Law reviews. - For article, "Complex Financial Institutions and Systemic Risk," see 45 Ga. L. Rev. 779 (2011). For article, "How the Poor Got Cut Out of Banking," see 62 Emory L.J. 483 (2013). For article, "Financial Reform's Internationalism," see 65 Emory L.J. 1255 (2016)

RESEARCH REFERENCES

Alternative Dispute Resolution for Banks and Other Financial Institutions, 46 Am. Jur. Trials 231.

CHAPTER 1 FINANCIAL INSTITUTIONS

Provisions Applicable to Department

of Banking and Finance and

Financial Institutions

Generally.

P URPOSES AND PRELIMINARY MATTERS .

O RGANIZATION AND PERSONNEL OF DEPARTMENT OF BANKING AND FINANCE .

O PERATIONS OF DEPARTMENT OF BANKING AND FINANCE .

P ROCEEDINGS INVOLVING THE DEPARTMENT OF BANKING AND FINANCE .

P ERMISSIVE CLOSING DAYS, EMERGENCY CLOSINGS, BUSINESS RESTRICTIONS, AND VOLUNTARY LIQUIDATIONS .

N AMES, REGISTERED OFFICES, AND ADVERTISING .

R ECEIVERSHIP POWERS AND PROCEDURES GENERALLY .

C LAIMS, PRIORITIES, AND ACCOUNTING IN RECEIVERSHIPS .

R ECEIVERSHIP PROCEDURES INVOLVING TRUST OR POOLED ASSETS .

C HANGE IN CONTROL OF FINANCIAL INSTITUTIONS .

C OSTS ON JUDICIAL PROCESS .

D EPOSITS OF DECEASED DEPOSITORS .

B ANK FEES .

Banks and Trust Companies.

G ENERAL MATTERS .

G ENERAL POWERS OF BANKS AND TRUST COMPANIES .

P OWERS OF BANKS .

P OWERS OF TRUST COMPANIES .

A FFILIATE TRANSFERS .

F IDUCIARY INVESTMENT COMPANIES .

D EPOSITS, SAFE-DEPOSIT AGREEMENTS, AND MONEY RECEIVED FOR TRANSMISSION .

B ANKING DEPOSITORIES, RESERVES, AND REMISSIONS .

I NCORPORATION OF BANKS AND TRUST COMPANIES .

F INANCIAL STRUCTURE .

S HAREHOLDERS .

D IVIDENDS, DISTRIBUTIONS, AND PREFERRED SHARE ACQUISITION .

M ANAGEMENT .

A MENDMENT OF ARTICLES .

M ERGER AND CONSOLIDATION OF STATE BANKS AND TRUST COMPANIES .

C ONVERSIONS, MERGERS, AND CONSOLIDATIONS INVOLVING NATIONAL BANKS .

S ALE AND OTHER DISPOSITION OF ASSETS .

R EPRESENTATIVE OFFICES AND REGISTRATION .

B ANK BRANCHES, OFFICES, FACILITIES, AND HOLDING COMPANIES .

I NTERSTATE ACQUISITIONS OF BANKS AND BANK HOLDING COMPANIES .

I NTERSTATE BANKING AND BRANCHING BY MERGER .

Credit Unions.

G ENERAL PROVISIONS; ORGANIZATION .

C REDIT UNION CONSERVATORS .

O PERATION AND REGULATION .

Sale of Payment Instruments.

Cashing of Payment Instruments.

International Banking Corporations and Bank Agencies.

Domestic International Banking Facilities.

Business Development Corporations.

Building and Loan Associations and Savings and Loan Associations.

Multiple-Party Accounts.

Criminal and Related Provisions.

Transition Provisions; Fees of Secretary of State.

Records and Reports of Currency Transactions.

Small Minority Business Development Corporations.

Licensing of Mortgage Lenders and Mortgage Brokers.

Cross references. - Negotiable instruments, § 11-3-101 et seq.

Bank deposits and collections, § 11-4-101 et seq.

Making of loans for educational purposes, § 20-3-230 et seq.

Taxation of financial institutions, § 48-6-90 et seq.

State depositories, § 50-17-50 et seq.

Law reviews. - For article discussing the consolidation of laws dealing with various types of financial organizations into the Financial Institutions Code of Georgia, see 11 Ga. St. B.J. 225 (1975). For survey article on business associations, see 42 Mercer L. Rev. 71 (1990). For annual survey article on business associations, see 45 Mercer L. Rev. 53 (1993). For annual survey article discussing commercial and banking law, see 49 Mercer L. Rev. 95 (1997). For survey article discussing developments in law of business associations for the period from June 1, 1998 through May 31, 1999, see 51 Mercer L. Rev. 127 (1999). For survey article discussing developments in law of business associations for the period from June 1, 1999 through May 31, 2000, see 52 Mercer L. Rev. 95 (2000). For annual survey article discussing developments in commercial law, see 52 Mercer L. Rev. 143 (2000). For survey article on cases in the areas of corporate, securities, partnership, and banking law for the period from June 1, 2002 through May 31, 2003, see 55 Mercer L. Rev. 55 (2003). For note discussing and comparing the prudent man rule and the legal list rule in trustee investment, see 15 Mercer L. Rev. 530 (1964). For note discussing transfer fees in home loan assumptions in reference to the Georgia usury laws, see 9 Ga. L. Rev. 454 (1975). For note on 1995 amendments and enactments of sections in this chapter, see 12 Ga. St. U.L. Rev. 1 (1995).

