2005 Legislation
Print Friendly

HOUSE BILL NO. 159 – Idaho Escrow Act

HOUSE BILL NO. 159

View Bill Status

View Bill Text

View Statement of Purpose / Fiscal Impact



Text to be added within a bill has been marked with Bold and
Underline. Text to be removed has been marked with
Strikethrough and Italic. How these codes are actually displayed will
vary based on the browser software you are using.

This sentence is marked with bold and underline to show added text.

This sentence is marked with strikethrough and italic, indicating
text to be removed.

Bill Status



H0159...........................................................by BUSINESS
IDAHO ESCROW ACT - Repeals, adds to and amends existing law to provide for
the Idaho Escrow Act; to define terms; to define conduct requiring a
license; to specify locations where business may be conducted; to provide
exemptions; to provide for the director's issuance or denial of licenses;
to provide for renewal of licenses; to require evidence of financial
responsibility; to provide for action in the case of a bond cancellation;
to limit the time within which an action may be brought against a bond; to
provide that licenses are not transferable or assignable; to require prior
written consent of the director of the Department of Finance for certain
transactions; to provide for civil and criminal penalties; to provide for
the maintenance, inspection and retention of books, accounts and records;
to require separate escrow trust fund accounts; to require written escrow
agreements; to require that records be reconciled at least monthly; to
provide for the interest received on funds; to require disclosure of
conflicts of interest; to require delivery of closing statements; to
provide that funds are not subject to execution or attachment in any claim
against the licensee; to provide for examinations and investigations; to
set forth additional powers and duties of the director; to set forth
prohibited practices; to provide remedies; to limit the impairment of other
remedies; to provide for continuing jurisdiction; to provide for
limitations of the act; to provide for severability; to provide for initial
licensing and compliance; to authorize Idaho chartered trust institutions
to act as trustees of trust deeds; and to remove a waiting period.
                                                                        
02/10    House intro - 1st rdg - to printing
02/11    Rpt prt - to Bus
02/24    Rpt out - rec d/p - to 2nd rdg
02/25    2nd rdg - to 3rd rdg
03/03    3rd rdg - PASSED - 55-13-2
      AYES -- Anderson, Andrus, Barraclough, Bastian, Bell, Bilbao, Black,
      Block, Boe, Bolz, Bradford, Cannon, Chadderdon, Collins, Deal,
      Denney, Edmunson, Ellsworth, Eskridge, Field(18), Field(23), Garrett,
      Henbest, Henderson, Jaquet, Jones, Lake, LeFavour, Martinez,
      McGeachin, Miller, Mitchell, Nielsen, Nonini, Pasley-Stuart, Pence,
      Raybould, Ring, Ringo, Roberts, Rusche, Rydalch, Sayler, Schaefer,
      Shepherd(2), Shirley, Skippen, Smith(30), Smith(24), Smylie,
      Snodgrass, Stevenson, Trail, Wills, Mr. Speaker
      NAYS -- Barrett, Bayer, Bedke, Clark, Hart, Harwood, Kemp, Mathews,
      McKague, Moyle, Sali, Shepherd(8), Wood
      Absent and excused -- Crow, Loertscher
    Floor Sponsor - Nonini
    Title apvd - to Senate
03/04    Senate intro - 1st rdg - to Com/HuRes
03/18    Rpt out - rec d/p - to 2nd rdg
03/21    2nd rdg - to 3rd rdg
03/22    3rd rdg - PASSED - 31-0-3, 1 vacancy
      AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett,
      Burtenshaw, Cameron, Coiner, Compton, Corder, Darrington, Davis,
      Gannon, Geddes, Goedde, Hill, Jorgenson, Kelly, Langhorst, Lodge,
      Malepeai, McGee, McKenzie, Pearce, Richardson, Schroeder, Stegner,
      Stennett, Sweet, Werk, Williams
      NAYS -- None
      Absent and excused -- Keough, Little, Marley, (District 21 seat
      vacant)
    Floor Sponsor - Cameron
    Title apvd - to House
03/23    To enrol
03/24    Rpt enrol - Sp signed
03/25    Pres signed
03/28    To Governor
04/01    Governor signed
         Session Law Chapter 236
         Effective: 07/01/05

Bill Text


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   First Regular Session - 2005
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                                                                        
                                     HOUSE BILL NO. 159
                                                                        
