Senate Bill sb2084c1

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    Florida Senate - 2007                           CS for SB 2084

    By the Committee on Banking and Insurance; and Senator Bennett





    597-2346-07

  1                      A bill to be entitled

  2         An act relating to financial services; amending

  3         s. 520.02, F.S.; defining the term "guaranteed

  4         asset protection products"; amending s. 520.07,

  5         F.S.; setting forth requirements and

  6         prohibitions for selling guaranteed asset

  7         protection products; amending s. 520.35, F.S.;

  8         revising the fee for a delinquency charge;

  9         amending s. 624.605, F.S.; including

10         debt-cancellation products under casualty

11         insurance; providing a definition; authorizing

12         certain entities to offer debt-cancellation

13         products under certain circumstances;

14         specifying that such products are not

15         insurance; amending ss. 627.553 and 627.679,

16         F.S.; revising limitations on the amount of

17         authorized insurance for debtors; amending s.

18         627.681, F.S.; revising a limitation on the

19         term of credit disability insurance; amending

20         s. 655.005, F.S.; redefining the terms "federal

21         financial institution" and "financial

22         institution"; defining the term

23         "debt-cancellation products"; amending s.

24         655.79, F.S.; providing that a deposit account

25         by a husband and wife is a tenancy by the

26         entirety; creating s. 655.947, F.S.; providing

27         a definition; authorizing financial

28         institutions to offer debt-cancellation

29         products; authorizing a fee; requiring the

30         Financial Services Commission to adopt rules;

31         providing that a periodic payment option is not

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 1         required for certain debt-cancellation

 2         products; amending s. 655.954, F.S.;

 3         authorizing a financial institution to offer a

 4         debt-cancellation product but not as a

 5         requirement of receiving a loan; amending s.

 6         658.21, F.S.; revising an ownership of capital

 7         criterion for capital accounts at financial

 8         institutions and one-bank holding companies;

 9         amending s. 658.34, F.S.; prohibiting certain

10         stock issuance practices for banks; amending s.

11         658.36, F.S.; requiring a state bank or trust

12         company to file a written notice before

13         increasing its capital stock; amending s.

14         658.44, F.S.; revising criteria for determining

15         the value of dissenting shares of certain

16         entities; providing an effective date.

17  

18  Be It Enacted by the Legislature of the State of Florida:

19  

20         Section 1.  Present subsections (7) through (19) of

21  section 520.02, Florida Statutes, are redesignated as

22  subsections (8) through (20), respectively, and a new

23  subsection (7) is added to that section, to read:

24         520.02  Definitions.--In this act, unless the context

25  or subject matter otherwise requires:

26         (7)  "Guaranteed asset protection products" means loan,

27  lease, or retail installment contract terms, or modifications

28  or addendums to loan, lease, or retail installment contracts,

29  under which a creditor agrees to waive a customer's liability

30  for payment of some or all of the amount by which the debt

31  exceeds the value of the collateral. This product is not

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 1  insurance for purposes of the Florida Insurance Code. This

 2  subsection applies to all such guaranteed asset protection

 3  products issued before October 1, 2007.

 4         Section 2.  Subsection (11) is added to section 520.07,

 5  Florida Statutes, to read:

 6         520.07  Requirements and prohibitions as to retail

 7  installment contracts.--

 8         (11)  In conjunction with entering into a new retail

 9  installment contract or contract for a loan, a motor vehicle

10  retail installment seller, as defined in s. 520.02(10), sales

11  finance company, as defined in s. 520.02(18), or retail

12  lessors, as defined in s. 521.003(8), and their assignees may

13  offer, for a fee or otherwise, optional guaranteed asset

14  protection products in accordance with this chapter. The motor

15  vehicle retail installment seller, sales finance company, or

16  retail lessor may not require the purchase of a guaranteed

17  asset protection product as a condition for making the loan.

18  In order to offer any guaranteed asset protection product, the

19  motor vehicle retail installment seller, sales finance

20  company, or retail lessor, and their assignees, must comply

21  with the following:

22         (a)  The cost of a guaranteed asset protection product,

23  with respect to any loan covered by the product, may not

24  exceed the amount of the indebtedness.

