AN ACT to amend the Indiana Code concerning trade regulations; consumer sales and
credit and to make an appropriation.
Be it enacted by the General Assembly of the State of Indiana:
SECTION 1. IC 4-4-3-8 IS AMENDED TO READ AS FOLLOWS
[EFFECTIVE JANUARY 1, 2005]: Sec. 8. (a) The department shall
develop and promote programs designed to make the best use of the
resources of the state so as to assure a balanced economy and
continuing economic growth for Indiana and for those purposes may do
the following:
(1) Cooperate with federal, state, and local governments and
agencies in the coordination of programs to make the best use of
the resources of the state.
(2) Receive and expend all funds, grants, gifts, and contributions
of money, property, labor, interest accrued from loans made by
the department, and other things of value from public and private
sources, including grants from agencies and instrumentalities of
the state and the federal government. The department:
(A) may accept federal grants for providing planning
assistance, making grants, or providing other services or
functions necessary to political subdivisions, planning
commissions, or other public or private organizations;
(B) shall administer these grants in accordance with their
terms; and
(C) may contract with political subdivisions, planning
commissions, or other public or private organizations to carry
out the purposes for which the grants were made.
(3) Direct that assistance, information, and advice regarding the
duties and functions of the department be given the department by
any officer, agent, or employee of the state. The head of any other
state department or agency may assign one (1) or more of the
department's or agency's employees to the department on a
temporary basis, or may direct any division or agency under the
department's or agency's supervision and control to make any
special study or survey requested by the director.
(b) The department shall perform the following duties:
(1) Disseminate information concerning the industrial,
commercial, governmental, educational, cultural, recreational,
agricultural, and other advantages of Indiana.
(2) Plan, direct, and conduct research activities.
(3) Develop and implement industrial development programs to
encourage expansion of existing industrial, commercial, and
business facilities within Indiana and to encourage new industrial,
commercial, and business locations within Indiana.
(4) Assist businesses and industries in acquiring, improving, and
developing overseas markets and encourage international plant
locations within Indiana. The director, with the approval of the
governor, may establish foreign offices to assist in this function.
(5) Promote the growth of minority business enterprises by doing
the following:
(A) Mobilizing and coordinating the activities, resources, and
efforts of governmental and private agencies, businesses, trade
associations, institutions, and individuals.
(B) Assisting minority businesses in obtaining governmental
or commercial financing for expansion, establishment of new
businesses, or individual development projects.
(C) Aiding minority businesses in procuring contracts from
governmental or private sources, or both.
(D) Providing technical, managerial, and counseling assistance
to minority business enterprises.
(6) Assist in community economic development planning and the
implementation of programs designed to further this development.
(7) Assist in the development and promotion of Indiana's tourist
resources, facilities, attractions, and activities.
(8) Assist in the promotion and marketing of Indiana's agricultural
products, and provide staff assistance to the director in fulfilling
the director's responsibilities as commissioner of agriculture.
(9) Perform the following energy related functions:
(A) Assist in the development and promotion of alternative
energy resources, including Indiana coal, oil shale,
hydropower, solar, wind, geothermal, and biomass resources.
(B) Encourage the conservation and efficient use of energy,
including energy use in commercial, industrial, residential,
governmental, agricultural, transportation, recreational, and
educational sectors.
(C) Assist in energy emergency preparedness.
(D) Not later than January 1, 1994, establish:
(i) specific goals for increased energy efficiency in the
operations of state government and for the use of alternative
fuels in vehicles owned by the state; and
(ii) guidelines for achieving the goals established under item
(i).
(E) Establish procedures for state agencies to use in reporting
to the department on energy issues.
(F) Carry out studies, research projects, and other activities
required to:
(i) assess the nature and extent of energy resources required
to meet the needs of the state, including coal and other fossil
fuels, alcohol fuels produced from agricultural and forest
products and resources, renewable energy, and other energy
resources;
(ii) promote cooperation among government, utilities,
industry, institutions of higher education, consumers, and all
other parties interested in energy and recycling market
development issues; and
(iii) promote the dissemination of information concerning
energy and recycling market development issues.
(10) Implement any federal program delegated to the state to
effectuate the purposes of this chapter.
(11) Promote the growth of small businesses by doing the
following:
(A) Assisting small businesses in obtaining and preparing the
permits required to conduct business in Indiana.
ownership counselors. The attorney general and the entities
listed in IC 4-6-12-4(a)(1) through IC 4-6-12-4(a)(10) shall
cooperate with the department in implementing this
subdivision.
(c) The department shall submit a report to the general assembly
before October 1 of each year concerning the availability of and
location of markets for recycled products in Indiana. The report must
include the following:
(1) A priority listing of recyclable materials to be targeted for
market development. The listing must be based on an examination
of the need and opportunities for the marketing of the following:
(A) Paper.
(B) Glass.
(C) Aluminum containers.
(D) Steel containers.
(E) Bi-metal containers.
(F) Glass containers.
(G) Plastic containers.
(H) Landscape waste.
(I) Construction materials.
(J) Waste oil.
(K) Waste tires.
(L) Coal combustion wastes.
(M) Other materials.
(2) A presentation of a market development strategy that:
(A) considers the specific material marketing needs of Indiana;
and
(B) makes recommendations for legislative action.
(3) An analysis that examines the cost and effectiveness of future
market development options.
SECTION 2. IC 4-4-3-23 IS ADDED TO THE INDIANA CODE
AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
JANUARY 1, 2005]: Sec. 23. (a) The home ownership education
account within the state general fund is established to support the
home ownership education programs established under section
8(b)(15) of this chapter. The account is administered by the
department.
(b) The home ownership education account consists of fees
collected under IC 24-9-9.
(c) The expenses of administering the home ownership
education account shall be paid from money in the fund.
(d) The treasurer of state shall invest the money in the home
ownership education account not currently needed to meet the
obligations of the account in the same manner as other public
money may be invested.
(e) Money in the account may be spent only after appropriation
by the general assembly.
SECTION 3. IC 4-6-3-3, AS AMENDED BY P.L.2-2002,
SECTION 24, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JANUARY 1, 2005]: Sec. 3. If the attorney general has reasonable
cause to believe that a person may be in possession, custody, or control
of documentary material, or may have knowledge of a fact that is
relevant to an investigation conducted to determine if a person is or has
been engaged in a violation of IC 4-6-9, IC 4-6-10, IC 13-14-10,
IC 13-14-12, IC 13-24-2, IC 13-30-4, IC 13-30-5, IC 13-30-6,
IC 13-30-8, IC 23-7-8, IC 24-1-2, IC 24-5-0.5, IC 24-5-7, IC 24-5-8,
IC 24-9, IC 25-1-7, IC 32-34-1, or any other statute enforced by the
attorney general, only the attorney general may issue in writing, and
cause to be served upon the person or the person's representative or
agent, an investigative demand that requires that the person served do
any combination of the following:
(1) Produce the documentary material for inspection and copying
or reproduction.
(2) Answer under oath and in writing written interrogatories.
(3) Appear and testify under oath before the attorney general or
the attorney general's duly authorized representative.
SECTION 4. IC 4-6-12 IS ADDED TO THE INDIANA CODE AS
A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE
JANUARY 1, 2005]:
Chapter 12. Homeowner Protection Unit
Sec. 1. As used in this chapter, "unit" refers to the homeowner
protection unit established under this chapter.
Sec. 2. The attorney general shall establish a homeowner
protection unit to enforce IC 24-9 and to carry out this chapter.
Sec. 3. (a) Beginning July 1, 2005, the unit shall do the
following:
(1) Investigate deceptive acts in connection with mortgage
lending.
(2) Investigate violations of IC 24-9.
(3) Institute appropriate administrative and civil actions to
redress:
(A) deceptive acts in connection with mortgage lending;
and
(B) violations of IC 24-5-0.5 and IC 24-9.
(4) Cooperate with federal, state, and local law enforcement
agencies in the investigation of:
(A) deceptive acts in connection with mortgage lending;
(B) criminal violations involving deceptive acts in
connection with mortgage lending; and
(C) violations of IC 24-5-0.5 and IC 24-9.
(b) The attorney general shall adopt rules under IC 4-22-2 to the
extent necessary to organize the unit.
Sec. 4. (a) The following may cooperate with the unit to
implement this chapter:
(1) The Indiana professional licensing agency and the
appropriate licensing boards with respect to persons licensed
under IC 25.
(2) The department of financial institutions.
(3) The department of insurance with respect to the sale of
insurance in connection with mortgage lending.
(4) The securities division of the office of the secretary of
state.
(5) The supreme court disciplinary commission with respect
to attorney misconduct.
(6) The Indiana housing finance authority.
(7) The department of state revenue.
(8) The state police department.
(9) A prosecuting attorney.
(10) Local law enforcement agencies.
(11) The department of commerce.
(b) Notwithstanding IC 5-14-3, the entities listed in subsection
(a) may share information with the unit.
Sec. 5. The attorney general may file complaints with any of the
entities listed in section 4 of this chapter to carry out this chapter
and IC 24-9.
Sec. 6. The establishment of the unit and the unit's powers does
not limit the jurisdiction of an entity described in section 4 of this
chapter.
Sec. 7. The attorney general and an investigator of the unit may
do any of the following when conducting an investigation under
section 3 of this chapter:
(1) or more of the foregoing or a certificate of deposit for any of
the foregoing.
(2) A security issued or guaranteed by Canada, a Canadian
province, a political subdivision of a Canadian province, an
agency, or corporate or other instrumentality of one (1) or more
of the foregoing, or any other foreign government with which the
United States currently maintains diplomatic relations, if the
security is recognized as a valid obligation by the issuer or
guarantor.
(3) A security issued by and representing an interest in or a debt
of, or guaranteed by a bank organized under the laws of the
United States, a bank, savings institution, or trust company
organized and supervised under the laws of a state, a federal
savings association, a savings association organized under the
laws of a state and authorized to do business in Indiana, a federal
credit union or a credit union, industrial loan association, or
similar association organized and supervised under the laws of
this state, or a corporation or organization whose issuance of
securities is required by any other law to be passed upon and
authorized by the department of financial institutions or by a
federal agency or authority.
(4) A security issued or guaranteed by a railroad or other common
or contract carrier, a public utility, or a common or contract
carrier or public utility holding company. However, an issuer or
guarantor must be subject to regulation or supervision as to the
issuance of its own securities by a public commission, board, or
officer of the government of the United States, of a state, territory,
or insular possession of the United States, of a municipality
located in a state, territory, or insular possession, of the District
of Columbia, or of the Dominion of Canada or a province of
Canada.
(5) A security listed or approved for listing upon notice of
issuance on the New York Stock Exchange, the American Stock
Exchange, the Chicago Stock Exchange, or on any other exchange
approved and designated by the commissioner, any other security
of the same issuer that is of senior rank or substantially equal
rank, a security called for by subscription rights or warrants so
listed or approved, or a warrant or right to purchase or subscribe
to any of the foregoing.
(6) A promissory note, draft, bill of exchange, or banker's
acceptance that is evidence of:
(A) an obligation;
(B) a guarantee of an obligation;
(C) a renewal of an obligation; or
(D) a guarantee of a renewal of an obligation;
to pay cash within nine (9) months after the date of issuance,
excluding grace days, that is issued in denominations of at least
fifty thousand dollars ($50,000) and receives a rating in one (1)
of the three (3) highest rating categories from a nationally
recognized statistical rating organization.
(7) A security issued in connection with an employee stock
purchase, savings, pension, profit-sharing, or similar benefit plan.
(8) A security issued by an association incorporated under
IC 15-7-1.
(9) A security that is an industrial development bond (as defined
in Section 103(b)(2) of the Internal Revenue Code of 1954) the
interest of which is excludable from gross income under Section
103(a)(1) of the Internal Revenue Code of 1954 if, by reason of
the application of paragraph (4) or (6) of Section 103(b) of the
Internal Revenue Code of 1954 (determined as if paragraphs
(4)(A), (5), and (7) were not included in Section 103(b)),
paragraph (1) of Section 103(b) does not apply to the security.