                                   BY BUSINESS COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO ESCROW AGENCIES; REPEALING CHAPTER 9, TITLE 30, IDAHO CODE; AMEND-
  3        ING TITLE 30, IDAHO CODE, BY THE ADDITION OF A NEW CHAPTER  9,  TITLE  30,
  4        IDAHO  CODE,  TO PROVIDE A SHORT TITLE, TO DEFINE TERMS, TO DEFINE CONDUCT
  5        REQUIRING A LICENSE, TO SPECIFY LOCATIONS WHERE BUSINESS MAY BE CONDUCTED,
  6        TO PROVIDE EXEMPTIONS, TO PROVIDE FOR THE DIRECTOR'S ISSUANCE OR DENIAL OF
  7        LICENSES, TO PROVIDE FOR RENEWAL  OF  LICENSES,  TO  REQUIRE  EVIDENCE  OF
  8        FINANCIAL RESPONSIBILITY, TO PROVIDE FOR ACTION IN THE CASE OF A BOND CAN-
  9        CELLATION, TO LIMIT THE TIME WITHIN WHICH AN ACTION MAY BE BROUGHT AGAINST
 10        A  BOND,  TO  PROVIDE THAT LICENSES ARE NOT TRANSFERABLE OR ASSIGNABLE, TO
 11        REQUIRE PRIOR WRITTEN CONSENT OF THE DIRECTOR FOR THE CONTROL OF A LICENSE
 12        ACQUIRED THROUGH A STOCK PURCHASE OR OTHER DEVICE, TO  PROVIDE  FOR  CIVIL
 13        AND  CRIMINAL  PENALTIES,  TO  PROVIDE FOR THE MAINTENANCE, INSPECTION AND
 14        RETENTION OF BOOKS, ACCOUNTS AND RECORDS, TO REQUIRE SEPARATE ESCROW TRUST
 15        FUND ACCOUNTS, TO REQUIRE  WRITTEN  ESCROW  AGREEMENTS,  TO  REQUIRE  THAT
 16        RECORDS  BE  RECONCILED  AT  LEAST  MONTHLY,  TO  PROVIDE FOR THE INTEREST
 17        RECEIVED ON FUNDS, TO REQUIRE DISCLOSURE  OF  CONFLICTS  OF  INTEREST,  TO
 18        REQUIRE  DELIVERY  OF  CLOSING  STATEMENTS, TO PROVIDE THAT FUNDS OR OTHER
 19        VALUE RECEIVED BY A LICENSEE PURSUANT TO AN ESCROW OR TRUST ARE  NOT  SUB-
 20        JECT TO EXECUTION OR ATTACHMENT IN ANY CLAIM AGAINST THE LICENSEE, TO PRO-
 21        VIDE  FOR  EXAMINATIONS AND INVESTIGATIONS, TO SET FORTH ADDITIONAL POWERS
 22        AND DUTIES OF THE DIRECTOR, TO SET FORTH PROHIBITED PRACTICES, TO  PROVIDE
 23        REMEDIES,  TO  LIMIT THE IMPAIRMENT OF OTHER REMEDIES, TO PROVIDE FOR CON-
 24        TINUING JURISDICTION, TO PROVIDE FOR LIMITATION OF THE ACT, TO PROVIDE FOR
 25        SEVERABILITY AND TO PROVIDE FOR  INITIAL  LICENSING  AND  COMPLIANCE;  AND
 26        AMENDING  SECTION  45-1504,  IDAHO  CODE, TO REVISE PROVISIONS RELATING TO
 27        TRUSTEES OF TRUST DEEDS.
                                                                        
 28    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
 29        SECTION 1.  That Chapter 9, Title 30, Idaho Code,  be,  and  the  same  is
 30    hereby repealed.
                                                                        
 31        SECTION  2.  That Title 30, Idaho Code, be, and the same is hereby amended
 32    by the addition thereto of a NEW CHAPTER, to be known and designated as  Chap-
 33    ter 9, Title 30, Idaho Code, and to read as follows:
                                                                        
 34                                      CHAPTER 9
 35                                   IDAHO ESCROW ACT
                                                                        
 36        30-901.  SHORT  TITLE. (1) This chapter shall be known and may be cited as
 37    the "Idaho Escrow Act."
 38        (2)  It is the intent of the  legislature  that  the  escrow  industry  be
 39    supervised  and regulated by the department of finance in order to protect the
 40    citizens of the state and to provide that the business practices of the escrow
 41    industry are fair and orderly, with due regard to the  ultimate  consumers  in
                                                                        
                                           2
                                                                        
  1    this important area of property protection.
                                                                        
  2        30-902.  DEFINITIONS.  As  used  in  this chapter and in rules promulgated
  3    pursuant to this chapter:
  4        (1)  "Act" means the "Idaho Escrow Act," chapter 9, title 30, Idaho Code.
  5        (2)  "Department" means the Idaho department of finance.
  6        (3)  "Director" means the director of the Idaho department of finance.
  7        (4)  "Escrow" means any transaction in which any person, for  the  purpose
  8    of  effecting  the  sale,  transfer, encumbrance, or lease of real or personal
  9    property to another person, delivers any written instrument,  money,  evidence
 10    of title to real or personal property, or other thing of value to a third per-
 11    son  to  be held by that third person until the happening of a specified event
 12    or the performance of a prescribed condition, when the instrument, money, evi-
 13    dence of title or thing of value is then to be delivered by the  third  person
 14    to  a  grantee, grantor, promisee, promisor, obligee, obligor, bailee, bailor,
 15    or any agent or employee of any of the latter, pursuant  to  written  instruc-
 16    tions.
 17        (5)  "Escrow agency" means any person engaged in the business of accepting
 18    or  receiving escrows for deposit or delivery by any means, including over the
 19    internet, or by any other electronic means.
 20        (6)  "Escrow agent" means any person engaged in the business of  accepting
 21    or receiving escrows for deposit or delivery on behalf of an escrow agency.
 22        (7)  "License" means a license issued pursuant to this chapter.
 23        (8)  "Licensee" means a person holding a valid license as an escrow agency
 24    under this chapter.
 25        (9)  "Person"  means  an  individual,  cooperative,  association, company,
 26    firm, partnership, corporation, limited  liability  company,  or  other  legal
 27    entity,  or  the plural thereof, whether or not resident, nonresident or citi-
 28    zen.
                                                                        
 29        30-903.  LICENSE REQUIRED. (1) It shall be  unlawful  for  any  person  to
 30    directly or indirectly engage in or carry on, or purport to engage in or carry
 31    on,  the  business  of, or act in the capacity of, an escrow agency in or from
 32    Idaho without first obtaining a license under this chapter.
 33        (2)  The requirements of this chapter  shall  also  apply  to  any  escrow
 34    transaction effecting the sale, transfer, encumbrance or lease to another per-
 35    son of any real or personal property located in Idaho.
                                                                        
