ACTION ON LEGISLATION

Digital Signatures

HR 1714, S 761

President Clinton signed the digital signature bill on June 30.

The Electronic Signatures in Global and National Commerce Act makes contracts signed online as legally binding as paper contracts. It does not endorse a specific technology that must be used for digital signatures, leaving it up to the parties involved in a contract to settle on a method both view as safe and reliable.

The law permits financial services companies to make mortgage and other disclosures required by consumer-protection laws electronically instead of on paper. But companies must get customers' consent, provide a "clear and conspicuous" statement of any fees and the right of customers to change their minds, and run a test to determine whether customers have the proper software and hardware to open the companies' e-mails and attachments.

Lawmakers had struggled since November to hammer out a compromise, which the House approved 426-4 on June 14 and the Senate adopted two days later by an 87-0 tally.

Though contracts may be signed electronically starting Oct. 1, implementation of other parts of the law were delayed. Companies may begin electronically sending disclosures and other records on March 1, 2001, but regulators may have as many as three additional months to finalize rules implementing that section of the law.

Bankruptcy Reform

S 625, HR 833

President Clinton renewed his threat to veto bankruptcy reform legislation in a June 29 letter to House and Senate leaders.

The roller-coaster prospects for the legislation had been on the upswing recently as Republicans and Democrats seemed to be nearing a compromise that supporters said would be approved overwhelmingly.

But the President said the latest version was "seriously flawed" because it would not explicitly prevent attackers of abortion clinics or those who intimidate patients of such facilities from filing for bankruptcy to escape court penalties. He also complained that it would weaken consumer protections from abusive check collection practices, and that it would not eliminate state laws letting wealthy people escape creditors by buying expensive homes that cannot be seized.

Some lobbyists said the veto threat would doom the legislation this year, while others suggested it was political posturing.

Negotiations among House and Senate lawmakers have been led by the staffs of sponsors Sen. Charles E. Grassley and Rep. George W. Gekas. Many details remain sketchy, but sources said that banks and other financial institutions with less than $250 million of assets would be exempted from a requirement to provide a toll-free number for credit card customers who want to know how long it would take to pay off their balances at the minimum monthly rate.

The Senate approved its bankruptcy reform bill Feb. 2 on an 83-to-14 vote. In May 1999, on a vote of 313 to 108, the House passed a stricter version.

Money Laundering

HR 3886

The House Banking Committee voted 31-1 on June 8 for the Clinton administration's money-laundering bill, but opposition in the Senate is likely to prevent it from becoming law this year.

Introduced in March by House Banking Committee Chairman Jim Leach and ranking Democrat John J. LaFalce, the International Counter-Money-Laundering Act of 2000 would give the Treasury secretary authority to identify countries or overseas financial institutions with weak policies against money laundering or to target suspect types of international transactions.

Such formal designation would trigger different requirements depending on the situation. Banks dealing with those countries or institutions could be subject to increased reporting and record-keeping requirements. They could also be required to identify the owners of specific types of accounts frequently used in criminal activities, and could be prohibited from opening correspondent and payable-through accounts for banks in targeted jurisdictions.

The bill was amended to ease some requirements. The Treasury Department would have to ensure that any demand for the identification of beneficial owners be "reasonable and practicable" for the bank involved. Treasury also would have to consider compliance costs and burdens that specific actions would impose on U.S. banks.

Senate Banking Committee Chairman Phil Gramm has opposed the legislation because, he said, it would give the government too much power to invade people's privacy.

Medical Privacy

HR 4585

The House Banking Committee passed legislation June 29 on a 26-14 vote that would restrict the sharing of medical records among financial institutions. Under the bill, insurance companies could not transfer personally identifiable medical records to bank or other affiliates, or to third parties, unless customers affirmatively consented, or "opted in." Nor could a bank use such records to decide whether to grant a loan without the applicant's express permission. Consumers also would have the right to review and correct their medical records.