(10) A security issued by a nonprofit corporation that meets the
requirements of Section 103(e) of the Internal Revenue Code of
1954 and is designated by the governor as the secondary market
for guaranteed student loans under IC 20-12-21.2.
(11) A security designated or approved for designation upon
notice of issuance on the National Association of Securities
Dealers Automatic Quotation National Market System or any
other national market system approved and designated by the
commissioner, any other security of the same issuer that is of
senior rank or substantially equal rank, a security called for by
subscription rights or warrants so listed or approved, or a warrant
or right to purchase or subscribe to any of the foregoing.
(12) A security that is a "qualified bond" (as defined in Section
141(e) of the Internal Revenue Code, as amended).
(b) The following transactions are exempted from the registration
requirements of section 3 of this chapter:
(1) An isolated nonissuer offer or sale, whether effected through
a broker-dealer or not.
filing is withdrawn or is not completed by the issuer, the
commissioner must retain the filing fee.
(D) There has been compliance with section 6(l) of this
chapter.
(E) Unless the issuer is registered under the Investment
Company Act of 1940, all the following must be true at the
time of the transaction:
(i) The security belongs to a class that has been in the hands
of the public for at least ninety (90) days.
(ii) The issuer of the security is a going concern, is actually
engaged in business, and is not in bankruptcy or
receivership.
(iii) Except as permitted by order of the commissioner, the
issuer and any predecessors have been in continuous
operation for at least five (5) years. An issuer or predecessor
is in continuous operation only if the issuer or predecessor
has gross operating revenue in each of the five (5) years
immediately preceding the issuer's or predecessor's claim of
exemption and has had total gross operating revenue of at
least two million five hundred thousand dollars ($2,500,000)
for those five (5) years or has had gross operating revenue of
at least five hundred thousand dollars ($500,000) in not less
than three (3) of those five (5) years.
The commissioner may revoke the exemption afforded by this
subdivision with respect to any securities by issuing an order:
(i) if the commissioner finds that the further sale of the
securities in this state would work or tend to work a fraud on
purchasers of the securities;
(ii) if the commissioner finds that the financial condition of
the issuer is such that it is in the public interest and is
necessary for the protection of investors to revoke or restrict
the exemption afforded by this subsection; or
(iii) if the commissioner finds that, due to the limited
number of shares in the hands of the public or due to the
limited number of broker-dealers making a market in the
securities, there is not a sufficient market for the securities
so that there is not a current market price for the securities.
(4) A transaction between the issuer or other person on whose
behalf the offering is made by an underwriter, or among
underwriters.
the limited liability company or affiliated limited liability
company) issued and outstanding.
(10) The offer or sale of a security by the issuer of the security if
all of the following conditions are satisfied:
(A) The issuer reasonably believes that either:
(i) there are no more than thirty-five (35) purchasers of the
securities from the issuer in an offering pursuant to this
subsection, including purchasers outside Indiana; or
(ii) there are no more than twenty (20) purchasers in
Indiana.
In either case, there shall be excluded in determining the
number of purchasers a purchaser whom the issuer reasonably
believes to be an accredited investor or who purchases the
securities after they are registered under this chapter.
(B) The issuer does not offer or sell the securities by means of
a form of general advertisement or general solicitation.
(C) The issuer reasonably believes that each purchaser of the
securities is acquiring the securities for the purchaser's own
investment and is aware of any restrictions imposed on
transferability and resale of the securities. The basis for
reasonable belief may include:
(i) obtaining a written representation signed by the
purchaser that the purchaser is acquiring the securities for
the purchaser's own investment and is aware of any
restrictions imposed on the transferability and resale of the
securities; and
(ii) placement of a legend on the certificate or other
document that evidences the securities stating that the
securities have not been registered under section 3 of this
chapter, and setting forth or referring to the restrictions on
transferability and sale of the securities.
(D) The issuer:
(i) files with the commissioner and provides to each
purchaser in this state an offering statement that sets forth
all material facts with respect to the securities; and
(ii) reasonably believes immediately before making a sale
that each purchaser who is not an accredited investor either
alone or with a purchaser representative has knowledge and
experience in financial and business matters to the extent
that the purchaser is capable of evaluating the merits and
risks of the prospective investment.
(E) If the aggregate offering price of the securities in an
offering pursuant to this subdivision (including securities sold
outside of Indiana) does not exceed five hundred thousand
dollars ($500,000), the issuer is not required to comply with
clause (D) if the issuer files with the commissioner and
provides to each purchaser in Indiana the following
information and materials:
(i) copies of all written materials, if any, concerning the
securities that have been provided by the issuer to any
purchaser; and
(ii) unless clearly presented in all written materials, a written
notification setting forth the name, address, and form of
organization of the issuer and any affiliate, the nature of the
principal businesses of the issuer and any affiliate, and the
information required in section 5(b)(1)(B), 5(b)(1)(C),
5(b)(1)(D), 5(b)(1)(E), 5(b)(1)(H), and 5(b)(1)(I) of this
chapter.
(F) The commissioner does not disallow the exemption
provided by this subdivision within ten (10) full business days
after receipt of the filing required by clause (D) or (E). The
issuer may make offers (but not sales) before and during the
ten (10) day period, if:
(i) each prospective purchaser is advised in writing that the
offer is preliminary and subject to material change; and
(ii) no enforceable offer to purchase the securities may be
made by a prospective purchaser, and no consideration in
any form may be accepted or received (directly or indirectly)
from a prospective purchaser, before the expiration of the
ten (10) day period and the vacation of an order disallowing
the exemption.
(G) The issuer need not comply with clause (D), (E), or (F) if:
(i) each purchaser has access to all the material facts with
respect to the securities by reason of the purchaser's active
involvement in the organization or management of the issuer
or the purchaser's family relationship with a person actively
involved in the organization or management of the issuer;
(ii) there are not more than fifteen (15) purchasers in Indiana
and each Indiana purchaser is an accredited investor or is a
purchaser described in item (i); or
issuance of securities of the same or another issuer.
(16) A limited offering transactional exemption, which may be
created by rule adopted by the commissioner. The exemption
must further the objectives of compatibility with federal
exemptions and uniformity among the states.
(c) The commissioner may consider and determine if a proposed
sale, transaction, issue, or security is entitled to an exemption accorded
by this section. The commissioner may decline to exercise the
commissioner's authority as to a proposed sale, transaction, issue, or
security. An interested party desiring the commissioner to exercise the
commissioner's authority must submit to the commissioner a verified
statement of all material facts relating to the proposed sale, transaction,
issue, or security, which must be accompanied by a request for a ruling
as to the particular exemption claimed, together with a filing fee of one
hundred dollars ($100). After notice to the interested parties as the
commissioner determines is proper and after a hearing, if any, the
commissioner may enter an order finding the proposed sale,
transaction, issue, or security entitled or not entitled to the exemption
claimed. An order entered, unless an appeal is taken from it in the
manner prescribed in section 20 of this chapter, is binding upon the
commissioner and upon all interested parties, provided that the
proposed sale, transaction, issue, or security when consummated or
issued conforms in every relevant and material particular with the facts
as set forth in the verified statement submitted.
(d) The commissioner may by order deny or revoke an exemption
specified in subsection (a)(6), (a)(7), or (b) with respect to a specific
security or transaction, if the commissioner finds that the securities to
which the exemption applies would not qualify for registration under
sections 4 and 5 of this chapter. No order may be entered without
appropriate prior notice to all interested parties, opportunity for
hearing, and written findings of fact and conclusions of law, except that
the commissioner may by order summarily deny or revoke any of the
specific exemptions pending final determination of a proceeding under
this subsection. Upon the entry of a summary order, the commissioner
shall promptly notify all interested parties that it has been entered, of
the reasons for the order, and that within fifteen (15) days of the receipt
of a written request the matter will be set down for hearing. If no
hearing is requested and none is ordered by the commissioner, the
order will remain in effect until it is modified or vacated by the
commissioner. If a hearing is requested or ordered, the commissioner,
after notice of and opportunity for hearing to all interested persons,
may modify or vacate the order or extend it until final determination.
No order under this subsection may operate retroactively. No person
may be considered to have violated section 3 of this chapter by reason
of an offer or sale effected after the entry of an order under this
subsection if the person sustains the burden of proof that the person did
not know, and in the exercise of reasonable care could not have known,
of the order.
(e) If, with respect to an offering of securities, any notices or written
statements are required to be filed with the commissioner under
subsection (b)(10), the first filing made with respect to the offering
must be accompanied by a filing fee of one hundred dollars ($100).
(f) A condition, stipulation, or provision requiring a person
acquiring a security to waive compliance with this chapter or a
rule or order under this chapter is void.
SECTION 6. IC 23-2-1-6 IS AMENDED TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2004]: Sec. 6. (a) An application for
registration may be filed by:
(1) the issuer;
(2) any other person on whose behalf the offering is to be made;
or
(3) a registered broker-dealer.
(b) A person filing an application for registration shall pay a filing
fee of one-twentieth of one percent (0.05%) of the maximum aggregate
offering price at which the registered securities are to be offered in
Indiana, but the fee may not be less than two hundred fifty dollars
($250) and may not be more than one thousand dollars ($1,000).
(c) When an application for registration under subsection (b) is
withdrawn before the effective date or a preeffective stop order is
entered under section 7 of this chapter, the commissioner shall retain
two hundred fifty dollars ($250) of the fee.
(d) A person filing an amendment to an effective registration which
requires an order of the commissioner shall pay a twenty-five dollar
($25) filing fee.
(e) An application for registration shall specify:
(1) the amount of securities to be offered in this state;
(2) the states in which a registration statement or similar
document in connection with the offering has been or is to be
filed; and
(3) an adverse order, judgment, or decree entered in connection
with the offering by the regulatory authorities in each state or by
a court or the Securities and Exchange Commission.
(f) A document filed under this chapter within five (5) years
preceding the filing of an application for registration may be
incorporated by reference in the application for registration if the
document is currently accurate.
(g) The commissioner may by rule or otherwise permit the omission
of an item of information or document from an application for
registration.
(h) In the case of a nonissuer distribution, any part of the
information that might otherwise be required under section 5 of this
chapter or subsection (i) need not be furnished if the person filing the
application for registration produces evidence to the reasonable
satisfaction of the commissioner that the person, or the persons on
whose behalf the distribution is to be made, cannot furnish that part of
the required information without unreasonable effort or expense.
(i) A registration is effective for:
(1) two (2) years from its effective date; or
(2) a shorter period during which the security is being offered or
distributed in a nonexempted transaction by or for the account of
the issuer or the person on whose behalf the offering is being
made or by an underwriter or broker-dealer who is still offering
part of an unsold allotment or subscription taken by the
underwriter or broker-dealer as a participant in the distribution,
except during the time a stop order is in effect under section 7 of
this chapter.
(j) So long as a registration is effective, the commissioner may by
rule or order require the person who filed the application for
registration to file reports, not more often than quarterly, to keep
reasonably current the information contained in the application for
registration and to disclose the progress of the offering.
(k) The commissioner may by rule or order require as a condition of
registration by qualification or coordination:
(1) that a security issued within the past three (3) years or to be
issued to a promoter for a consideration substantially different
from the public offering price, or to a person for a consideration
other than cash, be deposited in escrow; and
(2) that the proceeds from the sale of the registered security be
impounded until the issuer receives a specified amount.
The commissioner may by rule or order determine the conditions of an
escrow or impounding required under this subsection, but the
commissioner may not reject a depository solely because of location in
another state.
(l) No transferable share is exempt from registration under section
2(b)(3) of this chapter or is qualified for registration under sections 4
or 5 of this chapter unless the issuer has designated a qualified transfer
agent to handle all transfers. The commissioner may adopt rules to
implement this subsection. The commissioner may by rule or order
exempt an issuer, wholly or partially, from the requirements of this
subsection.