JUDICIAL DECISIONS

Bank's exercise of power of sale not state action. - Statutory authorization of right of creditor bank to contract with debtors for power of sale under deed to secure debt does not, when combined with state's general regulation of banking industry's loan making procedures, convert exercise of such power of sale into state action; therefore, any contention that the creditor's exercise of the creditor's power of sale under a deed to secure debt violated the debtors' rights to procedural due process under U.S. Const., amend. 14 is without merit. Ray v. Bank of Covington, 247 Ga. 758 , 279 S.E.2d 425 (1981).

Cited in FDIC v. Willis, 497 F. Supp. 272 (S.D. Ga. 1980).

OPINIONS OF THE ATTORNEY GENERAL

Multiple office facilities. - Bank may establish multiple bank office facilities using single mobile bank unit on regular part-time basis. 1976 Op. Att'y Gen. No. 76-106.

National bank's cancellation of debt in event of borrower's death. - National bank operating in Georgia may not enter into a debt cancellation contract providing that debt will be automatically cancelled in the event of borrower's death without complying with Georgia's insurance laws. 1963-65 Op. Att'y Gen. p. 457.

RESEARCH REFERENCES

Gift of Fund on Deposit in Bank Account, 7 POF2d 375.

Bank's Failure to Use Ordinary Care in Detecting Forged or Altered Checks, 13 POF2d 347.

Commercial Paper - Negligence Contributing to Alteration or Unauthorized Signature Under UCC § 3-406, 14 POF2d 693.

Circumstances Rebutting Presumption of Payment of Savings Account, 18 POF2d 187.

Bank's Liability for Payment of Check or Withdrawal on Less than Required Number of Signatures, 25 POF2d 165.

Liability of Bank for Criminal Attack at ATM or Night Depository, 4 POF3d 497.

Banking Negligence - Improper Dishonor of Letter of Credit, 17 POF3d 541.

Bank Liability for Negligence in Lending and Breach of Loan Agreement, 69 Am. Jur. Trials 119.

ALR. - Finance company's liability in connection with consumer fraud practices of party selling goods or services, 18 A.L.R.4th 824.

Exclusion from debtor status of banks and the like by § 109(b)(2) of Bankruptcy Code (11 USCS § 109(b)(2)), 87 A.L.R. Fed. 282.

Construction and application of preemption exemption, under Employee Retirement Income Security Act (29 USCS § 1001 et seq.), for state laws regulating insurance, banking, or securities (29 USCS § 1144(b)(2)), 87 A.L.R. Fed. 797.

ARTICLE 1 PROVISIONS APPLICABLE TO DEPARTMENT OF BANKING AND FINANCE AND FINANCIAL INSTITUTIONS GENERALLY

Law reviews. - For survey article on commercial law, see 34 Mercer L. Rev. 31 (1982).

RESEARCH REFERENCES

ALR. - Failure of moneylender or creditor engaged in business of making loans to procure license or permit as affecting validity or enforceability of contract, 29 A.L.R.4th 884.

PART 1 P URPOSES AND PRELIMINARY MATTERS

Law reviews. - For note discussing the interrelationship between the International Banking Act, the provisions of the Financial Institutions Code relating to domestic banking, and the Foreign Corporations Chapter of the Corporation Code in the regulation of international banking in Georgia and comparing Georgia provisions with those of New York and California, see 27 Mercer L. Rev. 827 (1976).

7-1-1. Short title.

This chapter shall be known and may be cited as the "Financial Institutions Code of Georgia" (hereinafter called "this chapter").

(Code 1933, § 41A-101, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-2. Legislative findings.

The General Assembly finds and declares that the sound, efficient, and responsive operation of financial institutions is essential to the livelihood of the people of this state and to the stability and growth of the economy of this state and region and vitally affects the public interest.

(Code 1933, § 41A-103, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-3. Objectives of chapter; standards for construction and regulation.

  1. The underlying objectives of this chapter are to provide for:
    1. Safe and sound operation of financial institutions;
    2. Proper conservation of the assets of financial institutions;
    3. Public confidence in financial institutions;
    4. Protection for the interests of the depositors, creditors, and shareholders of financial institutions;
    5. Service by financial institutions responsive to the needs and convenience of depositors, borrowers, and other customers and conducive to economic progress and, to these ends, opportunities to expand services and facilities;
    6. Appropriate competition among financial institutions and between them and other financial organizations including those organized under the laws of the United States, other states, and foreign countries;
    7. Delegation to the department of rule-making power and administrative discretion in order that supervision of financial institutions may be flexible and responsive to changes in economic conditions and banking, fiduciary, and other commercial practices;
    8. Opportunity for management of financial institutions to exercise their business judgment;
    9. Simplification and modernization of the law governing banking, trust, and other financial institutions; and
    10. As to other entities under the supervision of the department that are not financial institutions, including check cashers and mortgage lenders and brokers, to provide for:
      1. Supervision and examination of their business affairs to ensure that they operate in a manner consistent with state law;
      2. Protection of the interests of consumers and service by these entities which is responsive to their consumers; and
      3. Simplification and modernization of the law that governs these entities, together with the delegation of rulemaking power and administrative discretion to the department to carry out its responsibilities, keeping in mind the need for economic and technological progress in the industry.
  2. This chapter shall be construed and applied to promote the foregoing objectives and they shall constitute standards to be observed by the department in promulgating rules and regulations, issuing cease and desist orders, conducting examinations, and exercising discretionary powers and in connection with all other matters embraced by this chapter.

