FINAL BILL REPORT

SSB 5340

                              C 203 L 90

BYSenate Committee on Financial Institutions & Insurance (originally sponsored by Senators Warnke, Smitherman and Johnson)

Regulating disbursements by escrow agents.

Senate Committee on Financial Institutions & Insurance

House Committe on Financial Institutions & Insurance

SYNOPSIS AS ENACTED

BACKGROUND:

Escrow agents must receive certain deposits to an escrow account before any disbursements can be made from the account.  Permissible forms of deposits are specified by state statute and include cash, certain checks and money orders, and depository checks governed under the federal Expedited Funds Availability Act.

Some concern has been expressed that the use of depository checks places risk upon the other depositors of an escrow agent's trust account.  Federal law requires these depository checks be available for disbursement in one business day regardless of whether the instrument has completed the clearing process.  Critics contend disbursements may be required prior to the clearance of the depository check.

In addition, retailers and other businesses who accept personal checks in payment for goods or services have a legal right to request reasonable identification from the person presenting the check.  Most retailers and businesses require customers paying by check to present a driver's license and a major credit card.  In most cases, the retailer records the driver's license and credit card numbers on the check.  Some concern has been expressed that recording credit card numbers on checks increases the opportunity for credit card fraud.

SUMMARY:

An escrow agent may not make a disbursement until the next business day after the business day on which the funds are deposited.  This requirement does not apply to deposits made in cash, interbank electronic transfers, and other forms of deposit that are convertible to cash on the same day the deposit is made.

If a credit card is shown as proof of identification or creditworthiness, the credit card number may not be recorded when a payment is made by check.  However, the recording of credit card numbers is permitted when the credit card serves in lieu of a security deposit.

VOTES ON FINAL PASSAGE:

     Senate   40    0

     House 96  0 (House amended)

     Senate          (Senate refused to concur)

Free Conference Committee

     House 93  0

     Senate   41    0

EFFECTIVE:June 7, 1990