Meanwhile, a showdown over medical privacy is expected at a Senate Banking Committee vote scheduled for today on securities reform legislation. Committee Chairman Phil Gramm plans to offer an amendment that would bar lenders from using an applicant's medical condition or history in deciding whether to grant a loan. Sen. Richard C. Shelby, R-Ala., has said he plans to offer a broader alternative that would prohibit financial institutions from sharing personally identifiable health information with affiliates or third parties in connection with any service unless customers have opted in.

Internet Gambling

HR 4419

The House Banking Committee on June 28 approved a bill that would prohibit the use of credit cards and other bank-issued payment instruments to pay for or collect winnings on Internet gambling.

Committee Chairman Jim Leach, the bill's main author, tried to make it more palatable to the Clinton administration after postponing a vote earlier this month because of objections by the Treasury and Justice departments. The Iowa Republican removed a provision that would have required U.S. representatives to the International Monetary Fund and World Bank to oppose loans to countries with a high level of Internet gambling. Also nixed was a provision that would have denied access to the federal payment system to any foreign financial firm based in a country with a high level of Internet gambling.

However, a successful amendment by Rep. John E. Sweeney, R-N.Y., could prevent the administration from supporting the revised bill. The Sweeney amendment would limit the ban to gambling that is illegal under state or federal law. The provision was intended to protect some kinds of off-track betting, and administration officials worry it could open a major loophole.

The Internet Gambling Funding Prohibition Act was introduced May 10 by three banking committee members: Rep. Leach, ranking Democrat John J. LaFalce, and Rep. Richard H. Baker, R-La.

PENDING LEGISLATION

Interest on Business Checking

HR 4067, S 576

Legislation that would let banks pay interest on business checking accounts remains on the Senate floor, stalled by Sen. Richard H. Bryan, D-Nev., who wants to tack on a privacy-related amendment. Meanwhile, Sen. Richard C. Shelby, R-Ala., and Sen. Charles E. Schumer, D-N.Y., have been negotiating on whether to postpone the bill's effective date to give small banks more time to prepare. The provisions are part of a larger regulatory relief bill.

The House on April 11 approved legislation introduced by banking committee Chairman Leach and Rep. Jack Metcalf, R-Wash., that would let banks pay interest on business checking accounts three years after its enactment. To appease bankers who oppose making these payments, the implementation date was set two years later than in an earlier proposal.

The House and Senate bills would expand sweep accounts in the interim. The bills would increase the number of withdrawals that corporate customers could make per month from sweep, or money market deposit, accounts to 24, from six.

NEW LEGISLATION

Deposit Insurance

S 2798, HR 4603, HR 4467, S 2589

Deposit insurance reformers were dealt a stiff blow on June 21 when Federal Reserve Board Chairman Alan Greenspan and Treasury Secretary Lawrence H. Summers said in testimony on Capitol Hill that they opposed raising coverage to $200,000 per account.

Some lawmakers have started offering alternatives.

Sen. Wayne Allard, R-Colo., introduced legislation on June 27 that would index the coverage limit every three years to account for inflation, starting from Jan. 1, 2001.

Rep. Charles A. Gonzalez, D-Texas, introduced legislation on June 8 that would require banking regulators to study the viability of doubling deposit insurance coverage to $200,000. The Deposit Insurance Increase Feasibility Act would direct the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Reserve Board to issue a joint study within six months of enactment. Their report would have to gauge the benefits for consumers and financial institutions, the effect such an increase would have on the bank and thrift insurance funds' reserve ratios, and whether a change in the premium system would be required.

Rep. Marge Roukema, chairman of the House Banking subcommittee on financial institutions, had supported doubling deposit insurance coverage but backpedaled after the comments by Mr. Greenspan and Mr. Summers. She describes her current position as neutral and plans to hold a hearing on the issue in September.

Rep. Joel Hefley, R-Colo., and Sen. Tim Johnson, D-S.D., introduced legislation in mid-May that would double deposit insurance coverage, to $200,000. Coverage levels would be adjusted every three years based to keep pace with inflation as measured by the consumer price index.

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