DEPARTMENT OF BANKING AND INSURANCE

DIVISION OF BANKING

General Provisions

Proposed Readoption with Amendments: N.J.A.C 3:26

Authorized By: Karen L. Suter, Commissioner, Department of Banking and Insurance

Authority: N.J.S.A. 17:1-8.1, 17:1-15(e), 17:12B-48(21) and 17:12B-197

Proposal Number: PRN 2001-116

Submit comments by May 16, 2001 to:

Karen Garfing, Assistant Commissioner
Regulatory Affairs
New Jersey Department of Banking and Insurance
P.O. Box 325
Trenton, NJ 08625-0325

Fax: (609) 292-0896

Email: Legsregs@dobi.state.nj.us


The agency proposal follows:

Summary

The Department of Banking and Insurance ("Department") proposes to readopt N.J.A.C. 3:26, which implements provisions of the Savings and Loan Act (1968), N.J.S.A. 17:12B-1 et seq. This chapter is scheduled to expire on June 17, 2001 pursuant to Executive Order No. 66 (1978).

Currently, N.J.A.C. 3:26-1.1 sets forth the minimum retention time for certain records prepared in the course of business of a State-chartered savings and loan association. It is proposed to be readopted without amendment. N.J.A.C. 3:26-2.1 prohibits any lender from charging more than $5.00 for substitution of an insurance policy by a mortgagor. It is proposed to be readopted without amendment. Subchapter 3 will remain reserved.

In accordance with N.J.S.A. 17:12B-48(21), N.J.A.C. 3:26-4.1 addresses parity of New Jersey savings and loan associations with Federal savings associations. It is proposed for amendment to recognize the merger of the Department of Banking and the Department of Insurance into the Department of Banking and Insurance; and the merger of the New Jersey Council of Savings Institutions and the New Jersey Savings League into the New Jersey League Community and Savings Bankers. Recent amendments to N.J.S.A. 17:42B-18(21) will be addressed in a separate rulemaking in the near future. The complexity of the topic warrants a distinct proposal and adoption.

Social Impact

The rules proposed for readoption with amendments apply to all savings and loan associations subject to supervision, regulation or licensing by the Department. They continue record retention timeframes for State associations, which protect consumers. Moreover, the rules proposed for readoption with amendments permit savings and loan associations to exercise powers authorized for Federal savings associations. Their readoption will continue to give State savings and loan associations competitive parity with Federal savings associations. Thus, State savings and loan associations may be able to offer additional products and services to their customers, which should have a beneficial social impact on consumers and savings and loan associations.

Economic Impact

The Department expects that the readoption of these rules with amendments will have little economic impact on State savings and loan associations. The requirement that records be kept for set periods of time is a reasonable commercial requirement that is an expected cost of doing business. The limit on a charge for substitution of an insurance policy provides a lender a reasonable reimbursement of administrative expense yet prevents a consumer from being charged an unreasonable fee.

In addition, the readoption of the parity provisions will continue to advance the competitive equality of New Jersey savings and loan associations with their federally chartered counterparts, which should be an economic benefit to industry and consumers.

Federal Standards Statement

Pursuant to the parity provisions at N.J.A.C. 3:36-4.1, New Jersey savings and loan associations may become subject to additional Federal standards. While those Federal standards cannot be identified at this time, they shall in no event be exceeded by State standards.

The balance of the rules proposed for readoptin with amendments are not subject of any standards or requirements imposed by Federal law.

Jobs Impact

The Department does not anticipate that any jobs will be lost as a result of the rules proposed for readoption with amendments. Savings and loan associations will most likely use existing staff for continued compliance with the rules. The amendments do not necessitate additional staff. However, if business increases as a result of the availability of new services, additional jobs may be created.

The Department invites commenters to submit any data or studies concerning the jobs impact of the proposed readoption with amendments together with their written comments on other aspects of this proposal.

Agriculture Industry Impact

The Department does not expect any agriculture industry impact from the rules proposed for readoption with amendments.

Regulatory Flexibility Analysis

Some savings and loan associations are small businesses as defined in the Regulatory Flexibility Act, N.J.S.A. 52:14B-16 et seq. The rules proposed for readoption with amendments impose a limitation on certain requirements on these entities, including the amount a lender can charge for the substitution of an insurance policy. The rules also require the retention of specified documents for stated time periods. In addition, the exercise of powers authorized for Federal savings associations through parity is subject to any Federal requirements imposed on the Federal counterparts. The readoption of these rules with amendments will continue to require savings and loan associations to operate in a manner that is responsible to the industry, its customers and the general public.

The Department does not believe that these requirements are unduly burdensome. Further, the Department believes these requirements are appropriate for all savings and loan associations. Thus, the purpose of these requirements does not vary based upon business size. Accordingly, no differentiation based on business size is made.

Full text of the rules proposed for readoption may be found in the New Jersey Administrative Code at N.J.A.C. 3:26.

Full text of the proposed amendments follows (additions indicated in boldface thus; deletions indicated in brackets [thus]):

3:26-4.1 State Savings and Loan Association parity with Federal savings and loan associations

In addition to other authority granted by law, and unless contrary to State law, a savings and loan association may exercise any power, right, benefit or privilege which is now or hereafter authorized for Federal savings and loan associations pursuant to Federal law or rules and regulations of any appropriate Federal agency. Any such power shall be exercised upon the same terms and subject to the same conditions as are authorized for Federal savings and loan associations. The powers, rights, benefits or privileges shall be automatically exercisable upon the expiration of 30 days from the date of adoption by the Federal regulatory agency, except if the Commissioner of Banking and Insurance within that 30-day period provides notice that the power shall not be granted to State savings and loan associations. Such notice shall be provided to each savings and loan association, and to the trade publications of [the New Jersey Council of Savings Institutions,]the New Jersey Bankers Association[,] and the New Jersey [Savings] League Community and Savings Bankers, and/or their successor organizations, if any, for publication. The Commissioner of Banking and Insurance may permit savings and loan associations to begin exercise of a power prior to the expiration of the 30-day period by providing notice of permission to each savings and loan association to the above mentioned trade publications.