SENATE BILL REPORT

SB 5340

BYSenators Warnke, Smitherman and Johnson

Restricting the forms of deposit available to 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)

                  February 1, 1990

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE, JANUARY 30, 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:

The language specifying any depository check governed by the federal Expedited Funds Availability Act as a permissible escrow account deposit is deleted.

EFFECT OF PROPOSED SUBSTITUTE:

The language concerning depository checks is retained.

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)