SENATE BILL REPORT

SSB 5340

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

Senate Hearing Date(s):February 2, 1989; February 24, 1989; January 30, 1990

Majority Report:  That Substitute Senate Bill No. 5340 be substituted therefor, and the substitute bill do pass.

      Signed by Senators von Reichbauer, Chairman; Johnson, Vice Chairman; McCaslin, McMullen, Rasmussen, Sellar, Smitherman, West.

Senate Staff:Benson Porter (786-7470)

                  March 1, 1990

House Committe on Financial Institutions & Insurance

AS PASSED SENATE, FEBRUARY 5, 1990

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.

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 interbank electronic transfers.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Senate Committee - Testified: Dean Morgan, Dee McComb, Mark Schedler, Escrow Association of Washington (pro)

HOUSE AMENDMENT:

The exception for interbank electronic transfers from the disbursement requirement is extended to deposits made in cash or other forms of deposit that permit conversion of the deposit to cash on the same day the deposit is made.