    (Code 1933, § 41A-104, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1997, p. 485, § 1; Ga. L. 2002, p. 1220, § 1.)

JUDICIAL DECISIONS

Approval of proposed exercises of incidental powers guided by paragraph (a)(6). - O.C.G.A. § 7-1-261 establishes legislative intent that state banks be authorized to exercise "incidental powers" and delegates authority to approve such powers to the commissioner, who shall be guided in this determination by the statutory objective stated in O.C.G.A. § 7-1-3(a)(6) of making state banks competitive with national banks. Department of Banking & Fin. v. Independent Ins. Agents of Ga., Inc., 158 Ga. App. 556 , 281 S.E.2d 265 (1981), rev'd on other grounds, 248 Ga. 787 , 285 S.E.2d 535 (1982) (decided prior to 1983 amendment of § 7-1-261 ).

7-1-4. Definitions.

Subject to additional definitions contained in the subsequent provisions of this chapter, as used in this chapter, the term:

  1. "Affiliate" means any corporation, business trust, association, or other similar organization:
    1. Of which a financial institution, directly or indirectly, owns or controls either a majority of the voting shares or more than 50 percent of the number of shares voted for the election of its directors, trustees, or other persons exercising similar functions at the preceding election or controls in any manner the election of a majority of its directors, trustees, or other persons exercising similar functions;
    2. Of which control is held, directly or indirectly, through stock ownership or in any other manner by the shareholders of a financial institution who own or control either a majority of the shares of such financial institution or more than 50 percent of the number of shares voted for the election of directors of such financial institution at the preceding election or by trustees for the benefit of the shareholders of any such financial institutions;
    3. Of which a majority of its directors, trustees, or other persons exercising similar functions are directors of any one financial institution; or
    4. Which owns or controls, directly or indirectly, either a majority of the shares of a financial institution or more than 50 percent of the number of shares of a financial institution voted for the election of directors of a financial institution at the preceding election or controls in any manner the election of a majority of the directors of a financial institution or for the benefit of whose shareholders or members all or substantially all the capital stock of a financial institution is held by trustees.

    (1.5) "Agency relationship" is a relationship created by a contractual agreement whereby a financial institution agrees with a third party, including another financial institution, to act in a principal or agent capacity to facilitate the conduct of activities related to the business of banking, which activities are currently authorized under this chapter or under other applicable law.