(m) A registration statement may be amended after its effective date
to increase the securities specified to be offered and sold if the public
offering price and underwriters' discounts and commissions are not
changed from the amounts reported to the commissioner. An
amendment becomes effective upon an order of the commissioner. A
person filing an amendment must pay a late registration fee of
twenty-five dollars ($25) and a filing fee under subsection (b) for the
additional securities proposed to be offered. An amendment relates
back to the date of the sale of additional securities being registered if
the amendment is filed within three (3) months after the date of the sale
and the additional filing fee and late registration fee are paid.
(n) As permitted by Section 106(c) of the Secondary Mortgage
Market Enhancement Act of 1984 (15 U.S.C. 77r-1(c)), securities that
are offered and sold pursuant to Section 4(5) of the Securities Act of
1933 or that are mortgage-related securities (as that term is defined in
Section 3(a)(41) of the Securities Exchange Act of 1934, 15 U.S.C.
78c(a)(41)):
(1) must comply with all applicable:
(A) registration and qualification requirements of this chapter;
and
(B) rules adopted by the commissioner; and
(2) shall not be treated as obligations issued by the United States
for the purposes of this chapter.
(o) If:
(1) the division:
(A) does not approve an application for registration by
coordination or qualification; and
(B) notifies the applicant not later than ten (10) days after
the date the application was not approved of a deficiency
in the application that, if satisfied, would allow the
approval of the application;
the applicant may satisfy the deficiency within sixty (60) days
after the date described in clause (B); and
(2) an applicant does not satisfy the deficiency described in
subdivision (1):
(A) the application is considered abandoned;
(B) the issuer does not receive a refund of the application
fee; and
(C) no further action is required by the division.
SECTION 7. IC 23-2-1-15, AS AMENDED BY P.L.270-2003,
SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2004]: Sec. 15. (a) This chapter shall be administered by a
division of the office of the secretary of state. The secretary of state
shall appoint a securities commissioner who shall be responsible for
the direction and supervision of the division and the administration of
this chapter under the direction and control of the secretary of state.
The salary of the securities commissioner shall be paid out of the funds
appropriated for the administration of this chapter. The commissioner
shall serve at the will of the secretary of state.
(b) The secretary of state:
(1) shall employ a chief deputy, a senior investigator, a senior
accountant, and other deputies, investigators, accountants, clerks,
stenographers, and other employees necessary for the
administration of this chapter; and
(2) shall fix their compensation with the approval of the budget
agency.
The chief deputy, other deputies, the senior investigator, and the senior
accountant, once employed under this chapter, may be dismissed only
for cause by the secretary of state upon ten (10) days notice in writing
stating the reasons for dismissal. Within fifteen (15) days after
dismissal, the chief deputy, other deputies, the senior investigator, and
the senior accountant may appeal to the state personnel board. The
state personnel board shall hold a hearing, and if it finds that the
appealing party was dismissed for a political, social, religious, or racial
reason, the appealing party shall be reinstated to the appealing party's
position without loss of pay. In all other cases, if the decision is
favorable to the appealing party, the secretary of state shall follow the
findings and recommendations of the board, which may include
reinstatement and payment of salary or wages lost. The hearing and any
subsequent proceedings or appeals shall be governed by the provisions
of IC 4-15-2 and IC 4-21.5.
(c) Fees and funds of whatever character accruing from the
administration of this chapter shall be accounted for by the secretary of
state and shall be deposited with the treasurer of state to be deposited
by the treasurer of state in the general fund of the state. Expenses
incurred in the administration of this chapter shall be paid from the
general fund upon appropriation being made for the expenses in the
manner provided by law for the making of those appropriations.
However, costs of investigations recovered under sections 16(d) and
17.1(c) of this chapter shall be deposited with the treasurer of state to
be deposited by the treasurer of state in a separate account to be known
as the securities division enforcement account. The funds in the
account shall be available, with the approval of the budget agency, to
augment and supplement the funds appropriated for the administration
of this chapter. The funds in the account do not revert to the general
fund at the end of any fiscal year.
(d) In connection with the administration and enforcement of the
provisions of this chapter, the attorney general shall render all
necessary assistance to the securities commissioner upon the
commissioner's request, and to that end, the attorney general shall
employ legal and other professional services as are necessary to
adequately and fully perform the service under the direction of the
securities commissioner as the demands of the securities division shall
require. Expenses incurred by the attorney general for the purposes
stated in this subsection shall be chargeable against and paid out of
funds appropriated to the attorney general for the administration of the
attorney general's office.
(e) Neither the secretary of state, the securities commissioner, nor
an employee of the securities division shall be liable in their individual
capacity, except to the state, for an act done or omitted in connection
with the performance of their respective duties under this chapter.
(f) The commissioner, subject to the approval of the secretary of
state, may adopt rules, orders, and forms necessary to carry out this
chapter, including rules and forms concerning registration statements,
applications, reports, and the definitions of any terms if the definitions
are consistent with this chapter. The commissioner may by rule or order
allow for exemptions from registration requirements under sections 3
and 8 of this chapter if the exemptions are consistent with the public
interest and this chapter.
(g) The provisions of this chapter delegating and granting power to
the secretary of state, the securities division, and the securities
commissioner shall be liberally construed to the end that:
(1) the practice or commission of fraud may be prohibited and
prevented;
(2) disclosure of sufficient and reliable information in order to
afford reasonable opportunity for the exercise of independent
judgment of the persons involved may be assured; and
(3) the qualifications may be prescribed to assure availability of
reliable broker-dealers, investment advisers, and agents engaged
in and in connection with the issuance, barter, sale, purchase,
transfer, or disposition of securities in this state.
It is the intent and purpose of this chapter to delegate and grant to and
vest in the secretary of state, the securities division, and the securities
commissioner full and complete power to carry into effect and
accomplish the purpose of this chapter and to charge them with full and
complete responsibility for its effective administration.
(h) It is the duty of a prosecuting attorney, as well as of the attorney
general, to assist the securities commissioner upon the commissioner's
request in the prosecution to final judgment of a violation of the penal
provisions of this chapter and in a civil proceeding or action arising
under this chapter. If the commissioner determines that an action based
on the securities division's investigations is meritorious:
(1) the commissioner or a designee empowered by the
commissioner shall certify the facts drawn from the investigation
to the prosecuting attorney of the judicial circuit in which the
crime may have been committed;
(2) the commissioner and the securities division shall assist the
prosecuting attorney in prosecuting an action under this section,
which may include a securities division attorney serving as a
special deputy prosecutor appointed by the prosecuting
attorney;
(3) a prosecuting attorney to whom facts concerning fraud are
certified under subdivision (1) may refer the matter to the attorney
general; and
(4) if a matter has been referred to the attorney general under
subdivision (3), the attorney general may:
(A) file an information in a court with jurisdiction over the
matter in the county in which the offense is alleged to have
been committed; and
(B) prosecute the alleged offense.
FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 19. (a) A person who
offers or sells a security in violation of this chapter, and who does not
sustain the burden of proof that the person did not know and in the
exercise of reasonable care could not have known of the violation, is
liable to any other party to the transaction who did not knowingly
participate in the violation or who did not have, at the time of the
transaction, knowledge of the violation, who may sue either at law or
in equity to rescind the transaction or to recover the consideration paid,
together, in either case, with interest as computed in subsection (g)(1),
plus costs, and reasonable attorney's fees, less the amount of any cash
or other property received on the security upon the tender of the
security by the person bringing the action or for damages if the person
no longer owns the security. Damages are the amount that would be
recoverable upon a tender less:
(1) the value of the security when the buyer disposed of the
security; and
(2) the interest as computed in subsection (g)(1) on the value of
the security from the date of disposition.
(b) A person who purchases a security in violation of this chapter,
and who does not sustain the burden of proof that the person did not
know and in the exercise of reasonable care could not have known of
the violation, is liable to any other party to the transaction who did not
knowingly participate in the violation or who did not have, at the time
of the transaction, knowledge of the violation. The other party to the
transaction may bring an action to rescind the transaction or for
damages, together, in either case, with reasonable attorney's fees, upon
the tender of the consideration received by the person bringing the
action.
(c) A person who, for compensation, engages in the business of
advising others, either directly or through publications or writings, as
to the value of securities or as to the advisability of investing in,
purchasing, or selling securities, or who, for compensation and as a part
of a regular business, issues analyses or reports concerning securities
and:
(1) violates section 8, 12.1(b), or 14, or 26 of this chapter;
(2) employs a device, scheme, or artifice to defraud a person; or
(3) engages in an act that operates or would operate as fraud or
deceit upon a person;
is liable to the other person, who may bring an action to recover any
consideration paid for advice, any loss due to advice, interest at eight
percent (8%) each year from the date consideration was paid, costs, and
reasonable attorney's fees less the value of cash or property received
due to the advice. It is a defense to an action brought for a violation of
section 12.1(b) or 26 of this chapter that the person accused of the
violation did not know of the violation and, exercising reasonable care,
could not have known of the violation.
(d) A person who directly or indirectly controls a person liable
under subsection (a), (b), or (c), a partner, officer, or director of the
person, a person occupying a similar status or performing similar
functions, an employee of a person who materially aids in the conduct
creating the liability, and a broker-dealer or agent who materially aids
in the conduct are also liable jointly and severally with and to the same
extent as the person, unless the person who is liable sustains the burden
of proof that the person did not know, and in the exercise of reasonable
care could not have known, of the existence of the facts by reason of
which the liability is alleged to exist. There is contribution as in cases
of contract among the several persons liable.
(e) A tender specified in this section may be made at any time
before entry of judgment.
(f) A cause of action under this statute survives the death of a person
who might have been a plaintiff or defendant.
(g) Action under this section shall be commenced within three (3)
years after discovery by the person bringing the action of a violation of
this chapter, and not afterwards. No person may sue under this section:
(1) if that person received a written offer, before suit and at a time
when the person owned the security, to refund the consideration
paid together with interest on that amount from the date of
payment to the date of repayment, with interest on:
(A) interest-bearing obligations to be computed at the same
rate as provided on the security; and
(B) all other securities at the rate of eight percent (8%) per
year;
less the amount of any income received on the security, and the
person failed to accept the offer within thirty (30) days of its
receipt; or
(2) if the person received an offer before suit and at a time when
the person did not own the security, unless the person rejected the
offer in writing within thirty (30) days of its receipt.
(h) No person who has made or engaged in the performance of a
contract in violation of this chapter or a rule or order under this
chapter, or who has acquired a purported right under a contract with
knowledge of the facts by reason of which its making or performance
was in violation, may base a suit on the contract.
(i) A condition, stipulation, or provision binding a person acquiring
a security to waive compliance with this chapter or a rule or order
under this chapter is void.
(j) The rights and remedies specifically prescribed by this chapter
are the only rights and remedies created by this chapter, but are in
addition to any other rights or remedies that exist at law or in equity.
SECTION 9. IC 23-2-1-19.5 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 19.5. (a) If the
commissioner determines, after notice and opportunity for a hearing,
that any person has violated this chapter, the commissioner may, in
addition to or in lieu of all other remedies, impose a civil penalty upon
any person who has violated this chapter. This penalty may not exceed
ten thousand dollars ($10,000) for each violation of this chapter found
to have been committed. An appeal from the decision of the
commissioner imposing a civil penalty under this subsection may be
taken by any aggrieved party pursuant to section 20 of this chapter.
(b) The commissioner may bring any action in the circuit or superior
court of Marion County to enforce payment of any penalty imposed
under subsection (a).
(c) Penalties collected under this section shall be deposited in the
securities division enforcement account established under section 15(c)
of this chapter.