25         (b)  Any contract or agreement pertaining to a

26  guaranteed asset protection product is governed by this

27  section.

28         (c)  The guaranteed asset protection product is

29  considered an obligation of any person who purchases or

30  otherwise acquires the loan contract covering the product.

31  

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 1         (d)  Entities providing guaranteed asset protection

 2  products shall provide readily understandable disclosures that

 3  detail eligibility requirements, conditions, refunds, and

 4  exclusions. The disclosures must state that the purchase of

 5  the product is optional. The disclosures must be in plain

 6  language and of a type face and size that are easy to read.

 7         (e)  Entities must provide a copy of the executed

 8  guaranteed asset protection product contract to the buyer. The

 9  entity bears the burden of proving that the contract was

10  provided to the buyer.

11         (f)  Entities may not offer a contract for a guaranteed

12  asset protection product which contains terms giving the

13  entity the right to unilaterally modify the contract unless:

14         1.  The modification is favorable to the buyer and is

15  made without an additional charge to the buyer; or

16         2.  The buyer is notified of any proposed change and is

17  provided a reasonable opportunity to cancel the contract

18  without penalty before the change takes effect.

19         (g)  If a contract for a guaranteed asset protection

20  product is terminated, the entity must refund to the buyer any

21  unearned fees paid for the contract unless the contract

22  provides otherwise. A refund is not due to a consumer who

23  receives a benefit under such product. In order to receive a

24  refund, the buyer must notify the entity of the event

25  terminating the contract and request a refund within 90 days

26  after the occurrence of the event terminating the contract.

27  Any entity may offer a buyer a contract that does not provide

28  for a refund only if the entity also offers that buyer a bona

29  fide option to purchase a comparable contract that provides

30  for a refund.

31  

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 1         Section 3.  Subsection (3) of section 520.35, Florida

 2  Statutes, is amended to read:

 3         520.35  Revolving accounts.--

 4         (3)  Notwithstanding the provisions of any other law,

 5  the seller under a revolving account may charge, receive, and

 6  collect a finance charge which may not exceed 15 cents per $10

 7  per month, computed on all amounts unpaid under the revolving

 8  account from month to month (which need not be a calendar

 9  month) or other regular period, and a delinquency charge not

10  to exceed $25 $10 for each payment in default for a period of

11  not less than 10 days, if the charge is agreed upon, in

12  writing, between the parties before imposing any charge.  If

13  the amount of the finance charge so computed is less than $1

14  for any such month, a finance charge of $1 for any such month

15  may be charged, received, and collected.  If the regular

16  period is other than such monthly period or if the unpaid

17  amount is less than or greater than $5, the permitted finance

18  charge shall be computed proportionately.  Such finance charge

19  may be computed for all unpaid balances within a range of not

20  in excess of $10 on the basis of the median amount within such

21  range, if as so computed such finance charge is applied to all

22  unpaid balances within such range.

23         Section 4.  Paragraph (r) is added to subsection (1) of

24  section 624.605, Florida Statutes, to read:

25         624.605  "Casualty insurance" defined.--

26         (1)  "Casualty insurance" includes:

27         (r)  Insurance for debt-cancellation

28  products.--Insurance that a creditor may purchase against the

29  risk of financial loss from the use of debt-cancellation

30  products with consumer loans, leases, or retail installment

31  contracts.

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 1         1.  For purposes of this paragraph, the term

 2  "debt-cancellation product" means loan, lease, or retail

 3  installment contract terms, or modifications to loan, lease,

 4  or retail installment contracts, under which a creditor agrees

 5  to cancel or suspend all or part of a customer's obligation to

 6  make payments upon the occurrence of specified events and

 7  includes, but is not limited to, debt-cancellation contracts,

 8  debt-suspension agreements, and guaranteed asset-protection

 9  contracts.

10         2.  Debt-cancellation products may be offered by

11  financial institutions, as defined in s. 655.005(1)(h),

12  insured depository institutions, as defined in 12 U.S.C. s.