  2. "Agreement for the payment of money" means a consensual monetary obligation not in the form of an evidence of indebtedness or an investment security and includes an account or general intangible as defined in Code Section 11-9-102.
  3. "Appropriated retained earnings" means that portion of the retained earnings of a bank or trust company set aside by resolution of the board of directors as unavailable for the payment of dividends or other distribution to shareholders.
  4. "Articles" means original or restated articles of incorporation or articles of consolidation and all the amendments thereto, including articles of merger or conversion, and also includes what heretofore have been designated by law as certificates of incorporation or charters and, in case of foreign corporations, whatever documents are equivalent to "articles" in their jurisdiction of incorporation. After an amendment restating articles in their entirety, the "articles" shall not include any prior documents, and the certificate of amendment issued by the Secretary of State shall so state.
  5. "Assets" means all the property and rights of every kind of a financial institution.
  6. "Attorney" means an attorney at law who is regularly retained as counsel for a financial institution or who is a partner or associate of a firm which is regularly retained as counsel for a financial institution.
  7. "Bank" means a corporation existing under the laws of this state on April 1, 1975, or organized under this chapter and authorized to engage in the business of receiving deposits withdrawable on demand or deposits withdrawable after stated notice or lapse of time; "bank" shall also include national banks located in this state for the purpose of Part 6 of Article 2 of this chapter, relating to deposits, safe-deposit agreements, and money received for transmission, and Article 8 of this chapter, relating to multiple deposit accounts; provided, however, that the term "bank" shall not include a credit union, a savings and loan association, or a licensee under Article 4 of this chapter, but shall include a federal or state credit union for the purposes of Part 6 of Article 2 of this chapter, provided that this inclusion is not intended to grant or expand any powers to credit unions not authorized in Part 6 of Article 2 of this chapter or by other law.
  8. Reserved.
  9. "Capital debt" means the sum of the face value of the subordinated securities of a financial institution issued pursuant to Code Section 7-1-419.
  10. "Capital stock" means the sum of the par value of the authorized shares which have been issued and remain outstanding of a bank or trust company.
  11. Reserved.
  12. "Commercial bank" means a bank authorized to hold deposits subject to check.
  13. "Commissioner" means the commissioner of banking and finance.
  14. "Corporation" means a corporation, whether profit or nonprofit, and includes a professional corporation or joint-stock association, organized under the laws of this state, the United States, or any other state, territory, or dependency of the United States or under the laws of a foreign country.
  15. "Credit union" means a cooperative society incorporated under the laws of this state on April 1, 1975, or organized under Article 3 of this chapter and existing for the twofold purpose of promoting thrift among its members and creating a source of credit for them at reasonable rates.
  16. "Department" means the Department of Banking and Finance.
  17. "Depositor" means any person or corporation who shall deposit money or items for the payment of money in any financial institution, which funds are subsequently (allowing time for collections) withdrawable either on demand or after a stated notice or lapse of time, whether interest is allowed thereon or not, and shall also include:
    1. Holders of demand and time certificates of deposit;
    2. Owners of certified or cashiers' checks and checks purchased from a licensee under Article 4 of this chapter; and
    3. Shareholders in credit unions, federal credit unions, and savings and loan associations to the extent that funds paid in by them are withdrawable within the terms of this definition.
  18. "Evidence of indebtedness" means a note, draft, or similar negotiable or nonnegotiable instrument.
  19. "Federal credit union" means an association organized pursuant to the Federal Credit Union Act, 12 U.S.C. Sections 1750-1795i.
  20. "Fiduciary" means an executor, administrator, guardian, receiver, trustee, assignee for benefit of creditors, or one acting in a similar capacity.
  21. "Financial institution" means:
    1. A bank;
    2. A trust company;
    3. Reserved;
    4. A credit union;
    5. A corporation licensed to engage in the business of selling payment instruments in this state on April 1, 1975, or so licensed pursuant to Article 4 of this chapter;
    6. Business development corporations existing on April 1, 1975, pursuant to the former "Georgia Business Development Corporation Act of 1972," approved April 3, 1972 (Ga. L. 1972, p. 798), or organized pursuant to Article 6 of this chapter;
    7. An international bank agency doing business in this state on April 1, 1975, pursuant to the former "International Bank Agency Act," approved April 6, 1972 (Ga. L. 1972, p. 1140), or authorized to do business in this state pursuant to Article 5 of this chapter;
    8. In addition, as the context requires, a national bank, savings and loan association, or federal credit union for the purpose of the following provisions:
      1. Code Section 7-1-2, relating to findings of the General Assembly;
      2. Code Section 7-1-8, relating to supplementary principles of law;
      3. Code Section 7-1-37, relating to restrictions on officials and personnel;
      4. Code Section 7-1-70, relating to disclosure of information;
      5. Code Section 7-1-90, relating to judicial review of department action;
      6. Code Sections 7-1-111 and 7-1-112, relating to emergency closings and business restrictions;
      7. Paragraph (3) of subsection (a) of Code Section 7-1-394, relating to criteria to be considered in approving new banks;
      8. Code Section 7-1-840, relating to criminal prosecutions; and
      9. Code Section 7-1-841, relating to application of Title 16 provisions;
    9. A bank holding company as defined in Code Section 7-1-605 for the purposes of Code Sections 7-1-61, 7-1-71, and 7-1-91;
    10. Banks chartered by states other than Georgia for the purposes of paragraph (10) of Code Section 7-1-261, relating to agency relationships; and
    11. Federal credit unions for the purposes of Part 6 of Article 2 of this chapter, relating to deposits, safe-deposit agreements, and money received for transmission, and Article 8 of this chapter, relating to multiple-party accounts.
  22. "Insolvency" means:
    1. Inability to meet liabilities as they become due in the regular course of business; or
    2. Insufficiency in actual cash market value of assets to pay liabilities to depositors and other creditors.

    (22.5) "Main office" means the principal banking location of a bank as such location appears in the records of the Department of Banking and Finance. If a bank does not designate a main office, the department shall choose a banking location of the bank to be the main office.

  23. "National bank" means a national banking association organized pursuant to 12 U.S.C. Section 21-215b.
  24. Reserved.
  25. "Paid-in capital" means the sum of the considerations received in the sale or exchange of shares of a bank or trust company in excess of the amount of the capital stock and the expense fund required by Code Section 7-1-396 and includes the surplus, if any, created by or arising out of a reduction of the capital stock of such financial institution effected in a manner permitted by law, any amounts properly regarded as surplus of such financial institution on April 1, 1975, and any amounts transferred from the expense fund as permitted by Code Section 7-1-412.
  26. "Person" means an individual, trust, general or limited partnership, unincorporated association (except a joint-stock association), or any other form of unincorporated enterprise.
  27. "Principal court" means the superior court of the county where the registered office of a financial institution is located or, in the case of a proposed financial institution, will initially be located, as shown in its articles or application for authority to commence business. Whenever under this chapter the principal court is authorized to take any action but lacks, because of constitutional restrictions, jurisdiction or venue over the person or corporation against which such action is to be taken or over the subject matter which is to be affected by its action, then such action may be taken by the superior court of this state in which jurisdiction and venue are proper or, in the absence of any such court, by a court of another state, a federal court, or a court of a foreign country in which jurisdiction and venue are proper.
  28. "Public body" means an agency, authority, board, commission, instrumentality, or similar entity which is part of or connected with the government or political subdivision referred to in the context.
  29. "Public sale" means a sale:
    1. Held at a place reasonably available to persons who might desire to attend and submit bids;
    2. At which those attending shall be given the opportunity to bid on a competitive basis;
    3. At which the sale, if made, shall be made to the highest and best bidder; and
    4. Except as otherwise provided in Title 11 for advertising or dispensing with the advertising of public sales, of which notice is given by advertisement once a week for two weeks in the newspaper in which the sheriff's advertisements are published in the county where the sale is to be held, and which notice shall state the day and hour, between 9:00 A.M. and 5:00 P.M., and the place of sale and shall briefly identify the goods to be sold.

    (29.5) "Registered agent" means the person or corporation on whom service of process is to be made in a proceeding against a bank. Written notice of any change in the identity or address of a bank's registered agent must be delivered to the Department of Banking and Finance in addition to and at the same time as such notice is filed with the Secretary of State. The provisions of Part 1 of Article 5 of Chapter 2 of Title 14 shall apply to any such registered agent.