 36        30-904.  PLACE OF BUSINESS. No licensee under this chapter shall engage in
 37    the  escrow  business  at  any  place of business for which it does not hold a
 38    license, nor shall it engage in business under any other name than that on the
 39    license. Every escrow agency licensed under this chapter shall maintain a home
 40    office as its principal location for the transaction of escrow  business.  The
 41    director  may,  on  application,  issue additional branch licenses to the same
 42    escrow agency licensee upon compliance with all the provisions of this chapter
 43    governing the issuance of a single escrow agency license.
                                                                        
 44        30-905.  EXEMPT PERSONS AND TRANSACTIONS. The requirements of this chapter
 45    do not apply to:
 46        (1)  Any person licensed to practice law in this state  while  engaged  in
 47    the  performance  of  his  professional duties, except an attorney or law firm
 48    actively engaging in a separate business as an escrow agency;
 49        (2)  Any person licensed or chartered under the laws of any  state  or  of
 50    the  United  States  as  a bank, savings and loan association, credit union or
 51    industrial loan company as well as wholly-owned subsidiaries and affiliates of
                                                                        
                                           3
                                                                        
  1    such organizations;
  2        (3)  Title insurance companies having a valid  certificate  of  authority,
  3    and  title insurance agents having a valid license as a title insurance agent,
  4    issued by the Idaho department of insurance;
  5        (4)  Any real estate company, broker or salesperson licensed by  and  sub-
  6    ject to the jurisdiction of the Idaho real estate commission, while performing
  7    acts  in the course of or incidental to sales or purchases of real or personal
  8    property handled  or  negotiated  by  such  real  estate  company,  broker  or
  9    salesperson;
 10        (5)  Any  receiver, trustee in bankruptcy, executor, administrator, guard-
 11    ian or other person acting under the supervision or order of any court of this
 12    state or of any federal court;
 13        (6)  A person licensed in this state  as  a  certified  public  accountant
 14    while  engaged in the performance of his professional duties who is not activ-
 15    ely engaged in a separate business as an escrow agency;
 16        (7)  Any state or federally chartered nondepository financial institution;
 17        (8)  Regulated lenders subject to the requirements  of  the  Idaho  credit
 18    code,  chapters 41 through 46, title 28, Idaho Code, to the extent not engaged
 19    in a separate business as an escrow agency;
 20        (9)  Agencies of the United States and agencies of this  state  and  their
 21    political subdivisions;
 22        (10) Mortgage  brokers and mortgage lenders subject to the requirements of
 23    the Idaho residential mortgage practices act,  chapter  31,  title  26,  Idaho
 24    Code, to the extent not engaged in a separate business as an escrow agency; or
 25        (11) A  mortgage company to the extent that such mortgage company is regu-
 26    larly engaged in the business of a mortgage company as defined in the mortgage
 27    company act, chapter 28, title 26, Idaho Code.
                                                                        
 28        30-906.  EXEMPTION -- BURDEN OF PROOF. In any proceeding or  action  under
 29    this chapter, the burden of proving an exemption from the requirements of this
 30    chapter is upon the person claiming the exemption.
                                                                        
 31        30-907.  DIRECTOR'S  ISSUANCE OR DENIAL OF LICENSE. (1) The director shall
 32    receive and act upon all applications for licenses to engage in business as an
 33    escrow agency under this chapter. If the director finds that all  requirements
 34    of statute and rule have been met and all applicable fees paid, and the appli-
 35    cant  is  not  otherwise unqualified for licensure, the director shall issue a
 36    license to the applicant.
 37        (2)  An application for a license as an escrow agency shall be in  writing
 38    and  filed  with  the  director in such form as is prescribed by the director,
 39    shall include such information as the director  may  reasonably  require,  and
 40    shall  be verified on oath by the applicant. Such information shall be updated
 41    and filed with the director as necessary to keep the information current.  The
 42    application  for licensure shall be accompanied by an application fee of three
 43    hundred fifty dollars ($350). When an application for licensure is  denied  or
 44    withdrawn, the director shall retain all fees paid by the applicant.
 45        (3)  An application for an escrow agency license under this chapter may be
 46    denied if the director finds that:
 47        (a)  The  escrow  agency's business was or will be formed for any business
 48        other than legitimate escrow services, or proposes to use a name  that  is
 49        misleading or in conflict with the name of an existing licensee;
 50        (b)  Any   incorporator,   officer,  director,  member,  general  partner,
 51        employee or agent of the escrow agency applicant has been:
 52             (i)   Convicted of, or received a withheld judgment for,  any  felony
 53             or a misdemeanor involving dishonesty or moral turpitude; or
                                                                        
                                           4
                                                                        
  1             (ii)  Committed  any  crime  or  act  involving  dishonesty, fraud or
  2             deceit, which  crime or act is substantially related to the  qualifi-
  3             cations,  functions  or duties of a person engaged in an escrow busi-
  4             ness;
  5        (c)  There is no natural person possessing a minimum of three (3) years of
  6        supervisory experience in relation to an escrow business supervising  each
  7        escrow agency office;
  8        (d)  The  applicant  or  any  officer,  director, member, general partner,
  9        employee or agent of the applicant has demonstrated  lack  of  fitness  to
 10        transact escrow business;
 11        (e)  The  applicant has made any false statement of a material fact in the
 12        application for a license; or
 13        (f)  The applicant, any officer, director, member, general partner or  any
 14        person owning or controlling, directly or indirectly, ten percent (10%) or
 15        more  of  the  outstanding equity securities of the applicant has violated
 16        any provision of this chapter or rules promulgated thereunder, or any sim-
 17        ilar regulatory scheme in this state or in any foreign jurisdiction.
                                                                        