SECTION 10. IC 23-2-1-26 IS ADDED TO THE INDIANA CODE
AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY
1, 2004]: Sec. 26. (a) This section applies to a person engaged in the
business of providing advice to others, directly or by means of
analyses, reports, or other publications, concerning:
(1) the value of securities; or
(2) the advisability of:
(A) investing in;
(B) purchasing; or
(C) selling;
securities.
(b) A person described in subsection (a) may not:
(1) employ a device, a scheme, or an artifice to defraud a
person; or
(2) engage in an act, a practice, or a course of business that
operates or would operate as fraud or deceit upon a person.
SECTION 11. IC 23-2-1-27 IS ADDED TO THE INDIANA CODE
AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY
1, 2004]: Sec. 27. An administrative action under this chapter
survives the death of a person who might have been a respondent.
SECTION 12. IC 23-2-5-3, AS AMENDED BY P.L.115-2001,
SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2004]: Sec. 3. (a) As used in this chapter, "certificate of
registration" means a certificate issued by the commissioner
authorizing an individual to engage in origination activities on behalf
of a licensee.
(b) As used in this chapter, "creditor" means a person:
(1) that loans funds of the person in connection with a loan; and
(2) to whom the loan is initially payable on the face of the note or
contract evidencing the loan.
(c) As used in this chapter, "license" means a license issued by the
commissioner authorizing a person to engage in the loan brokerage
business.
(d) As used in this chapter, "licensee" means a person that is issued
a license under this chapter.
(e) As used in this chapter, "loan broker" means any person who, in
return for any consideration from any source procures, attempts to
procure, or assists in procuring a loan from a third party or any
other person, promises to procure a loan for any person or assist any
person in procuring a loan from any third party, or who promises to
consider whether or not to make a loan to any person. whether or not
the person seeking the loan actually obtains the loan. "Loan broker"
does not include:
(1) any bank, savings bank, trust company, savings association,
credit union, or any other financial institution that is:
(A) regulated by any agency of the United States or any state;
and
(B) regularly actively engaged in the business of making
consumer loans that are not secured by real estate or taking
assignment of consumer sales contracts that are not secured by
real estate;
(2) any person authorized to sell and service loans for the Federal
National Mortgage Association or the Federal Home Loan
Mortgage Corporation, issue securities backed by the Government
National Mortgage Association, make loans insured by the United
States Department of Housing and Urban Development, act as a
supervised lender or nonsupervised automatic lender of the
United States Department of Veterans Affairs, or act as a
correspondent of loans insured by the United States Department
of Housing and Urban Development;
(3) (2) any insurance company; or
(4) (3) any person arranging financing for the sale of the person's
product.
(f) As used in this chapter, "loan brokerage business" means a
person acting as a loan broker.
(g) As used in this chapter, "origination activities" means
establishing the terms or conditions of a loan with a borrower or
prospective borrower communication with or assistance of a
borrower or prospective borrower in the selection of loan products
or terms.
(h) As used in this chapter, "originator" means a person
engaged in origination activities. The term "originator" does not
include a person who performs origination activities for any entity
that is not a loan broker under subsection (e).
(i) As used in this chapter, "person" means an individual, a
partnership, a trust, a corporation, a limited liability company, a limited
liability partnership, a sole proprietorship, a joint venture, a joint stock
company, or another group or entity, however organized.
(i) (j) As used in this chapter, "registrant" means an individual who
is registered to engage in origination activities under this chapter.
(j) (k) As used in this chapter, "ultimate equitable owner" means a
person who, directly or indirectly, owns or controls any ownership
interest in a person, regardless of whether the person owns or controls
the ownership interest through one (1) or more other persons or one (1)
or more proxies, powers of attorney, or variances.
SECTION 13. IC 23-2-5-19, AS AMENDED BY P.L.230-1999,
SECTION 11, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2004]: Sec. 19. (a) The following persons are exempt from the
requirements of sections 4, 5, 6, 9, 10, 17, and 18, and 21 of this
chapter:
(1) Any attorney while engaging in the practice of law.
(2) Any certified public accountant, public accountant, or
accountant practitioner holding a certificate or registered under
IC 25-2.1 while performing the practice of accountancy (as
defined by IC 25-2.1-1-10).
dissolution on the business entity.
(e) A business entity administratively dissolved under this section
may carry on only those activities necessary to wind up and liquidate
the business entity's affairs.
SECTION 15. IC 24-4.5-1-102, AS AMENDED BY P.L.258-2003,
SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JANUARY 1, 2004 (RETROACTIVE)]: Sec. 102. Purposes; Rules of
Construction.(1) This article shall be liberally construed and applied
to promote its underlying purposes and policies.
(2) The underlying purposes and policies of this article are:
(a) to simplify, clarify, and modernize the law governing retail
installment sales, consumer credit, small loans, and usury;
(b) to provide rate ceilings to assure an adequate supply of credit
to consumers;
(c) to further consumer understanding of the terms of credit
transactions and to foster competition among suppliers of
consumer credit so that consumers may obtain credit at
reasonable cost;
(d) to protect consumer buyers, lessees, and borrowers against
unfair practices by some suppliers of consumer credit, having due
regard for the interests of legitimate and scrupulous creditors;
(e) to permit and encourage the development of fair and
economically sound consumer credit practices;
(f) to conform the regulation of consumer credit transactions to
the policies of the Federal Consumer Credit Protection Act; and
(g) to make uniform the law including administrative rules among
the various jurisdictions.
(3) A reference to a requirement imposed by this article includes
reference to a related rule of the department adopted pursuant to this
article.
(4) A reference to a federal law in IC 24-4.5 is a reference to the law
in effect December 31, 2002. 2003.
SECTION 16. IC 24-4.5-1-202 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 202. This article does
not apply to the following:
(1) Extensions of credit to government or governmental agencies
or instrumentalities.
(2) The sale of insurance by an insurer, except as otherwise
provided in the chapter on insurance (IC 24-4.5-4).
(3) Transactions under public utility, municipal utility, or
common carrier tariffs if a subdivision or agency of this state or
of the United States regulates the charges for the services
involved, the charges for delayed payment, and any discount
allowed for early payment.
(4) The rates and charges and the disclosure of rates and charges
of a licensed pawnbroker established in accordance with a statute
or ordinance concerning these matters.
(5) A sale of goods, services, or an interest in land in which the
goods, services, or interest in land are purchased primarily for a
purpose other than a personal, family, or household purpose.
(6) A loan in which the debt is incurred primarily for a purpose
other than a personal, family, or household purpose.
(7) An extension of credit primarily for a business, a commercial,
or an agricultural purpose.
(8) An installment agreement for the purchase of home fuels in
which a finance charge is not imposed.
(9) Loans made, insured, or guaranteed under a program
authorized by Title IV of the Higher Education Act of 1965 (20
U.S.C. 1070 et seq.).
(10) Transactions in securities or commodities accounts in which
credit is extended by a broker-dealer registered with the Securities
and Exchange Commission or the Commodity Futures Trading
Commission.
(11) A loan made:
(A) in compliance with the requirements of; and
(B) by a community development corporation (as defined
in IC 4-4-28-2) acting as a subrecipient of funds from;
the Indiana housing finance authority established by
IC 5-20-1-3.
SECTION 17. IC 24-4.5-7-104, AS ADDED BY P.L.38-2002,
SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2004]: Sec. 104. "Small loan" means a loan:
(a) with a principal loan amount that is more than at least fifty
dollars ($50) and less than four not more than five hundred one
dollars ($401); ($500); and
(b) in which the lender holds the borrower's check or receives the
borrower's written authorization to debit the borrower's
account under an agreement, either express or implied, for a
specific period before the lender:
(i) offers the check for deposit or presentment; or
(30) day period preceding the consumer's borrower's application for
a small loan under this chapter and exclusive of any income other than
regular net gross pay received, or as otherwise determined by the
department.
SECTION 23. IC 24-4.5-7-201, AS ADDED BY P.L.38-2002,
SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2004]: Sec. 201. (1) Finance charges on the first one two
hundred fifty dollars ($100) ($250) of a small loan are limited to
fifteen percent (15%) of the principal.
(2) Finance charges on the amount of a small loan greater than one
two hundred fifty dollars ($100) ($250) and less than or equal to four
hundred dollars ($400) are limited to ten thirteen percent (10%)
(13%) of the amount over one two hundred fifty dollars ($100). ($250)
and less than four hundred dollars ($400).
(3) The total amount of finance charges may not exceed thirty-five
dollars ($35). Finance charges on the amount of the small loan
greater than four hundred dollars ($400) and less than or equal to
five hundred dollars ($500) are limited to ten percent (10%) of the
amount over four hundred dollars ($400) and less than five
hundred dollars ($500).
SECTION 24. IC 24-4.5-7-202, AS ADDED BY P.L.38-2002,
SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2004]: Sec. 202. (1) Notwithstanding any other law, only the
following fees the only fee that may be contracted for and received by
the lender on a small loan or subsequent refinancing:
(a) The parties may contract for a delinquency charge of not more
than five dollars ($5) on any installment not paid in full within ten
(10) days after its scheduled due date.
(b) A delinquency charge under this section may be collected only
once on an installment, however long it remains in default. A
delinquency charge may be collected any time after it accrues.
(2) an additional charge may be made is a charge, not to exceed
twenty dollars ($20), for each:
(a) return by a bank or other depository institution of a:
(i) dishonored check;
(ii) negotiable order of withdrawal; or
(iii) share draft issued by the consumer; borrower; or
(b) time an authorization to debit the borrower's account is
dishonored.
This additional charge may be assessed one (1) time regardless of how
many times a check or an authorization to debit the borrower's
account may be submitted by the lender and dishonored.
SECTION 25. IC 24-4.5-7-301, AS ADDED BY P.L.38-2002,
SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2004]: Sec. 301. (1) For purposes of this section, the lender
shall disclose to the consumer borrower to whom credit is extended
with respect to a small loan the information required by the Federal
Consumer Credit Protection Act.
(2) In addition to the requirements of subsection (1), the lender must
conspicuously display in bold type a notice to the public both in the
lending area of each business location and in the loan documents the
following statement:
"WARNING: A small loan is not intended to meet long term
financial needs. A small loan should be used only to meet short
term cash needs. Renewing the small loan rather than paying the
debt in full will require additional finance charges. The cost of
your small loan may be higher than loans offered by other lending
institutions. Small loans are regulated by the State of Indiana
Department of Financial Institutions.
A consumer borrower may rescind a small loan without cost not
later than the end of the business day immediately following the
day on which the small loan was made. To rescind a small loan,
a consumer borrower must inform the lender that the consumer
borrower wants to rescind the small loan, and the consumer
borrower must return the cash amount of the principal of the
small loan to the lender.".
(3) The statement required in subsection (2) must be in:
(a) 14 point bold face type in the loan documents; and
(b) not less than one (1) inch bold print in the lending area of the
business location.
(4) When a borrower enters into a small loan, the lender shall
provide the borrower with a pamphlet approved by the
department that describes:
(a) the availability of debt management and credit counseling
services; and
(b) the borrower's rights and responsibilities in the
transaction.
SECTION 26. IC 24-4.5-7-401, AS AMENDED BY P.L.258-2003,
SECTION 2, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2004]: Sec. 401. (1) Except as provided in subsection (2), A
small loan may not be made for a term of less than fourteen (14) days.
(2) After the consumer's third borrower's fifth consecutive small
loan, another small loan may not be made to that consumer borrower
within seven (7) days after the due date of the third fifth consecutive
small loan. unless the new small loan is for a term of twenty-eight (28)
days or longer. After the borrower's fifth consecutive small loan, the
balance must be paid in full. However, the borrower and lender
may agree to enter into a simple interest loan, payable in
installments, under IC 24-4.5-3 within seven (7) days after the due
date of the fifth consecutive small loan.
SECTION 27. IC 24-4.5-7-402, AS ADDED BY P.L.38-2002,
SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2004]: Sec. 402. (1) A lender is prohibited from making a
small loan to a consumer borrower if the total payable amount of the
small loan exceeds twenty fifteen percent (20%) (15%) of the
consumer's borrower's monthly net gross income.