  30. "Registered office" means the location of the registered agent and may be a banking location.

    (30.5) "Retained earnings" means the balance of the net profits, income, gains, and losses from the date of incorporation or from the latest date when a deficit was last eliminated of a financial institution whose articles were granted by the Secretary of State and excludes subsequent distributions to shareholders and transfers to appropriated retained earnings. Retained earnings shall also include any portion of paid-in capital or appropriated retained earnings or, in the case of other organizations, equivalent funds, allocated to retained earnings in mergers, consolidations, or acquisitions of all or substantially all of the property or assets of another such financial institution or other organization permitted by law.

  31. "Savings and loan association" means an association created pursuant to the Home Owners' Loan Act, 12 U.S.C. Sections 1461-1470, including a federal savings bank.
  32. "Savings bank" means a state chartered bank that has powers no greater than a state bank as provided in this chapter but that may lend and invest in commercial loans in an aggregate amount that does not exceed 50 percent of its total assets. Such bank may elect, subject to department approval, or the department may require that the savings bank comply with selected provisions of the Home Owners' Loan Act that in the judgment and discretion of the department would be consistent with the charter and purpose of the bank. For the purposes of this paragraph, the term "commercial loan" means a loan for business, commercial, corporate, or agricultural purposes.
  33. "Shareholder" means the owner of shares in a financial institution.
  34. "Shares" means the units into which the proprietary interest of the institution is divided.

    (34.1) "State savings and loan association" means a bank which pays interest on substantially all of its depositors' funds and the majority of whose loans are secured by first liens on or other security interest in residential real property or upon the security of its deposits.

  35. "Statutory capital base" means the sum of the common equity tier 1 capital, as defined by applicable federal law, and the allowance of loan and lease losses, as defined by applicable federal law, as reported in the bank's most recent Consolidated Report of Condition and Income; provided, however, that the department may enact regulations to phase in the revision to this definition for those banks that will have a decreased statutory capital base as of July 1, 2017. If significant capital changes occur after the filing of the Consolidated Report of Condition and Income which causes the common equity tier 1 capital to increase or decrease by 5 percent or more, then the statutory capital base will be immediately recalculated at the time of the capital change and it will be effective until the filing of the next Consolidated Report of Condition and Income.
  36. "Subject to check" includes withdrawal or transfer by negotiable or transferable order or authorization even though such order or authorization does not constitute a check under Code Section 11-3-104.
  37. "Subsidiary" means a corporation controlled by a financial institution which owns at least a majority of its voting shares.
  38. "Third-party payment service" means any system employing checks, drafts, computer transmissions, or other techniques by which a depositor may effect payment to third parties.
  39. "Treasury shares" means shares of a financial institution which have been issued, have been subsequently acquired by, and belong to the financial institution otherwise than in a fiduciary capacity and have not been canceled. Such shares shall be deemed to be "issued" but not "outstanding" shares.
  40. "Trust company" means a corporation existing under the laws of this state on April 1, 1975, or organized under this chapter and authorized by law to engage in the business of acting as a fiduciary.

    (Code 1933, § 41A-102, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 1; Ga. L. 1977, p. 730, § 1; Ga. L. 1980, p. 972, § 1; Ga. L. 1981, p. 1566, § 1; Ga. L. 1982, p. 3, § 7; Ga. L. 1982, p. 2496, §§ 1, 2; Ga. L. 1983, p. 493, § 2; Ga. L. 1984, p. 949, § 1; Ga. L. 1985, p. 258, § 1; Ga. L. 1986, p. 458, § 1; Ga. L. 1991, p. 94, § 7; Ga. L. 1995, p. 673, §§ 1, 2; Ga. L. 1996, p. 6, § 7; Ga. L. 1998, p. 795, §§ 1, 2; Ga. L. 2000, p. 174, § 1; Ga. L. 2001, p. 362, § 24; Ga. L. 2001, p. 970, § 1; Ga. L. 2005, p. 826, § 1/SB 82; Ga. L. 2006, p. 72, § 7/SB 465; Ga. L. 2007, p. 502, § 1/SB 70; Ga. L. 2009, p. 86, § 1/HB 141; Ga. L. 2011, p. 518, § 1/HB 239; Ga. L. 2012, p. 775, § 7/HB 942; Ga. L. 2015, p. 344, § 1/HB 184; Ga. L. 2015, p. 996, § 3C-1/SB 65; Ga. L. 2016, p. 390, § 7-1/HB 811; Ga. L. 2017, p. 193, § 1/HB 143.)

The 2015 amendments. The first 2015 amendment, effective July 1, 2015, in paragraph (21), substituted "payment instruments" for "checks" in subparagraph (21)(E), rewrote subparagraphs (21)(I) and (21)(J), and, in subparagraph (21)(K), substituted "Federal credit unions for" for "For" at the beginning and deleted ", 'financial institution' shall also include federal credit unions" following "accounts" at the end; substituted "12 U.S.C. Sections 1461-1470" for "of 1933, 12 U.S.C. Sections 1461-1468" in the middle of paragraph (31); and, in paragraph (32), deleted the comma following "require" and deleted "of 1933" following "Act" in the middle of the second sentence. The second 2015 amendment, effective January 1, 2016, rewrote paragraph (29), which formerly read: " 'Public sale' means a sale as defined in paragraph (31.1) of Code Section 11-1-201."

