#2021-1 January 6, 2021

House, Senate Adjourn Session Early Wednesday Morning

On the last day of the 2019-2020 legislative session on Beacon Hill, the House and Senate worked until the early hours of Wednesday morning, ultimately reaching agreements on major economic development and transportation bills well after midnight.  After passing those bills and numerous other measures, the two branches adjourned after 4:30 a.m. – only a few hours before the new legislators for the 2021-2022 session were sworn in.

The last minute deals included a compromise transportation bond bill (H 5248), which authorizes billions of dollars of spending over multiple years on an array of transportation projects; an economic development bill (H 5250) and the credit union modernization bill (S 2828).  The $16.5 billion transportation bond bill, approved on a voice vote in the House at about 1:20 a.m., authorizes billions of dollars in bonds for highway and bridge maintenance, train modernization, and major capital projects such as a Red Line-Blue Line Connector, the extension of commuter rail service to the South Coast, and the approaches to the two Cape Cod bridges.

The measure also increases the per-ride fees charged on app-based services such as Uber and Lyft, an issue the House and Senate addressed in separate legislation earlier this session that was ultimately incorporated into the bond bill.  The $626.5 million economic development bill followed a similar path being filed and passed well into the early hours of Wednesday morning.  A more detailed analysis of that that bill is below.

When the dust settled, the end to the 2019-2020 legislative session turned out to be a rather productive one with all major issues in conference - Police Reform, Transportation, Climate Change and Economic Development -including a Housing piece - being completed and sent to Governor Bakers desk before gaveling out around 4:15AM.   The 2021-2022 legislative session starts today.

House & Senate Pass Credit Union Modernization Law with MBA-supported Banking Provisions

After MBA worked with the Legislature to enact the comprehensive Bank Modernization Law in 2014, the credit union industry has sought to expand its powers by filing credit union modernization bills during the last three legislative sessions.  Last session, MBA worked with former House Financial Services Committee Chairman Aaron Michlewitz (D-Boston) to significantly streamline the credit union modernization bill, recommending that many of the most controversial corporate governance changes and new powers be removed before the bill was reported out of the Committee.

While the redrafted bill was reported favorably, the House never considered it before adjourning.  This session, House Financial Services Committee Chairman Jamie Murphy (D- Weymouth) asked MBA and CCUA to work together on several outstanding issues in the hopes of reaching a compromise on a modernization bill.  The compromise language, now S 2828, initially passed the Senate earlier in the session and was sent to the House Ways and Means Committee, which reported a new draft favorably on Monday.  The amended bill was then passed by both chambers and sent to the Governor in the final hours of the 2019-2020. 

Based on our efforts over the last several years, the now enacted legislation is focused more on technical updates with some substantive changes rather than a complete transformation of the credit union governing laws.  In addition, several MBA-advocated provisions were included at our request as well as amendments sought by the Division of Banks they are provided below.

To review the final CU modernization bill, click here.

A summary of bank-related matters with reference to the SECTION of S 2828 is below: 

Updates to MA Banking Law and Corrections to the Bank Modernization Act

Mutual Holding Companies

SUMMARY: This amendment corrects an error whereby a bank in mutual form chartered by another state was erroneously omitted from the list of merger partners for a subsidiary bank of a mutual holding company.  The provision was in the original bill but was left out of the final law due to a drafting error. (SECTION 5)

Board Reports

SUMMARY: The consolidated reporting requirement in Chapter 482 has proven disruptive to the past practices of some banks that operated under a different timing sequence for their internal reports to the Board or designated Committee.  This amendment restores that prior reporting sequence as an option and provides banks with a choice of timing sequence for the internal reports. (SECTION 7)

Bank’s Right of Set Off

SUMMARY: This amendment restores the statutory authority, with any required notice, for a bank to set off against a deposit account for a debt resulting from consumer credit.  The rewrite of this section in Chapter 482 erroneously omitted the reference to the notice provision for consumer credit.  The required federal notice is referenced in statute. (SECTION 3).

Streamlined holding company transactions

SUMMARY: A significant provision of the 2014 Bank Modernization Act established a streamlined process for certain multi-step transactions involving a holding company and a subsequent bank merger or other transaction to be approved by the Massachusetts Commissioner of Banks.  In such cases, no approval by the Massachusetts Board of Bank Incorporation is required.  This amendment specifies that the streamlined process is available only if the threshold requirements in current law on reciprocity, the three-year age requirement for the bank being acquired, and the deposit cap limit of 30% of deposits are met. (SECTION 1)

MHC filings with the Secretary of State

SUMMARY: This subsection clarifies that a new bank formed to facilitate a multi-step transaction involving a mutual holding company shall file incorporation documents with the Secretary of State consistent with other statutes for a new bank.  It is also consistent with the filings in section 5 of this Chapter 167H for the reorganization into a mutual holding company resulting in a subsidiary banking institution, as defined.