(2) A small loan may be secured by only one (1) check or electronic
authorization to debit the borrower's account per small loan. The
check or electronic debit may not exceed the amount advanced to or on
behalf of the consumer borrower plus loan finance charges contracted
for and permitted.
(3) A consumer borrower may make partial payments in any
amount on the small loan without charge at any time before the due
date of the small loan. After each payment is made on a small loan,
whether the payment is in part or in full, the lender shall give a signed
and dated receipt to the consumer borrower making a payment
showing the amount paid and the balance due on the small loan.
(4) The lender shall provide to each consumer borrower a copy of
the required loan documents before the disbursement of the loan
proceeds.
(5) A consumer borrower may rescind a small loan without cost not
later than the end of the business day immediately following the day on
which the small loan was made. To rescind a small loan, a consumer
borrower must:
(a) inform the lender that the consumer borrower wants to
rescind the small loan; and
(b) return the cash amount of the principal of the small loan to the
lender.
(6) A lender shall not enter into a renewal with a borrower. If
a loan is paid in full, a subsequent loan is not a renewal.
claims and defenses of the maker.".
SECTION 33. IC 24-9 IS ADDED TO THE INDIANA CODE AS
A NEW ARTICLE TO READ AS FOLLOWS [EFFECTIVE
JANUARY 1, 2005]:
ARTICLE 9. HOME LOAN PRACTICES
Chapter 1. Application
Sec. 1. Except for IC 24-9-3-7(3), this article does not apply to:
(1) a loan made or acquired by a person organized or
chartered under the laws of this state, any other state, or the
United States relating to banks, trust companies, savings
associations, savings banks, credit unions, or industrial loan
and investment companies; or
(2) a loan:
(A) that can be purchased by the Federal National
Mortgage Association, the Federal Home Loan Mortgage
Association, or the Federal Home Loan Bank;
(B) to be insured by the United States Department of
Housing and Urban Development;
(C) to be guaranteed by the United States Department of
Veterans Affairs;
(D) to be made or guaranteed by the United States
Department of Agriculture Rural Housing Service;
(E) to be funded by the Indiana housing finance authority;
or
(F) with a principal amount that exceeds the conforming
loan size limit for a single family dwelling as established by
the Federal National Mortgage Association.
Chapter 2. Definitions
Sec. 1. The definitions in this chapter apply throughout this
article.
Sec. 2. "Benchmark rate" means the interest rate established
under Section 152 of the Federal Home Ownership and Equity
Protection Act of 1994 (15 U.S.C. 1602 (aa)) and the regulations
adopted under that act by the Federal Reserve Board, including 12
CFR 226.32 and the Official Staff Commentary to the regulations
as amended.
Sec. 3. "Bona fide discount points" means loan discount points
that:
(1) are knowingly paid by the borrower;
(2) are paid for the express purpose of reducing the interest
rate applicable to the loan;
(3) reduce the interest rate from an interest rate that does not
exceed the benchmark rate; and
(4) are recouped within the first four (4) years of the
scheduled loan payments;
if the reduction in the interest rate that is achieved by the payment
of the loan discount points reduces the interest charged on the
scheduled payments so that the borrower's dollar amount of
savings in interest during the first four (4) years of the loan is equal
to or greater than the dollar amount of loan discount points paid
by the borrower.
Sec. 4. "Borrower" means a person obligated to repay a home
loan, including a coborrower, cosigner, or guarantor.
Sec. 5. "Bridge loan" means temporary or short term financing
with a maturity of less than eighteen (18) months that requires
payments of interest only until the entire unpaid balance is due and
payable.
Sec. 6. (a) "Creditor" means:
(1) a person:
(A) who regularly extends consumer credit that is subject
to a finance charge or that is payable by written agreement
in more than four (4) installments; and
(B) to whom the debt arising from a home loan transaction
is initially payable; or
(2) a person who brokers a home loan, including a person
who:
(A) directly or indirectly solicits, processes, places, or
negotiates home loans for others;
(B) offers to solicit, process, place, or negotiate home loans
for others; or
(C) closes home loans that may be in the person's own
name with funds provided by others and that are
thereafter assigned to the person providing funding for the
loans.
(b) The term does not include:
(1) a servicer;
(2) a state or local housing finance authority;
(3) any other state or local governmental or
quasi-governmental entity; or
(4) an attorney providing legal services in association with the
closing of a home loan.
Sec. 7. (a) "Deceptive act" means an act or a practice as part of
a consumer credit mortgage transaction involving real property
located in Indiana in which a person at the time of the transaction
knowingly or intentionally:
(1) makes a material misrepresentation; or
(2) conceals material information regarding the terms or
conditions of the transaction.
(b) For purposes of this section, "knowingly" means having
actual knowledge at the time of the transaction.
Sec. 8. (a) "High cost home loan" means a home loan with:
(1) a trigger rate that exceeds the benchmark rate; or
(2) total points and fees that exceed:
(A) five percent (5%) of the loan principal for a home loan
having a loan principal of at least forty thousand dollars
($40,000); or
(B) six percent (6%) of the loan principal for a home loan
having a loan principal of less than forty thousand dollars
($40,000).
(b) Beginning July 1, 2006, the dollar amounts set forth in this
section are subject to change at the times and according to the
procedure set forth in the provisions of IC 24-4.5-1-106 concerning
the adjustment of dollar amounts in IC 24-4.5.
Sec. 9. "Home loan" means a loan, other than an open end
credit plan or a reverse mortgage transaction, that is secured by a
mortgage or deed of trust on real estate in Indiana on which there
is located or will be located a structure or structures:
(1) designed primarily for occupancy of one (1) to four (4)
families; and
(2) that is or will be occupied by a borrower as the borrower's
principal dwelling.
Sec. 10. (a) Except as provided in subsection (b), "points and
fees" means the total of the following:
(1) Points and fees (as defined in 12 CFR 226.32(b)(1) on
January 1, 2004).
(2) All compensation paid directly or indirectly to a mortgage
broker, including a broker that originates a loan in the
broker's own name.
As used in subdivision (2), "compensation" does not include a
payment included in subdivision (1).
(b) The term does not include the following:
(1) Bona fide discount points.
(2) An amount not to exceed one and one-half (1 1/2) points in
indirect broker compensation, if the terms of the loan do not
include a prepayment penalty that exceeds two percent (2%)
of the home loan principle.
(3) Reasonable fees paid to an affiliate of the creditor.
(4) Interest prepaid by the borrower for the month in which
the home loan is closed.
Sec. 11. "Political subdivision" means a municipality, school
district, public library, local housing authority, fire protection
district, public transportation corporation, local building
authority, local hospital authority or corporation, local airport
authority, special service district, special taxing district, or any
other type of local governmental corporate entity.
Sec. 12. "Rate" means the interest rate charged on a home loan,
based on an annual simple interest yield.
Sec. 13. "Total loan amount" means the principal of the home
loan minus the points and fees that are included in the principal
amount of the loan.
Sec. 14. "Trigger rate" means:
(1) for fixed rate home loans in which the interest rate will not
vary during the term of the loan, the rate as of the date of
closing;
(2) for home loans in which the interest varies according to an
index, the sum of the index rate as of the date of closing plus
the maximum margin permitted at any time under the loan
agreement; or
(3) for all other home loans in which the rate may vary at any
time during the term of the loan, the maximum rate that may
be charged during the term of the home loan.
Chapter 3. Prohibited Lending Practices Generally
Sec. 1. (a) A creditor making a home loan may not finance,
directly or indirectly, any:
(1) credit life insurance;
(2) credit disability insurance;
(3) credit unemployment insurance;
(4) credit property insurance; or
(5) payments directly or indirectly for any cancellation
suspension agreement or contract.
(b) Insurance premiums, debt cancellation fees, or suspension
fees calculated and paid on a monthly basis are not considered to
be financed by the creditor for purposes of this chapter.
Sec. 2. (a) A creditor may not knowingly or intentionally replace
or consolidate a zero (0) interest rate or other subsidized low rate
loan made by a governmental or nonprofit lender with a high cost
home loan within the first ten (10) years of the subsidized low rate
loan unless the current holder of the loan consents in writing to the
refinancing.
(b) For purposes of this section, a "subsidized low rate loan" is
a loan that carries a current interest rate of at least two (2)
percentage points below the current yield on treasury securities
with a comparable maturity. If the loan's current interest rate is
either a discounted introductory rate or a rate that automatically
steps up over time, the fully indexed rate or the fully stepped up
rate, as appropriate, should be used instead of the current rate to
determine whether a loan is a subsidized low rate loan.
(c) Each mortgage or deed of trust securing a zero (0) interest
rate or other subsidized low rate loan executed after January 1,
2005, must prominently display the following on the face of the
instrument:
"This instrument secures a zero (0) interest rate or other
subsidized low rate loan subject to IC 24-9-3-2.".
(d) A creditor may reasonably rely on the presence or absence
of the statement described in subsection (c) on the face of an
instrument executed after January 1, 2005, as conclusive proof of
the existence or nonexistence of a zero (0) interest rate or other
subsidized low rate loan.
Sec. 3. A creditor may not recommend or encourage default on
an existing loan or other debt before and in connection with the
closing or planned closing of a home loan that refinances all or part
of the existing loan or debt.
Sec. 4. A creditor shall treat each payment made by a borrower
in regard to a home loan as posted on the same business day as the
payment was received by the creditor, servicer, or creditor's agent,
or at the address provided to the borrower by the creditor,
servicer, or creditor's agent for making payments.
Sec. 5. (a) A home loan agreement may not contain a provision
that permits the creditor, in the creditor's sole discretion, to
accelerate the indebtedness without material cause.
(b) This section does not prohibit acceleration of a home loan in
good faith due to the borrower's failure to abide by the material
terms of the loan.
Sec. 6. (a) A creditor may not charge a fee for informing or
transmitting to a person the balance due to pay off a home loan or
to provide a written release upon prepayment. A creditor must
provide a payoff balance not later than ten (10) business days after
the request is received by the creditor.
(b) For purposes of this section, "fee" does not include actual
charges incurred by a creditor for express or priority delivery
requested by the borrower of home loan documents to the
borrower.
Sec. 7. A person may not:
(1) divide a loan transaction into separate parts with the
intent of evading a provision of this article;
(2) structure a home loan transaction as an open-end loan
with the intent of evading the provisions of this article if the
loan would be a high cost home loan if the home loan had been
structured as a closed-end loan; or
(3) engage in a deceptive act in connection with a home loan.
Sec. 8. A person seeking to enforce section 7(3) of this chapter,
may not knowingly or intentionally intimidate, coerce, or harass
another person.
Sec. 9. It is unlawful for a creditor to discriminate against any
applicant with respect to any aspect of a credit transaction on the
basis of race, color, religion, national origin, sex, marital status, or
age, if the applicant has the ability to contract.
Chapter 4. Additional Prohibitions for High Cost Home Loans
Sec. 1. The following additional limitations and prohibited
practices apply to a high cost home loan:
(1) A creditor making a high cost home loan may not directly
or indirectly finance any points and fees.
(2) Prepayment fees or penalties may not be included in the
loan documents for a high cost home loan or charged to the
borrower if the fees or penalties exceed in total two percent
(2%) of the high cost home loan amount prepaid during the
first twenty-four (24) months after the high cost home loan
closing.
(3) A prepayment penalty may not be contracted for after the
second year following the high cost home loan closing.
(4) A creditor may not include a prepayment penalty fee in a
high cost home loan unless the creditor offers the borrower
the option of choosing a loan product without a prepayment
fee. The terms of the offer must be made in writing and must
be initialed by the borrower. The document containing the
offer must be clearly labeled in large bold type and must
include the following disclosure:
"LOAN PRODUCT CHOICE
I was provided with an offer to accept a product both with
and without a prepayment penalty provision. I have chosen
to accept the product with a prepayment penalty.".