 18        30-908.  RENEWAL OF LICENSE. (1) On or before April 30 of each year, every
 19    licensee under this chapter shall pay an annual license  renewal  fee  of  one
 20    hundred  fifty dollars ($150), and shall file with the director a renewal form
 21    containing such information as the director may require.
 22        (2)  As a condition of renewal, each licensee shall file with the director
 23    a statement of its financial condition and status of its  escrow  transactions
 24    as of the preceding December 31. The financial statement must be in a form and
 25    contain the information prescribed by the director.
 26        (3)  Each license under this chapter shall remain in full force and effect
 27    unless  the  licensee fails to timely satisfy the renewal requirements of this
 28    section, or the license is relinquished, suspended or revoked;  provided  how-
 29    ever,  branch  licenses shall be terminated upon the relinquishment or revoca-
 30    tion of a home office license. Any licensee  may  relinquish  the  license  by
 31    notifying  the  director  of its relinquishment, but this relinquishment shall
 32    not affect the licensee's liability for acts previously committed, and may not
 33    occur after the filing of a complaint for  revocation  or  suspension  of  the
 34    license.
 35        (4)  Following  the  failure of a licensee to satisfy the renewal require-
 36    ments of this section, a person previously licensed as an escrow  agency  may,
 37    for  an  additional nonrefundable fee of two hundred dollars ($200), apply for
 38    the reinstatement of its previous  license  provided  that  he  satisfies  the
 39    renewal  requirements  of  this section no later than the last business day of
 40    May immediately following expiration of such license.
                                                                        
 41        30-909.  FINANCIAL RESPONSIBILITY -- FIDELITY BOND -- ERRORS AND OMISSIONS
 42    POLICY -- SURETY BOND. At the time of filing  an  application  for  an  escrow
 43    agency  license,  and  at  the  time  of  any renewal or reinstatement of such
 44    license, the applicant or licensee shall provide satisfactory evidence to  the
 45    director  of  having obtained the following as evidence of financial responsi-
 46    bility:
 47        (1)  A fidelity bond providing coverage in the  aggregate  amount  of  two
 48    hundred  thousand  dollars  ($200,000)  with  a deductible no greater than ten
 49    thousand dollars ($10,000) covering the applicant or licensee, as well as each
 50    corporate officer, partner, managing member, escrow agent and employee of  the
 51    applicant or licensee;
 52        (2)  An  errors and omissions policy issued to the escrow agency providing
 53    coverage in the minimum aggregate amount of fifty thousand  dollars  ($50,000)
                                                                        
                                           5
                                                                        
  1    or, alternatively, cash or securities in such amount deposited in a depository
  2    approved  by  the  director on condition that they be available for payment of
  3    any claim payable under an equivalent errors  and  omissions  policy  in  such
  4    amount; and
  5        (3)  A surety bond in an amount as set forth in paragraphs (a) through (f)
  6    of  this subsection. The surety bond shall be in a form provided by the direc-
  7    tor and the applicant shall be named as principal. The bond shall be  executed
  8    by  the  applicant as obligor and by a company authorized to do a surety busi-
  9    ness in Idaho. The bond shall be conditioned that the obligor as licensee will
 10    faithfully conform to and abide by this chapter and all rules adopted thereun-
 11    der, and shall be liable for reimbursement to all persons who suffer  loss  by
 12    reason  of a violation of this chapter or rules adopted thereunder. The surety
 13    bond provided shall be in an amount based upon the average  month-end  balance
 14    of  the  escrow  trust accounts of the applicant or licensee for the preceding
 15    calendar year, in increments as described in the following subsections:
 16        (a)  For average month-end escrow trust account balances of fifty thousand
 17        dollars ($50,000) or less, a surety bond in the amount of twenty  thousand
 18        dollars ($20,000) is required;
 19        (b)  For  average  month-end  escrow  trust  account balances of more than
 20        fifty thousand dollars ($50,000) but not more than two hundred fifty thou-
 21        sand dollars ($250,000), a surety bond in the  amount  of  fifty  thousand
 22        dollars ($50,000) is required;
 23        (c)  For  average month-end escrow trust account balances of more than two
 24        hundred fifty thousand dollars ($250,000) but not more than  five  hundred
 25        thousand  dollars  ($500,000),  a surety bond in the amount of one hundred
 26        thousand dollars ($100,000) is required;
 27        (d)  For average month-end escrow trust account balances of more than five
 28        hundred thousand dollars ($500,000) but not more than seven hundred  fifty
 29        thousand  dollars  ($750,000),  a surety bond in the amount of one hundred
 30        fifty thousand dollars ($150,000) is required;
 31        (e)  For average month-end escrow trust  account  balances  of  more  than
 32        seven hundred fifty thousand dollars ($750,000) but not more than one mil-
 33        lion  dollars  ($1,000,000),  a  surety  bond in the amount of two hundred
 34        thousand dollars ($200,000) is required;
 35        (f)  For average month-end escrow trust account balances of more than  one
 36        million  dollars  ($1,000,000), a surety bond in the amount of two hundred
 37        fifty thousand dollars ($250,000) is required.
 38        (4)  The escrow agency licensee shall place on file with the director  the
 39    surety  bond  and  proof of its errors and omissions coverage and its fidelity
 40    bond, which bonds and insurance coverage shall be continuous during the period
 41    of licensure of the licensee whether or not the bond  is  renewed,  continued,
 42    reinstated,  reissued,  or otherwise extended, replaced or modified, including
 43    increases or decreases in the penal sum. The surety upon the bond shall not be
 44    liable in an aggregate amount exceeding the penal sum set forth on the face of
 45    the bond.
 46        (5)  The surety bond shall name as beneficiaries:
 47        (a)  The state, for payment of any costs incurred and charges made in con-
 48        nection with any escrow agency's insolvency or  default,  including  costs
 49        and  charges  relating  to  an  examination and receivership of any escrow
 50        agency; and
 51        (b)  Any person who has a claim against the surety on the bonds  based  on
 52        any default or violation of any duty or obligation of the escrow agency.
 53        (6)  In  lieu  of  the  bonds  required  by this section, a certificate of
 54    deposit issued by a financial institution authorized to  conduct  business  in
 55    Idaho  and made payable to the director may be provided to the director in the
                                                                        
                                           6
                                                                        
  1    same principal amount as required for the bonds. The interest on the  certifi-
  2    cate  of deposit shall be payable to the escrow agency  licensee. The certifi-
  3    cate of deposit shall be maintained at all times during which the licensee  is
  4    authorized  to  engage in business as an escrow agency under this chapter, and
  5    must provide that it will remain in effect for at least three (3)  years  fol-
  6    lowing discontinuance of operations unless released earlier by the director.
  7        (7)  The  director  may,  in the public interest and for good cause shown,
  8    waive or modify any requirements of this section.
                                                                        
  9        30-910.  CANCELLATION OF FIDELITY BOND, SURETY BOND, OR BOTH --  NEW  BOND
 10    REQUIRED. Prior to cancellation of either the fidelity bond or the surety bond
 11    required  by  section  30-909, Idaho Code, or both, the escrow agency licensee
 12    shall file with the director satisfactory evidence of a new bond in the appro-
 13    priate amount with no lapse in coverage from the canceled bond. Failure to  do
 14    so  shall  be  grounds for the suspension or revocation of the escrow agency's
 15    license.
                                                                        
 16        30-911.  LIMITATION OF ACTIONS ON BOND. No action may  be  brought  on  an
 17    escrow  agency licensee's bond by any person after the expiration of three (3)
 18    years from the time when the act or default complained  of  becomes  known  or
 19    should have become known.
                                                                        
 20        30-912.  TRANSFERABILITY.  A  license  issued  under  this  chapter is not
 21    transferable or assignable, and control of a license  shall  not  be  acquired
 22    through  stock  purchase  or other device without the prior written consent of
 23    the director.
                                                                        
 24        30-913.  UNLAWFUL ACTS. Any person, except a person exempt  under  section
 25    30-905,  Idaho Code, who engages in activity as an escrow agency without first
 26    obtaining a license in accordance with this chapter, shall be guilty of a fel-
 27    ony.  Such person is also subject to a civil penalty in an amount  no  greater
 28    than five thousand dollars ($5,000) for each violation of this chapter or rule
 29    or order thereunder, in addition to other sanctions allowed by law.
                                                                        
 30        30-914.  ACCOUNTS TO BE MAINTAINED -- RECORDS OPEN TO INSPECTION -- RETEN-
 31    TION  OF  RECORDS  --  TRUST  ACCOUNT -- INTEREST ON ESCROW ACCOUNTS. (1) Each
 32    licensee shall maintain sufficient books, accounts and records readily  acces-
 33    sible  to  the  department  for  the  department  to determine at any time the
 34    licensee's financial condition, what duties and responsibilities the  licensee
 35    has  undertaken  to  perform  and  whether  it is properly performing all such
 36    duties, and any other information considered  necessary  by  the  director  to
 37    determine  whether  the  licensee is operating in a safe, competent and lawful
 38    manner. The books, records and accounts shall be maintained in accordance with
 39    generally accepted accounting principles and sound business practice.
 40        (2)  For each individual escrow account, the licensee shall  maintain  the
 41    escrow agreement and all amendments, all instructions affecting the agreement,
 42    all  related  correspondence, and an individual ledger reflecting all activity
 43    pertinent to that account.
 44        (3)  Each licensee  shall  continuously  maintain  the  following  general
 45    accounts:
 46        (a)  A general ledger reflecting assets, liabilities, income, expenses and
 47        equity accounts;
 48        (b)  An escrow liability control ledger for all escrow accounts;
 49        (c)  A cash receipts and disbursements journal; and
 50        (d)  Copies  of all receipts and disbursements used as a medium of posting
                                                                        
                                           7
                                                                        
  1        to individual escrow accounts.
  2        (4)  (a) Every licensee shall keep a separate escrow  trust  fund  account
  3        established at a financial institution located in Idaho, in which shall be
  4        kept  separate,  distinct and apart and segregated from the licensee's own
  5        funds, all funds or moneys of clients which are being held in trust by the
  6        licensee pending the closing of an escrow transaction or the full  perfor-
  7        mance  of  the  escrow  agreement.  All trust funds shall be deposited not
  8        later than the first banking day following receipt  thereof.  Such  funds,
  9        when  deposited,  shall  be  designated as "escrow accounts" or given some
 10        other appropriate designation indicating that the funds are not the  funds
 11        of the licensee.
 12        (b)  Every  licensee  shall maintain all other assets or property received
 13        pursuant to an escrow in accordance with a written escrow agreement  in  a
 14        manner  which will reasonably preserve and protect the property from loss,
 15        theft or damage, and which will  otherwise  comply  with  all  duties  and
 16        responsibilities of a fiduciary or bailee generally.
 17        (5)  The  records  referenced in this section shall be reconciled at least
 18    monthly.
 19        (6)  All records referenced in this section shall  be  maintained  by  the
 20    licensee for seven (7) years following the close of each account.
 21        (7)  Any  interest  received  on  funds deposited with an escrow agency in
 22    connection with an escrow must be paid over to the  depositing  party  to  the
 23    escrow  and  may  not  be transferred to an account of the escrow agency. This
 24    section shall not limit the right of the escrow agency to  contract  with  the
 25    depositing  party  with  respect  to  the interest received on the deposits by
 26    independent agreement.
                                                                        
 27        30-915.  NOTICE OF CONFLICT OF  INTEREST  --  CLOSING  STATEMENT.  (1)  An
 28    escrow  agency  licensee shall act without partiality to any of the parties to
 29    the escrow. An escrow agency  may  not  close  a  transaction  where  it  has,
 30    directly  or indirectly, a monetary interest in the subject property either as
 31    buyer or seller. If an escrow agency has a business  interest  in  the  escrow
 32    transaction  other  than  as  the  escrow agency licensee, the relationship or
 33    interest must be disclosed in the written escrow  instructions.  After  noting
 34    such  interest, an additional statement shall appear as follows: "We call this
 35    interest to your attention for disclosure purposes. This interest will not, in
 36    our opinion, prevent us from being a fair and impartial escrow agency in  this
 37    transaction,  but  you  are,  nevertheless, free to request the transaction be
 38    handled by some other escrow agency."
 39        (2)  On completion of an escrow transaction, the  escrow  agency  licensee
 40    shall  deliver to each principal a signed written closing statement. The clos-
 41    ing statement shall show all receipts and disbursements relating to the escrow
 42    transaction. Any charges by, or disbursements to, the escrow agency  shall  be
 43    clearly noted.
                                                                        
 44        30-916.  ATTACHMENT.  Funds  or  other  value received by a licensee under
 45    this chapter pursuant to an escrow or trust funds are not subject to execution
 46    or attachment in any claim against the licensee.
                                                                        
 47        30-917.  EXAMINATION AND INVESTIGATIONS. (1) The  director  shall  examine
 48    the  books, records and accounts of each licensee, within or without the state
 49    of Idaho, at intervals he deems necessary for the protection  of  the  public.
 50    The licensee so examined shall pay a fee for the examination at the rate fixed
 51    annually by the director, not to exceed fifty dollars ($50.00) per examination
 52    hour. If it is necessary for the examination to be conducted outside of Idaho,
                                                                        
                                           8
                                                                        
  1    the actual cost of travel for the examiners shall be reimbursed to the depart-
  2    ment  of  finance  by  the  licensee so examined. The director, upon his prior
  3    written approval, may accept  an  equivalent  examination  of  a  licensee  by
  4    another  state  or federal agency as a substitute for the examination pursuant
  5    to this section.
  6        (2)  The director may make  necessary  public  or  private  investigations
  7    within  or outside of Idaho to determine whether any person has violated or is
  8    about to violate this chapter or any rule or order under this chapter.
  9        (3)  For the purpose of any investigation or other proceeding  under  this
 10    chapter, the director or any officer designated by the director may administer
 11    oaths  or  affirmations, and upon his own motion or upon request of any party,
 12    may subpoena witnesses, compel their attendance, and require the production of
 13    any matter which is relevant to the investigation or other proceeding, includ-
 14    ing the existence, description, nature, custody, condition and location of any
 15    books, documents or other tangible things and the  identity  and  location  of
 16    persons  having  knowledge  or  relevant facts, or any other matter reasonably
 17    calculated to lead to the discovery of material evidence. Upon failure to obey
 18    a subpoena or to answer questions proposed by the  investigating  officer  and
 19    upon reasonable notice to all persons affected thereby, the director may apply
 20    to any district court for an order compelling compliance.
 21        (4)  Except  as  otherwise provided in this chapter, all proceedings under
 22    this chapter shall be conducted in accordance with the  administrative  proce-
 23    dure act, chapter 52, title 67, Idaho Code.
                                                                        
 24        30-918.  POWERS  AND  DUTIES OF THE DIRECTOR. (1) In addition to any other
 25    powers and duties of the director authorized by law, the  director  may  issue
 26    orders  and  promulgate rules that, in the opinion of the director, are neces-
 27    sary to execute, enforce and effectuate the purposes of this chapter.
 28        (2)  The director shall also:
 29        (a)  Administer and enforce the provisions and requirements of this  chap-
 30        ter; and
 31        (b)  Require that all funds collected by the department under this chapter
 32        be  deposited  into the finance administrative account pursuant to section
 33        67-2702, Idaho Code.
                                                                        
 34        30-919.  PROHIBITED  PRACTICES.  No  escrow  agency  licensee  or   person
 35    required to be licensed under this chapter, or any of its officers, directors,
 36    members, general partners, employees or agents shall:
 37        (1)  Issue,  circulate, make use of, publish or advertise, by any means of
 38    communication, that a person is engaged in accepting or receiving  escrows  if
 39    that person is not licensed under this chapter;
 40        (2)  Solicit  or  accept  an escrow instruction or amended or supplemental
 41    escrow instruction containing any blank to  be  filled  in  after  signing  or
 42    initialing  of  the  escrow  instruction  or permitting any person to make any
 43    addition to, deletion from, or alteration of an escrow instruction or  amended
 44    or supplemental escrow instruction unless the addition, deletion or alteration
 45    is  signed  or  initialed  by  any  affected party who signed or initialed the
 46    escrow instruction or amended or supplemental escrow instruction prior to  the
 47    addition, deletion or alteration;
 48        (3)  Fail  to  carry  out  an  escrow  transaction pursuant to the written
 49    escrow instructions unless amended by the written agreement of all parties  to
 50    the escrow agreement or their assigns;
 51        (4)  Accept funds or papers in escrow without a dated, written instruction
 52    signed by the parties, or their authorized representatives, adequate to admin-
 53    ister the escrow  account and to provide for sufficient funds and documents to
                                                                        
                                           9
                                                                        
  1    carry  out the terms of the escrow instructions. Funds and documents deposited
  2    shall be used only in accordance with such written instruction; provided  that
  3    if additional specific instructions are needed, the escrow agency shall obtain
  4    the  consent of both parties or such representatives to the escrow or an order
  5    of a court of competent jurisdiction at the expense of the escrow parties;
  6        (5)  Fail to promptly distribute funds, deeds or other  personal  property
  7    or instruments pursuant to escrow instructions;
  8        (6)  Fail  to  submit  to  an  examination by the department of its books,
  9    records and accounts, or refuse to provide to the department, within a reason-
 10    able time, all information requested by the department pursuant to this  chap-
 11    ter;
 12        (7)  Fail  to  deliver, without reasonable cause, within a reasonable time
 13    after the close of an escrow, to the respective parties of an escrow  transac-
 14    tion,  any money, documents or other properties held in escrow in violation of
 15    the provisions of the escrow instructions;
 16        (8)  Directly or indirectly employ  any  scheme,  device  or  artifice  to
 17    defraud  or  mislead  any person or engage in any unfair or deceptive practice
 18    toward any person;
 19        (9)  Fail to supervise diligently and control the  escrow-related  activi-
 20    ties of its agents, employees and independent contractors;
 21        (10) Engage  in fraudulent or dishonest abstraction or misappropriation or
 22    embezzlement of funds or other property held in trust;
 23        (11) Pay a fee or give any portion of its fees or charges, including  fees
 24    for  escrow services or other consideration, to any person as an inducement or
 25    as compensation for the referral of any escrow business; or
 26        (12) Disburse funds or deliver documents from an escrow for  recording  or
 27    otherwise  unless the escrow contains a credit balance consisting of collected
 28    funds, other than funds of the escrow agency or its affiliates, sufficient  to
 29    discharge  all  monetary  conditions  of the escrow. This requirement does not
 30    apply to escrows established for the purpose of  receiving  two  (2)  or  more
 31    periodic payments over a total period of time after establishment in excess of
 32    thirty (30) days.
                                                                        
 33        30-920.  REMEDIES. (1) Whenever it appears to the director that any person
 34    has  engaged  in  or  is about to engage in any act or practice constituting a
 35    violation of any provision of this chapter or any rule or order thereunder, is
 36    conducting its business in an unsafe and injurious manner, or that its capital
 37    or assets are impaired, the director may in his discretion:
 38        (a)  Order the person to cease and desist from the violation of any provi-
 39        sion of this chapter, rule or order thereunder;
 40        (b)  Issue an order revoking or suspending the  licensee's  escrow  agency
 41        license;
 42        (c)  After  notice  and the opportunity for a hearing, except as otherwise
 43        provided in this chapter, issue an order imposing a civil penalty  not  to
 44        exceed  five  thousand dollars ($5,000) for each violation of this chapter
 45        or any rule or order thereunder.
 46        (2)  In addition to such remedies, the director may bring an action in the
 47    fourth district court in and for Ada county or in  such  other  court  as  the
 48    director deems appropriate. Upon a proper showing, the court may:
 49        (a)  Grant  a  temporary  restraining  order,  followed  by  a preliminary
 50        injunction and a permanent injunction for the department  or  receiver  to
 51        exercise  control  of, operate or liquidate an escrow agency's business in
 52        this state, or such other injunctive relief as appropriate; and
 53        (b)  Except as otherwise provided by this chapter, impose a civil  penalty
 54        not to exceed five thousand dollars ($5,000) for each violation.
                                                                        
                                           10
                                                                        
  1        (3)  The court may not require the director to post a bond.
                                                                        
  2        30-921 -- 30-930.  RESERVED.
                                                                        
  3        30-931.  NO IMPAIRMENT OF OTHER REMEDIES. Nothing in this chapter shall be
  4    construed  so  as to impair or affect any statutory or common law right of any
  5    person to bring an action  in  any  court  having  jurisdiction  for  any  act
  6    involved in the transaction of an escrow business or the right of the state of
  7    Idaho  to sanction any person for any violation of any provision of this chap-
  8    ter.
                                                                        
  9        30-932.  CONTINUING JURISDICTION. If a license under this chapter is  sur-
 10    rendered,  suspended or revoked, the former licensee shall continue to be sub-
 11    ject to the provisions of this chapter and to the duties previously undertaken
 12    for so long as it acts as a fiduciary with respect to  any  escrow  previously
 13    undertaken.
                                                                        
 14        30-933.  STATUS  OF PREEXISTING ESCROWS. Nothing contained in this chapter
 15    shall be so construed as to impair or affect  the  obligation  of  any  escrow
 16    agreement  that  was lawfully entered into prior to the effective date of this
 17    act.
                                                                        
 18        30-934.  SEVERABILITY. The provisions of this act are hereby  declared  to
 19    be severable, and if any provision of this act or the application of such pro-
 20    vision  to any person or circumstance is declared invalid for any reason, such
 21    declaration shall not affect the validity of the remaining  portions  of  this
 22    act.
                                                                        
 23        30-935.  INITIAL  LICENSING  AND  COMPLIANCE. A person who conducts any of
 24    the activities set forth in section 30-902(4), Idaho Code, shall,  within  one
 25    hundred  twenty  (120) days following the effective date of this act, apply to
 26    the department for a license.
                                                                        
 27        SECTION 3.  That Section 45-1504, Idaho Code,  be, and the same is  hereby
 28    amended to read as follows:
                                                                        
 29        45-1504.  TRUSTEE  OF  TRUST  DEED -- WHO MAY SERVE -- SUCCESSORS. (1) The
 30    trustee of a trust deed under this act shall be:
 31        (a)  Any member of the Idaho state bar;
 32        (b)  Any bank or savings and loan association authorized  to  do  business
 33        under the laws of Idaho or the United States;
 34        (c)  An  authorized  trust  institution having a charter under chapter 32,
 35        title 26, Idaho Code, or aAny corporation authorized to  conduct  a  trust
 36        business under the laws of Idaho or the United States; or
 37        (d)  A  licensed  title  insurance agent or title insurance company autho-
 38        rized to transact business under the laws of the state of Idaho.
 39        (2)  In the event of death, dissolution, incapacity, disability or  resig-
 40    nation  of the trustee, the beneficiary may nominate in writing another quali-
 41    fied trustee. Provided, however, that the  beneficiary  may,  for  any  reason
 42    obtain  the  resignation  of  the  trustee by serving upon the trustee and the
 43    grantor in the deed of trust, at their last known address, a notice of  inten-
 44    tion  to appoint a successor trustee. Said notice shall be given by registered
 45    or certified mail, and twenty (20) days after the date of mailing  the  notice
 46    of  intention  to  appoint  a successor trustee the beneficiary may nominate a
 47    successor trustee. Upon recording in the mortgage records  of  the  county  or
                                                                        
                                           11
                                                                        
  1    counties in which the trust deed is recorded of the appointment of a successor
  2    trustee,  the  successor trustee shall be vested with all of the powers of the
  3    original  trustee.  Provided  that  a  trustee  may  not  be  changed  at  the
  4    beneficiary's nomination after foreclosure has commenced by the filing of  the
  5    notice  of  default and is proceeding timely The trustee may resign at its own
  6    election or be replaced by the beneficiary.  The  trustee  shall  give  prompt
  7    written  notice  of its resignation to the beneficiary. The resignation of the
  8    trustee shall become effective upon the recording of the notice of resignation
  9    in each county in which the deed of trust is recorded. If  a  trustee  is  not
 10    appointed  in the deed of trust, or upon the resignation, incapacity, disabil-
 11    ity, absence, or death of the trustee, or the election of the  beneficiary  to
 12    replace  the  trustee,  the beneficiary shall appoint a trustee or a successor
 13    trustee. Upon recording the appointment of a successor trustee in each  county
 14    in  which the deed of trust is recorded, the successor trustee shall be vested
 15    with all powers of an original trustee.

Statement of Purpose / Fiscal Impact


                     STATEMENT  OF  PURPOSE

                           RS 14451C3

This bill proposes that Idaho enact a law regulating escrow
agencies to enable the state to protect Idahoans who use escrow
services.  Idaho is one of the few states that does not have a
specific law regulating escrow agencies not offering title
insurance.  These laws protect members of the public who entrust an
escrow agency with their funds and property.  This is an area in
which the Department is receiving an increasing number of
inquiries.  The problem of fraudulent Internet escrow services
infiltrating legitimate websites, such as in eBay Auctions and
Amazon Z-shops, has become epidemic.  Other states have
strengthened their escrow laws because of significant problems
connected with escrow agencies, including increased bankruptcies
leading to consumers' loss of funds.  The Department of Finance
suggests that Idaho enact a law regulating escrow agencies for the
protection of Idahoans who use the services of escrow agencies.
This bill also proposes to amend Idaho Code Section 45-1504 to
authorize Idaho chartered trust institutions to act as trustees of
trust deeds in Idaho and to remove a twenty (20) day waiting period
for notification of the intent to appoint a successor trustee. 
These changes will make Idaho's trust deeds law more consistent
with other states, reduce interest charges, and speed up the debt
recovery process.  To promote and protect the public welfare, the
Department of Finance is also seeking to repeal Chapter 9, Title
30, Idaho code, the Guaranty, Title, and Trust Company Act. That
Act, adopted in 1901, is irreparably outdated and provides no real
public protection.  Allowing companies to engage in the businesses
authorized by that Act, subject to no meaningful regulation under
the Act, places the public at risk. Activities authorized by the
Guaranty, Title, and Trust Company Act are comprehensively
addressed by other provisions of Idaho law.


                          FISCAL  NOTE
                                
There is no fiscal impact to the General Fund.  The revenues
from licensing and annual renewals will flow into the Department's
dedicated account, and are expected to be sufficient to cover the
costs of implementing this program.


CONTACT   
Name:     Mike Larsen
Agency:   Finance, Dept. of
Phone:    332-8060


STATEMENT OF PURPOSE/FISCAL NOTE                    H 159