Extension of Deadline for Incorporating a New Bank

SUMMARY: Under current law, the Board of Bank Incorporation grant the organizers of a de novo bank a Certificate stating that public convenience and advantage will be promoted by the new bank and that competition will not be adversely affected.  The organizers then have one year from the date of that Certificate to complete the formation including the raising of the required capital, securing proper staff and facilities, and obtaining FDIC deposit insurance.  If the organization is not completed within one year, the Certificate is revoked by operation of law.

The bill grants the BBI the authority to permit a one-time extension subject to its terms, to the statutory time limit to complete the organization of a new bank.  A similar provision for the formation of a new credit union is also included in H 4290.  (SECTIONS 8, 9, and 77)

Provisions Added to Provide Equal Treatment of Banks and Credit Unions

18-65 Law

SUMMARY: At the Association’s suggestion, a section was added to the bill mandating that state-chartered credit unions provide a demand deposit account and a savings account to individuals who are 18 years of age or under, or 65 years of age or older. (SECTION 43)

Fee to establish a branch office

SUMMARY: Under current law, credit unions pay $500 less than banks for an application to establish a branch office.  Sections were added to both banking and credit union law requiring the Office of Administration and Finance (A&F) to set the same fee for both industries for a branch opening.  The provisions give A&F the discretion to adjust the fee based on assets; the number of existing branches or other criteria it deems appropriate. (SECTION 2 for banks and SECTION 23 for credit unions)

Legislature Agrees to $626 Million Economic Development Bill; MBA-Supported Patent Infringement Language Left out of Final Compromise Bill

With small businesses across the Commonwealth struggling to survive after months of closures and restrictions due to the pandemic, the Legislature reached an early-morning agreement Wednesday to provide hundreds of millions of dollars in state funds in an effort to spur job growth and keep businesses afloat as the COVID-19 vaccine is rolled out in the coming weeks.  The compromise bill came together after more than five months of private negotiations between House and Senate leaders and passed the House 143-4 at 4:00 a.m. while clearing the Senate 40-0 at 4:15 a.m.

While we are pleased that the bill contains several Association-supported provisions, we are disappointed that the conferees did not include MBA-sponsored language from the Senate bill to limit and prohibit unfounded patent infringement claims.  The provision, which requires a good faith showing of a patent violation before a demand letter can be sent amongst other provisions, has now been included in Economic Development bills in the last two sessions only to be vetoed by Governor Baker in 2019 and now dropped in the conference report.

The compromise bill also eliminated a House-backed provision to have Massachusetts join other New England states in legalizing sports betting.  However, the measure does include a version of Governor Baker’s long-stalled housing production proposal to lower the threshold for local boards to approve zoning bylaw changes to a simple majority.  Baker has advocated for several years for the change, noting that it is essential to meet his goal of creating 135,000 new units of housing by 2025 to ease the housing shortage, especially around Greater Boston.

We were also pleased that the legislation contains funding for several important loan programs for small businesses, including $30 million for a loan program similar to the federal Paycheck Protection Program for businesses hurt by COVID-19, and $35 million in loan funding for community development lending institutions to extend capital to small businesses, with a focus on minority- and women-owned businesses that have historically had trouble accessing financing and have been disproportionately impacted by the pandemic.  Additional funding for restaurants and other businesses is also included.  Several of our member banks are participating in these programs through the Massachusetts Growth Capital Corporation (MGCC) and this new funding will allow institutions to serve more small businesses in communities throughout the state.

The legislation also contains a local-option provision that allows municipalities to give tenant groups the right of first refusal to purchase certain multi-family properties.  MBA and a broad coalition of real estate and lending groups had opposed the inclusion of this language in the House bill and urged the conference committee to leave it out of the final agreement due to its potential to cloud titles, delay real estate closings and complicate financing.

Lawmakers also agreed on a “student loan bill of rights” – an issue the Association has been closely monitoring and which several key Senators have been supporting for multiple sessions.  The compromise language requires that borrowers are educated about their responsibilities and borrowing rights and licensed student loan servicers that take advantage of students could be fined and forced to repay student borrowers.  The Association was successful in receiving an exemption for state and out-of-state banks to the licensing portion of requirements, but we remain guarded with the potential implications of the law for our members who offer student lending products and services.

To review the Economic Development bill, click here.