(5) A creditor shall not sell or otherwise assign a high cost
home loan without furnishing the following statement to the
purchaser or assignee:
"NOTICE: This is a loan subject to special rules under
IC 24-9. Purchasers or assignees may be liable for all
claims and defenses with respect to the loan that the
borrower could assert against the lender.".
(6) A mortgage or deed of trust that secures a high cost home
loan at the time the mortgage or deed of trust is recorded
must prominently display the following on the face of the
instrument:
"This instrument secures a high cost home loan as defined
in IC 24-9-2-8.".
(7) A creditor making a high cost home loan may not finance,
directly or indirectly, any life or health insurance.
Sec. 2. A creditor may not knowingly or intentionally:
(1) refinance a high cost home loan by charging points and
fees on the part of the proceeds of the new high cost home
loan that is used to refinance the existing high cost loan within
four (4) years of the origination of the existing high cost home
loan; or
(2) divide a home loan transaction into multiple transactions
with the effect of evading this article. Where multiple
transactions are involved, the total points and fees charged in
all transactions shall be considered when determining
whether the protections of this section apply.
Sec. 3. Notwithstanding IC 24-4.5-3-402, a high cost home loan
agreement may not require a scheduled payment that is more than
twice as large as the average of earlier scheduled monthly
payments under the high cost home loan agreement unless the
payment becomes due and payable at least one hundred twenty
(120) months after the date of the high cost home loan. This
prohibition does not apply if:
(1) the payment schedule is adjusted to account for the
seasonal or irregular income of the borrower; or
(2) the loan is a bridge loan connected with or related to the
acquisition or construction of a dwelling intended to become
the borrower's principal dwelling.
Sec. 4. (a) Except as provided in subsection (b), a high cost home
loan may not include payment terms under which the outstanding
principal balance will increase at any time over the course of the
high cost home loan because the regular periodic payments do not
cover the full amount of interest due.
(b) This section does not apply to a temporary forbearance that
is requested by a borrower regarding a high cost home loan.
Sec. 5. A high cost home loan may not contain a provision that
increases the interest rate after default. However, this section does
not apply to interest rate changes in a variable rate loan otherwise
consistent with the provisions of the high cost home loan
documents if the change in the interest rate is not triggered by the
event of default or the acceleration of the indebtedness.
Sec. 6. A high cost home loan may not include terms under
which more than two (2) periodic payments required under the
high cost home loan are consolidated and paid in advance from the
high cost home loan proceeds provided to the borrower.
Sec. 7. A creditor may not make a high cost home loan without
first providing the borrower information to facilitate contact with
a nonprofit counseling agency certified by:
(1) the United States Department of Housing and Urban
Development; or
(2) the department of commerce under IC 4-4-3-8(b)(15);
at the same time as the good faith estimates are provided to the
borrower in accordance with the requirements of the federal Real
Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.) as
amended.
Sec. 8. (a) A creditor may not make a high cost home loan
without regard to repayment ability.
(b) If a creditor presents evidence that the creditor followed
commercially reasonable practices in determining the borrower's
debt to income ratio, there is a rebuttable presumption that the
creditor made the high cost home loan with due regard to
repayment ability. For purposes of this section, there is a
rebuttable presumption that the borrower's statement of income
provided to the creditor is true and complete.
(c) Commercially reasonable practices include the use of:
(1) the debt to income ratio:
(A) listed in 38 CFR 36.4337(c)(1); and
PAYMENT OBLIGATIONS UNDER THE LOAN.
YOU SHOULD CONSULT AN ATTORNEY AND A
QUALIFIED INDEPENDENT CREDIT COUNSELOR OR
OTHER EXPERIENCED FINANCIAL ADVISER
REGARDING THE RATE, FEES, AND PROVISIONS OF
THIS MORTGAGE LOAN BEFORE YOU PROCEED. A
LIST OF QUALIFIED COUNSELORS IS AVAILABLE
FROM THE INDIANA DEPARTMENT OF COMMERCE.
YOU ARE NOT REQUIRED TO COMPLETE THIS LOAN
AGREEMENT MERELY BECAUSE YOU HAVE
RECEIVED THIS DISCLOSURE OR HAVE SIGNED A
LOAN APPLICATION. REMEMBER, PROPERTY TAXES
AND HOMEOWNER'S INSURANCE ARE YOUR
RESPONSIBILITY. NOT ALL CREDITORS PROVIDE
ESCROW SERVICES FOR THESE PAYMENTS. YOU
SHOULD ASK YOUR CREDITOR ABOUT THESE
SERVICES.
ALSO, YOUR PAYMENTS ON EXISTING DEBTS
CONTRIBUTE TO YOUR CREDIT RATINGS. YOU
SHOULD NOT ACCEPT ANY ADVICE TO IGNORE
YOUR REGULAR PAYMENTS TO YOUR EXISTING
CREDITORS.".
Sec. 12. Without regard to whether a borrower is acting
individually or on behalf of others similarly situated, a provision
of a high cost home loan agreement that:
(1) requires arbitration of a claim or defense;
(2) allows a party to require a borrower to assert a claim or
defense in a forum that is:
(A) less convenient;
(B) more costly; or
(C) more dilatory;
for the resolution of the dispute than an Indiana court in
which the borrower may otherwise bring a claim or defense;
or
(3) limits in any way any claim or defense the borrower may
have;
is unconscionable and void.
Chapter 5. Claims, Defenses, Remedies
Sec. 1. (a) A person who purchases or is otherwise assigned a
high cost home loan is subject to all affirmative claims and any
defenses with respect to the high cost home loan that the borrower
could assert against a creditor or broker of the high cost home
loan. However, this section does not apply if the purchaser or
assignee demonstrates by a preponderance of the evidence that a
reasonable person exercising ordinary due diligence could not
determine that the loan was a high cost home loan. A purchaser or
an assignee is presumed to have exercised reasonable due diligence
if the purchaser or assignee:
(1) has in place at the time of the purchase or assignment of
the subject loans, policies that expressly prohibit the purchase
or acceptance of the assignment of any high cost home loans;
(2) requires by contract that a seller or an assignor of home
loans to the purchaser or assignee represents and warrants to
the purchaser or assignee that either:
(A) the seller or assignor will not sell or reassign any high
cost home loans to the purchaser or assignee; or
(B) the seller or assignor is a beneficiary of a
representation and warranty from a previous seller or
assignor to that effect;
(3) exercises reasonable due diligence:
(A) at the time of purchase or assignment of home loans;
or
(B) within a reasonable period after the purchase or
assignment of home loans;
intended by the purchaser or assignee to prevent the
purchaser or assignee from purchasing or taking assignment
of any high cost home loans; or
(4) satisfies the requirements of subdivisions (1) and (2) and
establishes that a reasonable person exercising ordinary due
diligence could not determine that the loan was a high cost
home loan based on the:
(A) documentation required by the federal Truth in
Lending Act (15 U.S.C. 1601 et seq.); and
(B) itemization of the amount financed and other
disbursement disclosures.
(b) A borrower acting only in an individual capacity may assert
against the creditor or any subsequent holder or assignee of a high
cost home loan:
(1) a violation of IC 24-9-4-2 as a defense, claim, or
counterclaim, after:
(A) an action to enjoin foreclosure or to preserve or obtain
possession of the dwelling that secures the loan is initiated;
right to foreclose must use the judicial foreclosure procedures of
the state in which the property securing the high cost home loan is
located. The borrower has the right to assert in the proceeding the
nonexistence of a default and any other claim or defense to
acceleration and foreclosure, including any claim or defense based
on any violations of this article.
(b) This section is not intended and shall not be construed to
allow any claim or defense otherwise barred by any statute of
limitation or repose.
Sec. 4. (a) A person who violates this article is liable to a person
who is a party to the home loan transaction that gave rise to the
violation for the following:
(1) Actual damages, including consequential damages. A
person is not required to demonstrate reliance in order to
receive actual damages.
(2) Statutory damages equal to two (2) times the finance
charges agreed to in the home loan agreement.
(3) Costs and reasonable attorney's fees.
(b) A person may be granted injunctive, declaratory, and other
equitable relief as the court determines appropriate in an action to
enforce compliance with this chapter.
(c) The right of rescission granted under 15 U.S.C. 1601 et seq.
for a violation of law is available to a person acting only in an
individual capacity by way of recoupment as a defense against a
party foreclosing on a home loan at any time during the term of the
loan. Any recoupment claim asserted under this provision is
limited to the amount required to reduce or extinguish the person's
liability under the home loan plus amounts required to recover
costs, including reasonable attorney's fees. This article shall not be
construed to limit the recoupment rights available to a person
under any other law.
(d) The remedies provided in this section are cumulative but are
not intended to be the exclusive remedies available to a person.
Except as provided in subsection (e), a person is not required to
exhaust any administrative remedies under this article or under
any other applicable law.
(e) Before bringing an action regarding an alleged deceptive act
under this chapter, a person must:
(1) notify the homeowner protection unit established by
IC 4-6-12-2 of the alleged violation giving rise to the action;
and
payments due to the creditor on a high cost home loan.
(b) This section does not prohibit a servicer from agreeing with
the borrower not to report specified payment history information
in the event of a resolved or an unresolved dispute with a borrower
and does not apply to high cost home loans held or serviced by a
lender for less than ninety (90) days.
Chapter 7. State Power to Regulate Lending
Sec. 1. The state is the sole regulator of the business of
originating, granting, servicing, and collecting loans and other
forms of credit in Indiana and the manner in which the business is
conducted. This regulation preempts all other regulation of these
activities by any political subdivision.
Sec. 2. Political subdivisions may not:
(1) enact, issue, or enforce ordinances, resolutions,
regulations, orders, requests for proposals, or requests for
bids pertaining to financial or lending activities, including
ordinances, resolutions, and rules that disqualify persons
from doing business with a municipality and that are based
upon lending terms or practices; or
(2) impose reporting requirements or any other obligations
upon persons regarding financial services or lending practices
or upon subsidiaries or affiliates that:
(A) are subject to the jurisdiction of the department of
financial institutions;
(B) are subject to the jurisdiction or regulatory supervision
of the Board of Governors of the Federal Reserve System,
the Office of the Comptroller of the Currency, the Office
of Thrift Supervision, the National Credit Union
Administration, the Federal Deposit Insurance
Corporation, the Federal Trade Commission, or the United
States Department of Housing and Urban Development;
(C) are chartered by the United States Congress to engage
in secondary market mortgage transactions;
(D) are created by the Indiana housing finance authority;
or
(E) originate, purchase, sell, assign, securitize, or service
property interests or obligations created by financial
transactions or loans made, executed, originated, or
purchased by persons referred to in clauses (A), (B), (C), or
(D).
Chapter 8. Penalties and Enforcement
Sec. 1. A person who knowingly or intentionally violates this
article commits:
(1) a Class A misdemeanor; and
(2) an act that is actionable by the attorney general under
IC 24-5-0.5 and is subject to the penalties listed in IC 24-5-0.5.
Sec. 2. (a) Beginning July 1, 2005, the attorney general and the
attorney general's homeowner protection unit established under
IC 4-6-12 shall enforce this article for any violation occurring
within five (5) years after the making of a home loan.
(b) The attorney general may refer a matter under section 1 of
this chapter to a prosecuting attorney for enforcement.
Sec. 3. (a) The attorney general may bring an action to enjoin a
violation of this article. A court in which the action is brought may:
(1) issue an injunction;
(2) order a person to make restitution;
(3) order a person to reimburse the state for reasonable costs
of the attorney general's investigation and prosecution of the
violation of this article; and
(4) impose a civil penalty of not more than ten thousand
dollars ($10,000) per violation.
(b) A person who violates an injunction under this section is
subject to a civil penalty of not more than ten thousand dollars
($10,000) per violation.
