take over or

purchase the loan in the event of default, by a

financially responsible person other than a person

engaged in the business of guaranteeing real estate

loans, or

(D)  an agreement by a financially responsible person

to take over or purchase the loan, or to provide funds

for payment thereof, within a period of five years from

the date of the loan

and there is a certificate of reliance setting forth the

applicable facts.

(vii)  loans made pursuant to any secondary mortgage law

of the Commonwealth.

(viii)  a residential mortgage loan secured by real

estate located in a low- to moderate-income area.

(f)  Loans acquired from international banking subsidiary--

The restriction of this section on the location of real estate

shall not apply in the case of a loan acquired from a

corporation or association of which the institution owns more

than fifty percent of the outstanding shares of capital under

subsection 311(d)(ii)(C), if such loan:

(i)  is secured by a first lien on improved real estate,

including farm land,

(ii)  satisfies all requirements of this section other

than the restriction on location of real estate, and

(iii)  is serviced by the corporation or association from

which it is acquired.

(f.1)  Variable interest rate loans--The requirements with

respect to payments under subsection (a)(i) of this section

shall not be applicable in the case of a variable interest rate

loan permitted by the act of January 30, 1974 (P.L.13, No.6),

referred to as the Loan Interest and Protection Law.

(f.2)  Alternative payment terms--An institution may permit

exceptions to the requirements as to time and amount of payments

applicable under subsection (a)(i) as to:

(i)  one payment in a calendar year and an aggregate of

five payments during the term of the loan, the aggregate

amount of which shall be added either to other regular

payments or to the final payment of the loan; or

(ii)  a difference in the amount of substantially equal

payments at the intervals occurring during the first one-

quarter of the total term of the loan from the amount of

substantially equal payments at the intervals occurring

during the remainder of the term; or

(iii)  in a case in which the principal amount of the

loan is distributed periodically to the borrower, a

requirement of payment of interest only from the dates of

such distributions of the principal amount and a requirement

for the payment of principal and interest, commencing not

more than three months after the last distribution, in

substantially equal payments at successive intervals of not

more than one year each and sufficient to pay all principal

of and interest on the loan within ten years after the date

of commencement of such payments.]

Section 14.  Section 316 of the act, amended or added

November 27, 1968 (P.L.1104, No.345) and September 27, 1973

(P.L.251, No.72), is repealed:

[Section 316.  Authorizing Certain Loans for Commercial,

Business, Professional, Agricultural or Nonprofit

Purposes Including Revolving Credit Plans

(a)  Maximum rate--An institution may make a charge for an

installment loan which complies with the requirements of this

section at a rate not in excess of five dollars ($5) per one

hundred dollars ($100) per annum computed on the original

principal amount for the period of the loan. If such loan is one

of a series of loans under an agreement ("revolving credit

plan") providing a maximum outstanding balance of all such loans

at any time, the institution may make a charge at a rate not in

excess of three-fourths of one percent per month on the actual

outstanding balance of the loan.

(b)  Eligible borrowers--An installment loan for which the

charge authorized by this section may be made may be granted

only to a customer which is a nonprofit organization or to a

customer which is engaged in a commercial, business,

professional or agricultural enterprise for purposes of such

enterprise.

(c)  Term--The term of the loan shall be a period not in

excess of seven years from the date of the loan. The aggregate

period for which the final maturity of the loan may be extended

shall be one year.

(d)  Maximum amount--The original principal amount of any

loan, and the total of the principal balances of all loans to

one borrower outstanding at any time, for which charges are made

pursuant to the authorization of the section and of section 309,

shall not be in excess of fifty thousand dollars ($50,000). For

any portion of one or more loans to one borrower in excess of

such amount, the charge which the institution may make shall be

governed by law other than this section.

(e)  Installments--The total amount payable on the loan shall

be payable in installments at substantially equal intervals of

not more than one year each.

(f)  Permissible charges--An institution may receive in

advance the charge permitted under subsection (a) of this

section and in addition may make the following charges:

(i)  premiums for insurance obtained in connection with

the loan,