The 2016 amendment, effective July 1, 2016, in paragraph (7), in the first sentence, inserted "the term" near the middle, deleted "a building and loan association," following "credit union," and substituted "Article 4 of this chapter, but shall" for "Article 4 of this chapter. 'Bank' shall"; substituted "Reserved" for " 'Building and loan association' means such an association as defined in paragraph (1) of subsection (a) and subsections (b) and (c) of Code Section 7-1-770" in paragraph (8); deleted "building and loan associations," following "federal credit unions," in subparagraph (17)(C); substituted "Reserved" for "A building and loan association" in subparagraph (21)(C), rewrote subparagraph (21)(H), and, in subparagraph (21)(K), substituted "safe-deposit" for "safe deposit" and "multiple-party accounts" for "multiple party deposit accounts".

The 2017 amendment, effective June 1, 2017, in paragraph (24), substituted "Reserved." for "'Net assets' means the amount by which the total assets exceed the total debts of a financial institution. Total assets shall include but not be limited to both tangible and intangible assets, including prepaid expenses, prepaid taxes, and accrued income using book values determined in accordance with generally accepted accounting principles applicable to financial institutions. Total assets shall not include intangible assets in the form of good will, core deposit intangibles, or other intangible assets related to the purchase, acquisition, or merger of a bank charter. Total debts shall include all liabilities, other than contingent liabilities, including accrued expenses, deferred or unearned income, and valuation reserves, all determined in accordance with generally accepted accounting principles applicable to financial institutions."; and substituted the present provisions of paragraph (35) for the former provisions, which read: "'Statutory capital base' means the sum of the capital stock, paid-in capital, appropriated retained earnings, and capital debt of a bank or trust company less any amount of good will, core deposit intangibles, or other intangible assets related to the purchase, acquisition, or merger of a bank charter or accumulated deficit (negative retained earnings).".

Editor's notes. - The Georgia Business Development Corporation Act of 1972, referred to in subparagraph (21)(F) of this section, was enacted by Ga. L. 1972, p. 798, and repealed by Ga. L. 1974, p. 705, § 3(k). The International Bank Agency Act, referred to in subparagraph (21)(G) of this section, was enacted by Ga. L. 1972, p. 1140, and repealed by Ga. L. 1974, p. 705, § 3(j).

Ga. L. 1983, p. 493, § 1, not codified by the General Assembly, provides that: "It is the intent of this Act to implement certain changes required by Article III, Section VI, Paragraph V(a) of the Constitution of the State of Georgia."

Ga. L. 2015, p. 996, § 1-1/SB 65, not codified by the General Assembly, provides:

"(a) This Act shall be known and may be cited as the 'Debtor Creditor Uniform Law Modernization Act of 2015.'

"(b) To promote consistency among the states, it is the intent of the General Assembly to modernize certain existing uniform laws promulgated by the Uniform Law Commission affecting debtor and creditor rights, responsibilities, and relationships and other federally recognized laws affecting such rights, responsibilities, and relationships."

Administrative Rules and Regulations. - Agency relationship of financial institutions, Official Compilation of Rules and Regulations of State of Georgia, Department of Banking and Finance, Banks, Chapter 80-1-2.

Law reviews. - For survey article on commercial law, see 34 Mercer L. Rev. 31 (1982). For article, "Business Associations," see 53 Mercer L. Rev. 109 (2001).

JUDICIAL DECISIONS

Editor's notes. - In light of the similarity of the statutory provisions, decisions under former Ga. L. 1919, p. 135 are included in the annotations for this Code section.

Corporation did not meet definition of person. - Corporation was not an eligible "payable on death" (POD) beneficiary on certificates of deposit or a trust account because under O.C.G.A. § 7-1-810(11) , a POD payee on a death account had to have been a person, and under § 7-1-810(2) , a beneficiary on a trust account had to have been a person; under O.C.G.A. § 7-1-4(26) , a "person" was defined as an individual, trust, general or limited partnership, unincorporated association (except a joint-stock association), or any other form of unincorporated enterprise. Thus, the corporation did not meet the statutory definition of person. Tuvim v. United Jewish Cmtys., Inc., 285 Ga. 632 , 680 S.E.2d 827 (2009).

Issuance of passbook. - Deposit is or is not, according to agreement, subject to check on bank with which the deposit was actually placed, and may or may not bear interest, and may be or may not be payable on demand. Issuance of a passbook is not conclusive evidence, but is material on the question whether the transaction is simply that of a borrower and lender in the ordinary sense or that of a deposit. Citizens Bank v. Mobley, 166 Ga. 543 , 144 S.E. 119 (1928), (decided under former GA. L. 1919, p. 135).

Execution and delivery of certificates of deposit. - In suit by depositor against bank, upon certificates of deposit issued by bank to depositor or depositor's agent, depositor made prima facie case of liability by proof of execution and delivery of certificates as alleged. Bank of Emanuel v. Hall, 33 Ga. App. 358 , 126 S.E. 728 , cert. denied, 33 Ga. App. 828 (1925), (decided under former Ga. L. 1919, p. 135).