13  1813(c), and subsidiaries of such institutions, as provided in

14  the financial institution codes, or by other business entities

15  as may be specifically authorized by law, and such products

16  are not insurance for purposes of the Florida Insurance Code.

17         Section 5.  Subsection (3) of section 627.553, Florida

18  Statutes, is amended to read:

19         627.553  Debtor groups.--The lives of a group of

20  individuals may be insured under a policy issued to a creditor

21  or its parent holding company, or to a trustee or trustees or

22  agent designated by two or more creditors, which creditor,

23  holding company, affiliate, trustee or trustees, or agent

24  shall be deemed the policyholder, to insure debtors of the

25  creditor or creditors, subject to the following requirements:

26         (3)  The amount of insurance on the life of any debtor

27  shall at no time exceed the amount owed by the debtor her or

28  him which is repayable in installments to the creditor or

29  $50,000, whichever is less, except that loans not exceeding 1

30  year's duration shall not be subject to such limits. However,

31  

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 1  on such loans not exceeding 1 year's duration, the limit of

 2  coverage shall not exceed $50,000 with any one insurer.

 3         Section 6.  Paragraph (b) of subsection (1) of section

 4  627.679, Florida Statutes, is amended to read:

 5         627.679  Amount of insurance; disclosure.--

 6         (1)

 7         (b)  The total amount of credit life insurance on the

 8  life of any debtor with respect to any loan or loans covered

 9  in one or more insurance policies shall at no time exceed the

10  amount of indebtedness $50,000 with any one creditor, except

11  that loans not exceeding 1 year's duration shall not be

12  subject to such limits, and on such loans not exceeding 1

13  year's duration, the limits of coverage shall not exceed

14  $50,000 with any one insurer.

15         Section 7.  Subsection (2) of section 627.681, Florida

16  Statutes, is amended to read:

17         627.681  Term and evidence of insurance.--

18         (2)  The term of credit disability insurance on any

19  debtor insured under this section shall not exceed the term of

20  indebtedness 10 years, and for credit transactions that exceed

21  60 months, coverage shall not exceed 60 monthly indemnities.

22         Section 8.  Paragraphs (g) and (h) of subsection (1) of

23  section 655.005, Florida Statutes, are amended, and paragraph

24  (t) is added to that subsection, to read:

25         655.005  Definitions.--

26         (1)  As used in the financial institutions codes,

27  unless the context otherwise requires, the term:

28         (g)  "Federal financial institution" means a federally

29  or nationally chartered or organized financial institution

30  association, bank, savings bank, or credit union.

31  

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 1         (h)  "Financial institution" means a state or federal

 2  savings or thrift association, bank, savings bank, trust

 3  company, international bank agency, international banking

 4  organization, international branch, international

 5  representative office, or international administrative office,

 6  or credit union, or an agreement corporation operating under

 7  s. 25 of the Federal Reserve Act, 12 U.S.C. ss. 601 et seq.,

 8  or an Edge Act corporation organized under s. 25(a) of the

 9  Federal Reserve Act, 12 U.S.C. ss. 611 et seq.

10         (t)  "Debt-cancellation products" means loan, lease, or

11  retail installment contract terms, or modifications or addenda

12  to loan, lease, or retail installment contracts, under which a

13  creditor agrees to cancel or suspend all or part of a

14  customer's obligation to make payments upon the occurrence of

15  specified events and includes, but is not limited to,

16  debt-cancellation contracts, debt-suspension agreements, and

17  guaranteed asset-protection contracts offered by financial

18  institutions, insured depository institutions, as defined in

19  12 U.S.C. s. 1813(c), and subsidiaries of such institutions.

