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NJBankers, IOLTA and the Supreme Court
NJBankers, IOLTA and the Supreme Court
New Jersey Banks get 90-day reprieve from deauthorization
NJBankers has successfully brought the issue of the mandated interest rate on New Jersey banks back to the table for discussion. As you may remember in my last article, NJBankers had sought a meeting with the Interest on Lawyer Trust Accounts (IOLTA) board to discuss letters that were sent threatening deauthorization to banks not in compliance with a mandated rate set by the board. While the IOLTA board agreed to the initial meeting, there were never further attempts to negotiate a potential compromise. Instead, many banks were sent letters stating they would be deauthorized on July 1.

Due to the pending crisis, NJBankers, the New Jersey League of Community Bankers and the New Jersey Department of Banking and Insurance (DOBI), along with both houses of the Legislature requested an immediate meeting with the New Jersey Supreme Court and the IOLTA board. They communicated the seriousness of the issue and asked that all parties come to the table for discussion before legislative action was taken and a possible legal battle ensued. 

The meeting bore some success in that Chief Justice Deborah Poritz agreed to stay any deauthorization for 90 days and offered to work with the Department to form a working group comprised of one bank, DOBI, Senate and Assembly counsel, the Court and the IOLTA board.

The meetings have already begun with a positive start as one of the first actions was to send surveys to banks on potential compromises. We appreciate the chief justice allowing the opportunity for all parties to come together for the purpose of arriving at a doable resolution of this very important matter.

NJBankers Counsel Mary Kay Roberts and I had our work cut out for us this spring, but successfully managed many legislative victories for NJBankers. Identity-theft reform, budget issues and gift card legislation, to name just a few, were all simultaneously moving quickly before the Legislature broke for summer recess. While it was very hectic, we were able to protect the interests of our many bank members and would like to thank you all for your valuable input.

Acting Gov. Richard T. Codey recently signed S-1760/A-3076 (Buono/Lance-Cryan/Malone), which would establish a dedicated assessment for the Division of Banking in DOBI for its costs associated with the regulation of New Jersey’s depository and financial institutions that it charters and regulates. NJBankers worked closely with the Department on the legislation and is grateful for their assistance in helping its passage.

Another bill recently signed by the governor that NJBankers worked closely with the Department on is S-2424/A-3981 (Lesniak/Cardinale-Cohen/Bateman). The bill strengthens DOBI’s enforcement powers with respect to state-chartered banks, savings banks and savings and loans and provides for more consistent enforcement authority across charter types. The bill also provides the department with regulatory authority which corresponds more closely to that of its federal regulatory counterparts. 

One issue that was particularly difficult to navigate was A-4001/S-1914 (Watson-Coleman/Cryan/Gusciora/Vas/VanDrew/Wisnieswski/Cohen-Turner/Baer/Vitale/Kavanaugh/Ciesla) “Identity Theft Prevention Act.” The many cases of individuals’ private information being breached were hitting almost daily as the Legislature was considering the bills. The result was one of the country’s strongest new laws on breach of personal information security, Social Security number reform and security freeze on credit reports. 

NJBankers led the coalition effort to work with consumer groups and the bill sponsors’ insistence that the legislative focus be on the criteria mentioned above. NJBankers would like to thank the coalition members and especially Sens. Lesniak, Gill, Turner and Baer along with Assemblywoman Bonnie Watson-Coleman and Assemblymen Cohen and Cryan. The bill passed both houses of the Legislature and awaits the governor’s signature.

S-2187/A-1079(Vitale/Coniglio/Gill-Cryan/Van Drew/Wisnieswski/Vas) passed both houses of the Legislature and included a provision prohibiting gift cards from expiring within a two-year period after purchase. The bill would also require that no dormancy fees, charged by some stores on unredeemed gift cards, be levied until after the 24-month period, and that dormancy fees could not exceed more than $2 a month. It also required that expiration date or dormancy fee provisions be included on the card in large-enough type to read clearly. The retailer would also have to provide a telephone number for the consumer to call and obtain additional information regarding expiration dates and dormancy fees. NJBankers was successful in exempting bank cards.

Other supported legislative activity included S-2617/A-2769 (Sweeney/Madden-Cohen/Deignan/Vas), which would prevent credit card fraud. The legislation also passed both the Senate and Assembly houses with full floor votes. Among other things, the bill prohibits the use of scanning devices or re-encoders to access or scan the encoded information on any ATM or debit card, credit card or other payment card, without the permission of the authorized user of the payment card.

The final budget negotiations were passed, much to the delight of the business community, without any major tax increases. The last-minute negotiations were very intense in that the revenue generators that were originally planned were scrapped last-minute by intense lobbying by all interests. NJBankers weighed in heavily on the lobbying campaign and expressed serious concern regarding any new taxes on business.

Many interests came together and applied continual pressure on the Legislature. The Realty Transfer Fee, which would have been increased for the third straight year, was spared. One of the more contentious issues was the Sales Tax Modernization Act, which would have created a new sales tax on downloaded software and also taxed limousine, charter airplanes, landscaping, tanning and massage therapy, was eliminated and saved the business community a staggering $275 million in tax increases.
One very important issue, especially to start-up banks, was the Net Operating Loss suspension. The budget honors a compromise agreed upon two years ago by the treasurer, legislators and the governor’s office about the full restoration of the NOLs. That accounts for a $250 million savings for businesses. There was a failed attempt at taxing insurance premiums but a significant hit was a $350 million diversion of Unemployment Insurance Trust Fund (UI) to pay for charity care. The UI Fund has been dramatically reduced from more than $3 billion in 2001 to just about $1 billion in 2005. Any further attempts of diverting funds from the UI could trigger a potential employer tax increase.

The successful NJBankers Action Banker Council meetings are being held monthly, mostly at the famous Mastoris Diner in Bordentown. If you haven’t made any of these legislative breakfast meetings, please watch for the next communication from our office.

In closing, I can’t emphasize enough the importance of you and your bank’s participation in the NJBankers political action campaign, JebPAC. If you haven’t contributed to date, please do!        

Robert J. Tartaglia is vice president and director of government relations for the New Jersey Bankers Association. He can be reached by e-mail at

Posted on Friday, September 30, 2005 (Archive on Thursday, December 29, 2005)
Posted by kdroney  Contributed by kdroney


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