(c) The court that issues an injunction retains jurisdiction over
a proceeding seeking the imposition of a civil penalty under this
section.
Sec. 4. The attorney general may file complaints with any of the
agencies listed in IC 4-6-12-4 to implement this chapter.
Chapter 9. Fees
Sec. 1. The county recorder shall assess a fee of three dollars
($3) under IC 36-2-7-10(b)(11) for each mortgage recorded. The
fee shall be paid to the county treasurer at the end of each calendar
month as provided in IC 36-2-7-10(a).
Sec. 2. The county auditor shall credit fifty cents ($0.50) of the
fee collected under IC 36-2-7-10(b)(11) for each mortgage recorded
to the county recorder's records perpetuation fund established
under IC 36-2-7-10(c).
Sec. 3. On or before June 20 and December 20 of each year,
after completing an audit of the county treasurer's monthly reports
required by IC 36-2-10-16, the county auditor shall distribute to
the auditor of state two dollars and fifty cents ($2.50) of the
mortgage recording fee collected under IC 36-2-7-10(b)(11) for
each mortgage recorded by the county recorder. The auditor of
state shall deposit the money in the state general fund to be
distributed as described in section 4 of this chapter.
Sec. 4. On or before June 30 and December 31 of each year the
auditor of state shall distribute one dollar and twenty-five cents
($1.25) of the mortgage recording fee to the home ownership
education account established by IC 4-4-3-23 and one dollar and
twenty-five cents ($1.25) of the mortgage recording fee to the
homeowner protection unit account established by IC 4-6-12-9.
SECTION 34. IC 28-1-11-3.2 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 3.2. (a) As used in this
section, "rights and privileges" means the power:
(1) to:
(1) (A) create;
(2) (B) deliver;
(3) (C) acquire; or
(4) (D) sell;
a product, a service, or an investment that is available to or
offered by; or
(2) to engage in other activities authorized for;
national banks domiciled in Indiana.
(b) A bank that intends to exercise any rights and privileges that are:
(1) granted to national banks; but
(2) not authorized for banks under the Indiana Code (except for
this section) or any rule adopted under the Indiana Code;
shall submit a letter to the department describing in detail the requested
rights and privileges granted to national banks that the bank intends to
exercise. If available, copies of relevant federal law, regulations, and
interpretive letters must be attached to the letter submitted by the bank.
(c) The department shall promptly notify the requesting bank of the
department's receipt of the letter submitted under subsection (b).
Except as provided in subsection (e), the bank may exercise the
requested rights and privileges sixty (60) days after the date on which
the department receives the letter unless otherwise notified by the
department.
(d) The department, through its members, may prohibit the bank
from exercising the requested rights and privileges only if the members
find that:
(1) national banks domiciled in Indiana do not possess the
requested rights and privileges; or
(2) the exercise of the requested rights and privileges by the bank
would adversely affect the safety and soundness of the bank.
(e) The sixty (60) day period referred to in subsection (c) may be
extended by the department based on a determination that the bank's
letter raised issues requiring additional information or additional time
for analysis. If the sixty (60) day period is extended under this
subsection, the bank may exercise the requested rights and privileges
only if the bank receives prior written approval from the department.
However:
(1) the members must:
(A) approve or deny the requested rights and privileges; or
(B) convene a hearing;
not later than sixty (60) days after the department receives the
bank's letter; and
(2) if a hearing is convened, the members must approve or deny
the requested rights and privileges not later than sixty (60) days
after the hearing is concluded.
(f) The exercise of rights and privileges by a bank in compliance
with and in the manner authorized by this section is not a violation of
any provision of the Indiana Code or rules adopted under IC 4-22-2.
(g) Whenever, in compliance with this section, a bank exercises
rights and privileges granted to national banks domiciled in Indiana, all
banks may exercise the same rights and privileges if the department by
order determines that the exercise of the rights and privileges by all
banks would not adversely affect their safety and soundness.
(h) If the department denies the request of a bank under this section
to exercise any rights and privileges that are granted to national banks,
the bank may appeal the decision of the department to the circuit court
with jurisdiction in the county in which the principal office of the bank
is located. In an appeal under this section, the court shall determine the
matter de novo.
SECTION 35. IC 28-1-20-4, AS AMENDED BY P.L.258-2003,
SECTION 6, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
UPON PASSAGE]: Sec. 4. (a) Except as provided in subsections (c),
(d), (g), and (k), it is unlawful for any person, firm, limited liability
company, or corporation (other than a bank or trust company, a bank
holding company, a subsidiary of a bank or trust company, a
subsidiary of a bank holding company, a subsidiary of a savings
bank, a subsidiary of a savings association, or a corporate fiduciary
organized or reorganized under IC 28 or statutes in effect at the time of
organization or reorganization or under the laws of the United States):
(1) to use the word "bank", "banc", or "banco" as a part of the
name or title of the person, firm, or corporation; or
(2) to advertise or represent the person, firm, limited liability
company, or corporation to the public:
(A) as a bank or trust company or a corporate fiduciary; or
(B) as affording the services or performing the duties which by
law only a bank or trust company or a corporate fiduciary is
entitled to afford and perform.
(b) A financial institution organized under the laws of any state or
the United States that establishes a branch office under this title is
authorized to do business at that branch using a name other than the
name of its home office.
(c) Notwithstanding the prohibitions of this section, an out-of-state
financial institution with the word "bank" in its legal name may use the
word "bank" if the financial institution is insured by the Federal
Deposit Insurance Corporation or its successor.
(d) Notwithstanding subsection (a), a building and loan association
organized under IC 28-4 (before its repeal) may include in its name or
title:
(1) the words "savings bank"; or
(2) the word "bank" if the name or title also includes either the
words "savings bank" or letters "SB".
A building and loan association that includes "savings bank" in its title
under this section does not by that action become a savings bank for
purposes of IC 28-6.1.
(e) The name or title of a savings bank governed by IC 28-6.1 must
include the words "savings bank" or the letters "SB".
(f) A savings association may include in its name the words
"building and loan association".
(g) Notwithstanding subsection (a), a bank holding company (as
defined in 12 U.S.C. 1841) may use the word "bank" or "banks" as a
part of its name. However, this subsection does not permit a bank
holding company to advertise or represent itself to the public as
affording the services or performing the duties that by law a bank or
trust company only is entitled to afford and perform.
(h) The department is authorized to investigate the business affairs
of any person, firm, limited liability company, or corporation that uses
"bank", "banc", or "banco" in its title or holds itself out as a bank,
corporate fiduciary, or trust company for the purpose of determining
whether the person, firm, limited liability company, or corporation is
violating any of the provisions of this article, and, for that purpose, the
department and its agents shall have access to any and all of the books,
records, papers, and effects of the person, firm, limited liability
company, or corporation. In making its examination, the department
may examine any person and the partners, officers, members, or agents
of the firm, limited liability company, or corporation under oath,
subpoena witnesses, and require the production of the books, records,
papers, and effects considered necessary. On application of the
department, the circuit or superior court of the county in which the
person, firm, limited liability company, or corporation maintains a
place of business shall, by proper proceedings, enforce the attendance
and testimony of witnesses and the production and examination of
books, papers, records, and effects.
(i) The department is authorized to exercise the powers under
IC 28-11-4 against a person, firm, limited liability company, or
corporation that improperly holds itself out as a financial institution.
(j) A person, firm, limited liability company, or corporation who
violates this section is subject to a penalty of five hundred dollars
($500) per day for each and every day during which the violation
continues. The penalty imposed shall be recovered in the name of the
state on relation of the department and, when recovered, shall be paid
into the financial institutions fund established by IC 28-11-2-9.
(k) The word "bank", "banc", or "banco" may not be included in the
name of a corporate fiduciary.
(l) A person, firm, limited liability company, or corporation may not
use the name of an existing bank or bank holding company or a name
confusingly similar to that of an existing bank or bank holding
company when marketing to or soliciting business from a customer or
prospective customer if the reference to the existing bank or bank
holding company is:
(1) without the consent of the existing bank or bank holding
company; and
(2) in a manner that could cause a reasonable person to believe
that the marketing material or solicitation:
(A) originated from;
(B) is endorsed by; or
(C) is in any other way the responsibility of;
the existing bank or bank holding company.
twenty percent (20%) of the unimpaired capital and surplus of
the credit union;
(C) the loan is approved by the credit committee or loan
officer; and
(D) the borrower takes no part in the consideration of or vote
on the application.
(4) To invest in any of the following:
(A) Bonds, notes, or certificates that are the direct or indirect
obligations of the United States, or of the state, or the direct
obligations of a county, township, city, town, or other taxing
district or municipality or instrumentality of Indiana and that
are not in default.
(B) Bonds or debentures issued by the Federal Home Loan
Bank Act (12 U.S.C. 1421 through 1449) or the Home Owners'
Loan Act (12 U.S.C. 1461 through 1468).
(C) Interest-bearing obligations of the FSLIC Resolution Fund
and obligations of national mortgage associations issued under
the authority of the National Housing Act.
(D) Mortgages on real estate situated in Indiana which are
fully insured under Title 2 of the National Housing Act (12
U.S.C. 1707 through 1715z).
(E) Obligations issued by farm credit banks and banks for
cooperatives under the Farm Credit Act of 1971 (12 U.S.C.
2001 through 2279aa-14).
(F) In savings and loan associations, other credit unions that
are insured under IC 28-7-1-31.5 and certificates of
indebtedness or investment of an industrial loan and
investment company if the association or company is federally
insured. Not more than twenty percent (20%) of the assets of
a credit union may be invested in the shares or certificates of
an association or company; nor more than forty percent (40%)
in all such associations and companies.
(G) Corporate credit unions.
(H) Federal funds or similar types of daily funds transactions
with other financial institutions.
(I) Mutual funds created and controlled by credit unions, credit
union associations, or their subsidiaries. Mutual funds referred
to in this clause may invest only in instruments that are
approved for credit union purchase under this chapter.
(J) Shares, stocks, or obligations of any credit union service
organization (as defined in Section 712 of the Rules and
Regulations of the National Credit Union Administration) with
the approval of the department. Not more than five percent
(5%) of the total paid in and unimpaired capital of the credit
union may be invested under this clause.
(5) To deposit its funds into:
(A) depository institutions that are federally insured; or
(B) state chartered credit unions that are privately insured by
an insurer approved by the department.
(6) To purchase, hold, own, or convey real estate as may be
conveyed to the credit union in satisfaction of debts previously
contracted or in exchange for real estate conveyed to the credit
union.
(7) To own, hold, or convey real estate as may be purchased by
the credit union upon judgment in its favor or decrees of
foreclosure upon mortgages.
(8) To issue shares of stock and upon the terms, conditions,
limitations, and restrictions and with the relative rights as may be
stated in the bylaws of the credit union, but no stock may have
preference or priority over the other to share in the assets of the
credit union upon liquidation or dissolution or for the payment of
dividends except as to the amount of the dividends and the time
for the payment of the dividends as provided in the bylaws.
(9) To charge the member's share account for the actual cost of
necessary locator service when the member has failed to keep the
credit union informed about the member's current address. The
charge shall be made only for amounts paid to a person or concern
normally engaged in providing such service, and shall be made
against the account or accounts of any one (1) member not more
than once in any twelve (12) month period.
(10) To transfer to an accounts payable, a dormant account, or a
special account share accounts which have been inactive, except
for dividend credits, for a period of two (2) years. The credit
union shall not consider the payment of dividends on the
transferred account.
(11) To invest in fixed assets with the funds of the credit union.
An investment in fixed assets in excess of five percent (5%) of its
assets is subject to the approval of the department.
(12) To establish branch offices, upon approval of the department,
provided that all books of account shall be maintained at the
principal office.
(13) To pay an interest refund on loans proportionate to the
interest paid during the dividend period by borrowers who are
members at the end of the dividend period.