OPINIONS OF THE ATTORNEY GENERAL

"Receiving deposits". - Arrangement by which business corporation would receive money from individuals and in return issue to the individuals the corporation's debt securities redeemable by negotiable checks would involve "receiving deposits" within the meaning of O.C.G.A. § 7-1-4(7) , and only persons or entities authorized to engage in the banking business by O.C.G.A. § 7-1-241 may lawfully engage in such arrangements. 1982 Op. Att'y Gen. No. 82-68.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, , Banks and Financial Institutions, §§ 1, 13, 14, 146, 147, 176 et seq., 308, 328, 711 et seq. 18 Corporations, §§ 1-4, 28 to 41, 55. 11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1017 et seq., 1032, 1034, 1046 et seq. 18A Am. Jur. 2d, Corporations, §§ 199, 276, 431, 445, 728. 18B Am. Jur. 2d, Corporations, § 1197. 19 Am. Jur. 2d, Corporations, §§ 2150-2152.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 2, 3, 172, 269-271, 276, 499, 599, 625. 12 C.J.S., Building and Loan Associations, Savings and Loan Associations, and Credit Unions, § 1 et seq. 18 C.J.S., Corporations, 1 et seq. 19 C.J.S., Corporations, § 719 et seq.

ALR. - What is a bank or banking corporation within exemption provision of Bankruptcy Act, 97 A.L.R. 1087 .

What are "financial corporations" or "moneyed institutions" within state tax laws, 145 A.L.R. 354 .

Maintenance of computer terminal in retail store for purpose of effecting transfer of funds between financial institution and its depositors as conduct of banking business by store, 73 A.L.R.3d 1282.

7-1-5. Unauthorized activity as a financial institution.

Whenever it shall appear to the department that any person or corporation is conducting business as a financial institution without authority pursuant to this chapter, the department may determine, for purposes of Parts 4, 7, 8, and 9 of this article, that such person or corporation is a financial institution as defined in paragraph (21) of Code Section 7-1-4.

(Code 1933, § 41A-410, enacted by Ga. L. 1978, p. 1717, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 3.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 20, 21, 792.

7-1-6. Notices; waivers of notice.

Except as otherwise expressly provided:

  1. Any notice required to be given under this chapter may be delivered in person or by first-class mail or statutory overnight delivery to the last known address of the person or corporation or to the registered office of the corporation. If the notice is sent by first-class mail or statutory overnight delivery, it shall be deemed to have been given when deposited in the United States mail or with a commercial firm regularly engaged in the business of document delivery;
  2. In addition to the methods of notice provided for in paragraph (1) of this Code section, notice of meetings, including annual and special meetings, may be delivered by electronic transmission, including but not limited to e-mails, pursuant to Code Section 14-2-141;
  3. If such notice is of a meeting, it shall specify the place, day, and hour of the meeting. Notice of a meeting of shareholders shall be given not less than ten nor more than 60 days before the meeting. Notice of a special meeting shall specify the general nature of the business to be transacted;
  4. Any written notice required to be given under this chapter need not be given if there is a waiver thereof in writing signed by the person or on behalf of the corporation entitled to such notice or by their proxy, whether before or after the time when the notice would otherwise be required to be given, provided that no such waiver shall apply by its terms to more than one required notice;
  5. Attendance of a person, either in person or by proxy, at any meeting shall constitute a waiver of notice of such meeting, except where a person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting was not lawfully called or convened; and
  6. If the language of a proposed resolution or a proposed plan requiring approval by shareholders is included in a written notice of a meeting of shareholders, the shareholders' meeting considering the resolution or plan may adopt it with such clarifying or other amendments as do not enlarge its original purpose without further notice to shareholders not present in person or by proxy.

    (Code 1933, § 41A-107, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2005, p. 826, § 2/SB 82; Ga. L. 2006, p. 72, § 7/SB 465; Ga. L. 2015, p. 344, § 2/HB 184; Ga. L. 2018, p. 214, § 1/HB 780.)

The 2015 amendment, effective July 1, 2015, in paragraph (1), substituted "or statutory overnight delivery" for ", or by telegram, charges prepaid," in the middle of the first sentence, and, in the second sentence, substituted "first-class mail or statutory overnight delivery" for "mail or by telegraph" near the beginning, and substituted "commercial firm regularly engaged in the business of document delivery;" for "telegraph office." at the end; added paragraph (2); added the paragraph (3) designation; and redesignated former paragraphs (2) through (4) as present paragraphs (4) through (6), respectively.

The 2018 amendment, effective May 3, 2018, inserted "or" following "in person" in the first sentence of paragraph (1). See Editor's notes for applicability.

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

RESEARCH REFERENCES

Am. Jur. 2d. - 18A Am. Jur. 2d, Corporations, § 977 et seq. 18B Am. Jur. 2d, Corporations, § 1370.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 50, 51, 168.

7-1-7. Publication of notices or advertisements.

  1. Except as otherwise expressly provided, any notice or advertisement required by this chapter to be published in a newspaper shall be published once a week for four weeks in the newspaper which is, on the date of the first such publication, the official organ (as determined pursuant to Code Section 9-13-142) of the county which is or is to be the location of the main office of the financial institution.
  2. The department may waive or modify any requirement to publish a notice:
    1. In order to facilitate a merger, consolidation, or sale of assets when one of the parties is a failed or failing bank as determined by the commissioner;
    2. Whenever it determines that the public benefit is not significantly served by a second or subsequent publication in a situation where a series of transactions would otherwise require multiple publications;
    3. Where a similar publication required by another state or federal regulator serves substantially the same purpose;
    4. By regulation or order, whenever it determines that a lesser number of publications will reduce administrative burden and will adequately serve the public benefit of the notice; or
    5. For other reasons of regulatory parity.
  3. The department may require proof of publication or modified publication having been completed prior to consummation of the underlying transaction.