20         Section 9.  Subsection (1) of section 655.79, Florida

21  Statutes, is amended to read:

22         655.79  Deposits and accounts in two or more names;

23  presumption as to vesting on death.--

24         (1)  Unless otherwise expressly provided in a contract,

25  agreement, or signature card executed in connection with the

26  opening or maintenance of an account, including a certificate

27  of deposit, a deposit account in the names of two or more

28  persons shall be presumed to have been intended by such

29  persons to provide that, upon the death of any one of them,

30  all rights, title, interest, and claim in, to, and in respect

31  of such deposit account, less all proper setoffs and charges

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 1  in favor of the institution, vest in the surviving person or

 2  persons. Any deposit or account made in the name of two

 3  persons who are husband and wife shall be considered a tenancy

 4  by the entirety unless otherwise specified in writing.

 5         Section 10.  Section 655.947, Florida Statutes, is

 6  created to read:

 7         655.947  Debt-cancellation products.--

 8         (1)  Debt-cancellation products may be offered, and a

 9  fee may be charged, by financial institutions and subsidiaries

10  of financial institutions subject to this section and the

11  rules and orders of the commission or office. As used in this

12  section, the term "financial institutions" includes those

13  institutions defined in s. 655.005(1), insured depository

14  institutions, as defined in 12 U.S.C. s. 1813, and

15  subsidiaries of these institutions.

16         (2)  A financial institution must manage the risks

17  associated with debt-cancellation products in accordance with

18  prudent safety and soundness principles. A financial

19  institution must establish and maintain effective

20  risk-management and control processes over its

21  debt-cancellation products and programs. These processes must

22  include appropriate recognition and financial reporting of

23  income, expenses, assets, and liabilities, and appropriate

24  treatment of all expected and unexpected losses associated

25  with the products. Each financial institution should also

26  assess the adequacy of its internal control and risk-

27  mitigation activities in view of the nature and scope of its

28  debt-cancellation products and programs.

29         (3)  The commission shall adopt rules pursuant to ss.

30  120.536(1) and 120.54 to administer this section, which rules

31  must be consistent with 12 C.F.R. part 37, as amended.

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 1         (4)  For purposes of this section and any rules adopted

 2  pursuant to this section, a periodic payment option is not

 3  required to be offered for any debt-cancellation product

 4  designed to protect a customer against a deficiency between

 5  the outstanding loan or lease amount and the value of the

 6  motor vehicle that is used as collateral for the loan or

 7  lease.

 8         Section 11.  Section 655.954, Florida Statutes, is

 9  amended to read:

10         655.954  Financial institution loans; credit cards.--

11         (1)  Notwithstanding any other provision of law, a

12  financial institution shall have the power to make loans or

13  extensions of credit to any person on a credit card or

14  overdraft financing arrangement and to charge, in any billing

15  cycle, interest on the outstanding amount at a rate that is

16  specified in a written agreement, between the financial

17  institution and borrower, governing the credit card account.

18  Such credit card agreement may modify any terms or conditions

19  of such credit card account upon prior written notice of such

20  modification as specified by the terms of the agreement

21  governing the credit card account or by the Truth in Lending

22  Act, 15 U.S.C. ss. 1601 et seq as amended, and the rules and

23  regulations adopted thereunder.  Any such notice provided by a

24  financial institution shall specify that the borrower has the

25  right to surrender the credit card whereupon the borrower

26  shall have the right to continue to pay off the borrower's

27  credit card account in the same manner and under the same

28  terms and conditions as then in effect.  The borrower's

29  failure to surrender the credit card prior to the

30  modifications becoming effective shall constitute a consent to

31  the modifications.

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 1         (2)  In conjunction with entering into any contract or

 2  agreement for a loan, line of credit, or loan extension, a

 3  financial institution, an insured depository institution, as

 4  defined in 12 U.S.C. s. 1813, and subsidiaries of these

 5  institutions, may offer, for a fee or otherwise, optional

 6  debt-cancellation products under s. 655.947 and the rules

 7  adopted under that section. The financial institution may not

 8  require a person to purchase a debt-cancellation product as a

 9  condition for a loan, line of credit, or loan extension.

10         (3)(2)  For the purpose of this section, the term:

11         (a)  "Billing cycle" has the same meaning as ascribed

12  to it under the federal Truth in Lending Act, as amended, 15

13  U.S.C. ss. 1601 et seq., and the associated regulations which

14  are in effect as of June 30, 2007 1992.

15         (b)  "Interest" means those charges considered a

16  finance charge under the federal Truth in Lending Act, as

17  amended, 15 U.S.C. ss. 1601 et seq., and the associated

18  regulations which are in effect as of June 30, 2007 1992.

19         Section 12.  Subsection (2) of section 658.21, Florida

20  Statutes, is amended to read:

21         658.21  Approval of application; findings

22  required.--The office shall approve the application if it

23  finds that:

24         (2)  The proposed capitalization is in such amount as

25  the office deems adequate, but in no case may the total

26  capital accounts at opening for a bank be less than $8 $6

27  million if the proposed bank is to be located in any county

28  which is included in a metropolitan statistical area, or $4

29  million if the proposed bank is to be located in any other

30  county.  The total capital accounts at opening for a trust

31  company may not be less than $3 $2 million. The organizing

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 1  directors of the proposed bank must directly own or control at

 2  least the lesser of $3 million or 25 percent of the bank's

 3  total capital accounts proposed at opening as approved by the

 4  office. If the proposed bank will be owned by a single-bank

 5  holding company, the organizing directors of the proposed bank

 6  collectively must directly own or control at least an amount

 7  of the single-bank holding company's capital accounts equal to

 8  the lesser of $3 million or 25 percent of the proposed bank's

 9  total capital accounts proposed at opening as approved by the

10  office. If the proposed bank will be owned by an existing

11  multibank holding company, the proposed directors must have a

12  substantial capital investment in the holding company, as

13  determined by the office. However, the investment is not

14  required to exceed the amount otherwise required for a

15  single-bank holding company application. Of total capital

16  accounts at opening, as noted in the application or amendments

17  or changes to the application, at least 25 percent of the

18  capital shall be directly owned or controlled by the

19  organizing directors of the bank. Directors of banks owned by

20  single-bank holding companies shall have direct ownership or

21  control of at least 25 percent of the bank holding company's

22  capital accounts. The office may disallow illegally obtained

23  currency, monetary instruments, funds, or other financial

24  resources from the capitalization requirements of this

25  section. The proposed stock offering must comply with the

26  requirements of ss. 658.23-658.25 and 658.34-658.37.

27         Section 13.  Section 658.34, Florida Statutes, is

28  amended to read:

29         658.34  Shares of capital stock.--

30  

31  

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 1         (1)  A bank or trust company shall issue its capital

 2  stock with par value of not more than $100 nor less than $1

 3  per share.

 4         (2)  A No bank or trust company may not shall issue any

 5  shares of capital stock at a price less than par value, and

 6  prior to issuance, any such shares must be fully paid in cash.

 7         (3)  With the approval of the office, a bank or trust

 8  company may issue preferred stock of one or more classes in an

 9  amount and with a par value as approved by the office.

10         (4)  With the approval of the office, a bank or trust

11  company may issue less than all the number of shares of any of

12  its capital stock authorized by its articles of incorporation.

13  Such authorized but unissued shares may be issued only for the

14  following purposes:

15         (a)  To provide for stock options and warrants as

16  provided in s. 658.35.

17         (b)  To declare or pay a stock dividend; however, any

18  such stock dividend must comply with the provisions of this

19  section and s. 658.37.

20         (c)  To increase the capital of the bank or trust

21  company, with the approval of the office.

22         (5)  A financial institution may not issue or sell

23  stock of the same class which creates different rights,

24  options, warrants, or benefits among the purchasers or

25  stockholders of that class of stock. This subsection does not

26  prohibit the financial institution from creating uniform

27  restrictions on the transfer of stock as permitted in s.

28  607.0627.

29         Section 14.  Subsection (2) of section 658.36, Florida

30  Statutes, is amended to read:

31         658.36  Changes in capital.--

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 1         (2)  A Any state bank or trust company may, with the

 2  approval of the office, provide for an increase in its capital

 3  stock only if the state bank or trust company files a written

 4  notice 15 days before the increase.

 5         Section 15.  Subsections (2) and (5) of section 658.44,

 6  Florida Statutes, are amended to read:

 7         658.44  Approval by stockholders; rights of dissenters;

 8  preemptive rights.--

 9         (2)  Written notice of the meeting of, or proposed

10  written consent action by, the stockholders of each

11  constituent state bank or state trust company shall be given

12  to each stockholder of record, whether or not entitled to

13  vote, and whether the meeting is an annual or a special

14  meeting or whether the vote is to be by written consent

15  pursuant to s. 607.0704, and the notice shall state that the

16  purpose or one of the purposes of the meeting, or of the

17  proposed action by the stockholders without a meeting, is to

18  consider the proposed plan of merger and merger agreement.

19  Except to the extent provided otherwise with respect to

20  stockholders of a resulting bank or trust company pursuant to

21  subsection (7), the notice shall also state that dissenting

22  stockholders, including those not entitled to vote but

23  dissenting as set forth in paragraph (c), will be entitled to

24  payment in cash of the value of only those shares held by the

25  stockholders:

26         (a)  Which at a meeting of the stockholders are voted

27  against the approval of the plan of merger and merger

28  agreement;

29         (b)  As to which, if the proposed action is to be by

30  written consent of stockholders pursuant to s. 607.0704, such

31  written consent is not given by the holder thereof; or

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 1         (c)  With respect to which the holder thereof has given

 2  written notice to the constituent state bank or trust company,

 3  at or prior to the meeting of the stockholders or on or prior

 4  to the date specified for action by the stockholders without a

 5  meeting pursuant to s. 607.0704 in the notice of such proposed

 6  action, that the stockholder dissents from the plan of merger

 7  and merger agreement, and which shares are not voted for

 8  approval of the plan or written consent given under paragraph

 9  (a) or paragraph (b).

10  

11  Hereinafter in this section, the term "dissenting shares"

12  means and includes only those shares, which may be all or less

13  than all the shares of any class owned by a stockholder,

14  described in paragraphs (a), (b), and (c).

15         (5)  The fair value, as defined in s. 607.1301(4), of

16  dissenting shares of each constituent state bank or state

17  trust company, the owners of which have not accepted an offer

18  for such shares made pursuant to subsection (3), shall be

19  determined as of the effective date of the merger under ss.

20  607.1326-607.1331, except as the procedures for notice and

21  demand are otherwise provided in this section. by three

22  appraisers, one to be selected by the owners of at least

23  two-thirds of such dissenting shares, one to be selected by

24  the board of directors of the resulting state bank, and the

25  third to be selected by the two so chosen.  The value agreed

26  upon by any two of the appraisers shall control and be final

27  and binding on all parties.  If, within 90 days from the

28  effective date of the merger, for any reason one or more of

29  the appraisers is not selected as herein provided, or the

30  appraisers fail to determine the value of such dissenting

31  shares, the office shall cause an appraisal of such dissenting

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 1  shares to be made which will be final and binding on all

 2  parties.  The expenses of appraisal shall be paid by the

 3  resulting state bank or trust company.

 4         Section 16.  This act shall take effect October 1,

 5  2007.

 6  

 7          STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
                       COMMITTEE SUBSTITUTE FOR
 8                         Senate Bill 2084

 9                                 

10  The committee substitute provides the following changes:

11  1.   Authorizes the sale of optional guaranteed asset
         protection (GAP) products by motor vehicle installment
12       sellers, sales finance companies, retail lessors and
         their assignees.
13  
    2.   Increases the maximum delinquency charge from $10 to $25
14       for a default payment pursuant to a revolving account
         provision in a retail installment contract.
15  
    3.   Specifies that a deposit or account made in the name of
16       two persons who are husband and wife is considered a
         tenancy by the entirety unless otherwise specified in
17       writing.

18  4.   Increases the minimum proposed capitalization for a
         proposed bank or trust company from $6 million to $8
19       million.

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                                  16

CODING: Words stricken are deletions; words underlined are additions.