Around the Capitol
The state legislative session began on March 11 and must end by June 3, and what an eventful session it has been thus far. In addition to other matters, in the last couple of weeks we have been involved in efforts to improve property insurance availability and affordability; combat financial crime; and to oppose bills creating a state-sponsored gold depository and expanding credit union authorities. Below is a rundown of bills on those topics.
Insurance-Related Bills
HB 613 by Rep. Gabe Firment and SB 295 by Sen. Heather Cloud would change Louisiana from a "prior approval" rating to a "file and use" rating, thereby allowing insurers to begin using an actuarily sound market rate while giving the commissioner of insurance 30 days to disapprove. HB 613 has passed the house and SB 295 has passed the senate.
SB 323 by Sen. Kirk Talbot deals with good faith and fair dealing in insurance claims handling. This bill amends our current law to provide, among other things, that in a named storm situation the clock would start to run upon satisfactory written proof of loss and would give 60 days to pay residential catastrophe claims and 90 days to pay commercial catastrophe claims. This bill would also provide a cure period (i.e., the insurer must be given demand for the amount due plus up to 20% for attorney fees/expenses) before a bad faith claim can be filed or prosecuted. If paid by the insurer, the claim is over. Our understanding is that the bill does not change the 50% bad faith penalty for bad actors. It also establishes and clarifies the rights, duties and timelines imposed on both the policyholder and insurer to ensure swift resolution of the claims process. This bill has passed the senate.
HB 611 by Rep. Gabe Firment and SB 370 by Sen. Adam Bass change Louisiana’s three-year insurance rule that prohibits insurers from non-renewing policies. We are told Louisiana is the only place in the world that has a three-year rule for homeowners' policies. It makes our state out of line with the rest of the insurance market. Both bills modify the existing homeowners' insurance policies with regards to deductibles while allowing insurance companies to manage their risk by removing up to 5% of their existing policies that are subject to the three-year rule. HB 611 has a further stipulation that no more than 5% of the insurer's policies in force in any one parish are included within their nonrenewal plan. Both bills also provide that, upon request of the insurer, the commissioner may approve the nonrenewal of more than 5% of the insurer's customers' policies in a given calendar year. After August 1, 2024, any new policies written would not be subject to the three-year rule under both of these bills. HB 611 has passed the house and SB 370 has passed the senate.
All of these bills are supported by Insurance Commissioner Tim Temple and the Independent Insurance Agents and Brokers of Louisiana, among other groups. LBA also supports all of the above-mentioned bills.
Combatting Financial Crime
Regarding LBA legislation, we have filed five bills, four of which are focused on the industry priority of combatting check fraud and payment card fraud. Below is a summary of those bills, all of which have passed the relevant house committees.
Crime of mail theft and associated fraud—HB 202 by Rep. Kim Carver creates a new state crime of mail theft to help combat check fraud and identity theft. This new statute would also make it a crime to possess or sell stolen mail, as well as to steal or possess without authorization a mailbox key. Mail theft has become a major problem across the country and stolen mail is a major source of check fraud and other financial crime. Currently, there is only a federal mail theft statute. We are seeking a statute with significant penalties, especially for repeat offenders.
Crime of skimming payment card data and possession of skimmers—HB 211 by Rep. Debbie Villio modernizes and strengthens the state crime law of skimming payment card information (R.S. 14:67.4) by enhancing penalties (especially for repeat offenders) and including as a violation of the law, possession of commonly used equipment for skimming when there is intent to defraud.
Crime of check fraud—HB 214 by Rep. Debbie Villio modernizes and strengthens the state’s monetary instrument abuse statute (R.S. 14:72.2), which is the primary statute used by state and local law enforcement to charge perpetrators of check fraud. The bill updates the language in the statute to reference washed checks and it will enhance the penalties, especially for repeat offenders. This will help combat check fraud that is occurring when criminals present counterfeit or altered checks to a financial institution with intent to defraud. As mentioned above, we believe that a significant amount of check fraud is originating from checks stolen in the mail.
Recovery on breach of warranty under Uniform Commercial Code—HB 232 by Rep. Nick Muscarello amends Louisiana’s Uniform Commercial Code provisions relative to presentment warranties and transfer warranties to clarify that when a bank is successful in its lawsuit to recover for an altered check based on a breach of warranty claim, the prevailing bank is entitled to recover its reasonable attorney fees as part of its expenses. This bill requires prior notice and opportunity to pay the claim before attorney fees can be recovered. Thus, the bank would need to give written notice of its warranty claim to the presenting/transferring bank and give them 30 days to respond before attorney fees could be recoverable.
Bills of Concern
Gold depository bill—HB 714 by Rep. Raymond Crews would: (1) establish gold and silver as legal tender in the state; (2) authorize the state treasurer to issue gold and silver specie (coins) and to establish a state digital currency backed by gold and silver; (3) allow the state treasurer to facilitate the creation of deposit accounts for the purchase and sale of gold and silver (which we are told would be physically stored in Texas); and (4) enable the use of payment cards to purchase goods and services out of the deposit account by converting the value of the new gold or silver digital currency, which is backed by the actual gold or silver, to U.S. dollars by electronic means.
This bill was heard in the House Commerce Committee this past Monday and was defeated on a 16-2 vote after tremendous advocacy by the Louisiana banking community opposing the measure. Thank you for your outreach to Louisiana legislators!
This misguided bill would have put the state of Louisiana into the business of banking by taking deposits and issuing debit cards to be used for purchases. Among numerous other concerns, this taxpayer-subsidized program would have incented the movement of money out of local communities and our state, which would reduce local deposits available for funding loans in Louisiana communities, thereby reducing the tax base and economic development opportunity in those communities. No state in the country has passed this type of state-run program.
Credit union expansion of powers bill—HB 239 by Rep. Edmond Jordan would allow credit unions to act as fiscal agents of governmental entities, which means they could hold the operational deposit accounts of governmental entities. LBA strongly opposes this bill as it would be a big shift in public policy in Louisiana because currently the law is clear that only stock-based, federally-insured institutions (i.e., banks) can serve as a fiscal agent of a local government.
The current law is good public policy because, unlike banks, credit unions do not pay taxes on income or capital at the federal, state or local level, and also are exempt from sales taxes. Also, unlike banks, credit unions are not subject to the Community Reinvestment Act, which requires banks to help meet the credit needs of the communities in which they do business, including low- and moderate-income neighborhoods.
Credit unions with such a substantial tax exemption should not be given authority to hold additional taxpayer dollars, especially when they do not have bank-like CRA obligations to show that money is being properly lent in the community.
This bill was scheduled to be heard in the House Commerce Committee this past Monday but it was voluntarily deferred by the author. It is now rescheduled for hearing next Tuesday, April 2.
Louisiana bankers also have engaged in strong advocacy efforts opposing this measure. Thank you for your efforts on this issue and we may ask for your help again next week to continue to express your opposition to HB 239.
We will keep you updated on all of the above bills and others throughout the remainder of the session.
Thanks for your support!