(14) To purchase life savings and loan protection insurance for
the benefit of the credit union and its members, if:
(A) the coverage is placed with an insurance company licensed
to do business in Indiana; and
(B) no officer, director, or employee of the credit union
personally benefits, directly or indirectly, from the sale or
purchase of the coverage.
(15) To sell and cash negotiable checks, travelers checks, and
money orders for members.
(16) To purchase members' notes from any liquidating credit
union, with written approval from the department, at prices agreed
upon by the boards of directors of both the liquidating and the
purchasing credit unions. However, the aggregate of the unpaid
balances of all notes of liquidating credit unions purchased by any
one (1) credit union shall not exceed ten percent (10%) of its
unimpaired capital and surplus unless special written
authorization has been granted by the department.
(17) To exercise such incidental powers necessary or requisite to
enable it to carry on effectively the business for which it is
incorporated.
(18) To act as a custodian or trustee of any trust created or
organized in the United States and forming part of a stock bonus,
pension, or profit sharing plan which qualifies or qualified for
specific tax treatment under Section 408(a) or Section 401(d) of
the Internal Revenue Code, if the funds of the trust are invested
only in share accounts or insured certificates of the credit union.
(19) To issue shares of its capital stock or insured certificates to
a trustee or custodian of a pension plan, profit sharing plan, or
stock bonus plan which qualifies for specific tax treatment under
Sections 401(d) or 408(a) of the Internal Revenue Code.
(20) A credit union may exercise any rights and privileges that
are:
(A) granted to federal credit unions; but
(B) not authorized for credit unions under the Indiana Code
(except for this section) or any rule adopted under the Indiana
Code;
automated teller machine is to be located.
(27) To demand and receive, for the faithful performance and
discharge of services performed under the powers vested in the
credit union by this article:
(A) reasonable compensation, or compensation as fixed by
agreement of the parties;
(B) all advances necessarily paid out and expended in the
discharge and performance of its duties; and
(C) unless otherwise agreed upon, interest at the legal rate on
the advances referred to in clause (B).
(28) Subject to any restrictions the department may impose, to
become the owner or lessor of personal property acquired upon
the request and for the use of a member and to incur additional
obligations as may be incident to becoming an owner or lessor of
such property.
SECTION 37. IC 28-7-1-9.2, AS ADDED BY P.L.134-2001,
SECTION 19, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2004]: Sec. 9.2. (a) As used in this section, "rights and
privileges" means the power:
(1) to:
(1) (A) create;
(2) (B) deliver;
(3) (C) acquire; or
(4) (D) sell;
a product, a service, or an investment that is available to or
offered by; or
(2) to engage in other activities authorized for;
federal credit unions domiciled in Indiana.
(b) A credit union that intends to exercise any rights and privileges
that are:
(1) granted to federal credit unions; but
(2) not authorized for credit unions under the Indiana Code
(except for this section) or any rule adopted under the Indiana
Code;
shall submit a letter to the department describing in detail the requested
rights and privileges granted to federal credit unions that the credit
union intends to exercise. If available, copies of relevant federal law,
regulations, and interpretive letters must be attached to the letter
submitted by the credit union.
(c) The department shall promptly notify the requesting credit union
of the department's receipt of the letter submitted under subsection (b).
Except as provided in subsection (e), the credit union may exercise the
requested rights and privileges sixty (60) days after the date on which
the department receives the letter unless otherwise notified by the
department.
(d) The department, through its members, may prohibit the credit
union from exercising the requested rights and privileges only if the
members find that:
(1) federal credit unions domiciled in Indiana do not possess the
requested rights and privileges; or
(2) the exercise of the requested rights and privileges by the credit
union would adversely affect the safety and soundness of the
credit union.
(e) The sixty (60) day period referred to in subsection (c) may be
extended by the department based on a determination that the credit
union's letter raised issues requiring additional information or
additional time for analysis. If the sixty (60) day period is extended
under this subsection, the credit union may exercise the requested
rights and privileges only if the credit union receives prior written
approval from the department. However:
(1) the members must:
(A) approve or deny the requested rights and privileges; or
(B) convene a hearing;
not later than sixty (60) days after the department receives the
credit union's letter; and
(2) if a hearing is convened, the members must approve or deny
the requested rights and privileges not later than sixty (60) days
after the hearing is concluded.
(f) The exercise of rights and privileges by a credit union in
compliance with and in the manner authorized by this section is not a
violation of any provision of the Indiana Code or rules adopted under
IC 4-22-2.
(g) Whenever, in compliance with this section, a credit union
exercises rights and privileges granted to federal credit unions
domiciled in Indiana, all credit unions may exercise the same rights and
privileges if the department by order determines that the exercise of the
rights and privileges by all credit unions would not adversely affect
their safety and soundness.
(h) If the department denies the request of a credit union under this
section to exercise any rights and privileges that are granted to federal
credit unions, the credit union may appeal the decision of the
department to the circuit court with jurisdiction in the county in which
the principal office of the credit union is located. In an appeal under
this section, the court shall determine the matter de novo.
SECTION 38. IC 28-8-4-27 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 27. (a) Except as
provided in section 29 of this chapter, an application must be
accompanied by a security device that secures the faithful performance
of the obligations of the licensee to receive, handle, transmit, and pay
money in connection with the:
(1) sale and issuance of payment instruments; or
(2) transmission of money.
(b) The security device required under subsection (a) must:
(1) be in an amount as provided under subsection (c);
(2) run to the state; and
(3) be in a form acceptable to the director.
(c) The security device must be in an amount calculated as follows:
STEP ONE: Subtract one (1) from the number of locations where
the applicant proposes to engage in business under the license.
STEP TWO: Multiply the difference determined under STEP
ONE by ten thousand dollars ($10,000).
STEP THREE: Add one two hundred thousand dollars ($100,000)
($200,000) to the product determined under STEP TWO.
STEP FOUR: Pay the amount that is the lesser of:
(1) the sum determined in STEP THREE; or
(2) two three hundred thousand dollars ($200,000). ($300,000).
(d) If the security device filed is a bond, the aggregate liability of the
surety shall not exceed the principal sum of the bond.
SECTION 39. IC 28-8-4-33 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 33. (a) A license
granted under this chapter permits a licensee to conduct business:
(1) at one (1) or more locations directly or indirectly owned by the
licensee; or
(2) through one (1) or more authorized delegates.
(b) Each licensee shall maintain a policy of insurance issued by an
insurer authorized to do business in Indiana that insures the applicant
against loss by a criminal act or act of dishonesty. The principal sum
of the policy shall be equivalent to one-half (1/2) the amount of the
required security device required under section 27 of this chapter or
deposit required under section 29 of this chapter.
financial institution of the department's receipt of the notice.
(b) A subsidiary may exercise a power or engage in an activity
permitted to be performed by a financial institution under the same
conditions and restrictions as if the power or activity is performed by
the financial institution itself, or the activity has been authorized by as
"activity eligible for notice" procedures under 12 CFR
5.34(e)(2)(ii). 5.34(e).
(c) The qualified subsidiary may exercise or engage in the activity
thirty (30) days after the date on which the department receives the
notification unless otherwise notified by the department.
SECTION 43. IC 28-13-16-5, AS ADDED BY P.L.215-1999,
SECTION 10, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2004]: Sec. 5. A financial institution may acquire or establish
a nonqualifying subsidiary by submitting an application to the
department containing:
(1) a complete description of the financial institution's investment
in the subsidiary;
(2) the activity to be conducted; and
(3) a representation that the activity:
(A) could be performed by a financial institution under
statutory authority of this title;
(B) is a part of or incidental to the business of banking as
determined by the director; or
(C) has been authorized by as "activity eligible for notice"
procedures under 12 CFR 5.34(e)(2)(ii). 5.34(e).
The department shall notify the requesting financial institution of the
department's receipt of the application.
SECTION 44. IC 28-15-2-2 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 2. (a) As used in this
section, "rights and privileges" means the power:
(1) to:
(1) (A) create;
(2) (B) deliver;
(3) (C) acquire; or
(4) (D) sell;
a product or service product, a service, or an investment that is
available to or offered by; or
(2) to engage in other activities authorized for;
federal savings associations domiciled in Indiana.
(b) Subject to this section, savings associations may exercise the
rights and privileges that are granted to federal savings associations.
(c) A savings association that intends to exercise any rights and
privileges that are:
(1) granted to federal savings associations; but
(2) not authorized for savings associations under:
(A) the Indiana Code (except for this section); or
(B) a rule adopted under IC 4-22-2;
shall submit a letter to the department, describing in detail the
requested rights and privileges granted to federal savings associations
that the savings association intends to exercise. If available, copies of
relevant federal law, regulations, and interpretive letters must be
attached to the letter.
(d) The department shall promptly notify the requesting savings
association of its receipt of the letter submitted under subsection (c).
Except as provided in subsection (f), the savings association may
exercise the requested rights and privileges sixty (60) days after the
date on which the department receives the letter unless otherwise
notified by the department.
(e) The department, through its members, may prohibit the savings
association from exercising the requested rights and privileges only if
the members find that:
(1) federal savings associations in Indiana do not possess the
requested rights and privileges; or
(2) the exercise of the requested rights and privileges by the
savings association would adversely affect the safety and
soundness of the savings association.
(f) The sixty (60) day period referred to in subsection (d) may be
extended by the department based on a determination that the savings
association letter raises issues requiring additional information or
additional time for analysis. If the sixty (60) day period is extended
under this subsection, the savings association may exercise the
requested rights and privileges only if the savings association receives
prior written approval from the department. However:
(1) the members must:
(A) approve or deny the requested rights and privileges; or
(B) convene a hearing;
not later than sixty (60) days after the department receives the
savings association's letter; and
(2) if a hearing is convened, the members must approve or deny
the requested rights and privileges not later than sixty (60) days
after the hearing is concluded.
(g) The exercise of rights and privileges by a savings association in
compliance with and in the manner authorized by this section does not
constitute a violation of any provision of the Indiana Code or rules
adopted under IC 4-22-2.
(h) Whenever, in compliance with this section, a savings association
exercises rights and privileges granted to national savings associations
domiciled in Indiana, all savings associations may exercise the same
rights and privileges if the department by order determines that the
exercise of the rights and privileges by all savings associations would
not adversely affect their safety and soundness.
SECTION 45. IC 32-29-1-2.5 IS ADDED TO THE INDIANA
CODE AS A NEW SECTION TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2004]: Sec. 2.5. A mortgagee or a
mortgagee's assignee or representative may not require a
mortgagor, as a condition of receiving or maintaining a mortgage,
to obtain hazard insurance coverage against risks to improvements
on the mortgaged property in an amount exceeding the
replacement value of the improvements.
SECTION 46. IC 34-7-4-2, AS AMENDED BY SEA 263-2004,
SECTION 120, IS AMENDED TO READ AS FOLLOWS
[EFFECTIVE JANUARY 1, 2005]: Sec. 2. Statutes outside IC 34
providing causes of action or procedures include the following:
(1) IC 4-21.5-5 (Judicial review of administrative agency actions).
(2) IC 22-3-4 (Worker's compensation administration and
procedures).
(3) IC 22-4-17 (Unemployment compensation system, employee's
claims for benefits).
(4) IC 22-4-32 (Unemployment compensation system, employer's
appeal process).
(5) IC 22-9 (Civil rights actions).
(6) IC 24-9 (Home loans).
(7) IC 31-14 (Paternity).
(7) (8) IC 31-15 (Dissolution of marriage and legal separation).
(8) (9) IC 31-16 (Support of children and other dependants).
(9) (10) IC 31-17 (Custody and visitation).
(10) (11) IC 31-19 (Adoption).
(11) (12) IC 32-27-2, IC 32-30-1, IC 32-30-2, IC 32-30-2.1,
IC 32-30-2, IC 32-30-4, IC 32-30-9, IC 32-30-10, IC 32-30-12,
IC 32-30-13, and IC 32-30-14 (Real property).
Approved: