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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
]]]] 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 a Any corporation authorized to conduct a trust 36 business under the laws of Idaho orthe 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 reason42 obtain the resignation of the trustee by serving upon the trustee and the43 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 registered45 or certified mail, and twenty (20) days after the date of mailing the notice46 of intention to appoint a successor trustee the beneficiary may nominate a47 successor trustee. Upon recording in the mortgage records of the county or11 1 counties in which the trust deed is recorded of the appointment of a successor2 trustee, the successor trustee shall be vested with all of the powers of the3 original trustee. Provided that a trustee may not be changed at the4 beneficiary's nomination after foreclosure has commenced by the filing of the5 notice of default and is proceeding timelyThe 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 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