    (Code 1933, § 41A-108, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1980, p. 972, § 2; Ga. L. 1987, p. 1586, § 1; Ga. L. 1995, p. 673, § 3; Ga. L. 1998, p. 795, § 3; Ga. L. 2000, p. 136, § 7; Ga. L. 2000, p. 174, § 2.)

Code Commission notes. - The amendment (enactment) of this Code section by Ga. L. 2000, p. 136, § 7, irreconcilably conflicted with and was treated as superseded by Ga. L. 2000, p.174, § 2. See County of Butts v. Strahan, 151 Ga. 417 (1921).

Administrative Rules and Regulations. - Notification of filing and protest, Official Compilation of Rules and Regulations of State of Georgia, Department of Banking and Finance, Banks, Rule 80-1-1-.04.

RESEARCH REFERENCES

Am. Jur. 2d. - 18A Am. Jur. 2d, Corporations, § 977 et seq. 18B Am. Jur. 2d, Corporations, § 1460.

C.J.S. - 19 C.J.S., Corporations, § 802 et seq.

7-1-8. Applicability of common law.

Unless expressly or impliedly displaced by this chapter, general principles of common law shall apply to financial institutions.

(Code 1933, § 41A-109, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-9. Reservation of power over financial institutions.

The General Assembly shall at all times have power to prescribe such regulations, provisions, and limitations as it may deem advisable, which regulations, provisions, and limitations shall be binding upon financial institutions that are subject to this chapter. The General Assembly shall have the power to amend, repeal, or modify this chapter at pleasure.

(Code 1933, § 41A-110, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 20.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 5, 7.

7-1-10. Rules of construction.

  1. The rules of statutory construction contained in Chapter 3 of Title 1 shall apply to this title.
  2. Unless otherwise specifically indicated and to the full extent permitted by the Constitution of Georgia, any reference in this title to an existing statute or regulation shall mean to such statute or regulation as has been or may in the future be amended or have material added to it. If in any case such construction is not constitutionally permissible, such reference shall mean to the statute or regulation as it existed on July 1, 2016.
  3. Any reference in this title to an action by a superior court or other court shall authorize a judge of such court to take such action in term or in vacation, whether present in the county or absent from it.

    (Code 1933, § 41A-105, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 7-2/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted "title" for "chapter" throughout this Code section; and substituted "July 1, 2016" for "April 1, 1975" in the last sentence of subsection (b).

7-1-11. Registration of nonresident corporations.

Repealed by Ga. L. 2016, p. 390, § 2-1/HB 811, effective July 1, 2016.

Editor's notes. - Ga. L. 2017, p. 774, § 7/HB 323, part of an Act to revise, modernize, and correct the Code, repealed the reservation of this Code section.

This Code section was based on Code 1981, § 7-1-11 , enacted by Ga. L. 1987, p. 1586, § 2; Ga. L. 2015, p. 693, § 3-5/HB 233.

PART 2 O RGANIZATION AND PERSONNEL OF DEPARTMENT OF BANKING AND FINANCE

7-1-30. Department created.

There is created the Department of Banking and Finance.

(Ga. L. 1919, p. 135, art. 2, § 1; Code 1933, § 13-301; Ga. L. 1972, p. 1015, § 1101; Ga. L. 1972, p. 1198, § 2.)

7-1-31. Position and term of commissioner.

  1. The head of the department shall be the commissioner who shall exercise supervision and control over all divisions and employees of the department.
  2. The commissioner shall be appointed by the Governor, by and with the advice and consent of the Senate, for a four-year term. The initial term of the commissioner shall terminate on January 20, 1976. Each succeeding term of office shall be for four years commencing on the expiration date of the previous term. Beginning July 1, 1999, the salary of the commissioner shall be set by the Governor.

    (Ga. L. 1919, p. 135, art. 2, § 2; Code 1933, § 13-302; Ga. L. 1972, p. 1015, §§ 1101, 1102; Ga. L. 1972, p. 1198, §§ 2, 3; Code 1933, § 41A-201, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1999, p. 910, § 1; Ga. L. 1999, p. 1213, § 1.)

Editor's notes. - The amendment of this Code section by Ga. L. 1999, p. 910, § 1, was superseded by the amendment by Ga. L. 1999, p. 1213, § 1.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 104.

C.J.S. - 9 C.J.S., Banks and Banking, § 139.

7-1-32. Qualifications of commissioner.

The commissioner shall be of good moral character, shall not have been convicted in any court of competent jurisdiction of any crime involving moral turpitude, shall have been a citizen of this state for not less than three years, and shall have attained the age of 30 years but be less than 70 years. In addition, the commissioner shall have had at least five years' experience as an active officer of a bank or national bank or as an examiner or other officer in a federal or state agency supervising such institutions.

(Ga. L. 1919, p. 135, art. 2, § 4; Code 1933, § 13-304; Code 1933, § 40-3597, enacted by Ga. L. 1972, p. 1015, § 1102; Ga. L. 1972, p. 1198, § 3; Code 1933, § 41A-202, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 104.

C.J.S. - 9 C.J.S., Banks and Banking, § 139.

7-1-33. Removal or suspension of commissioner.

The commissioner may be suspended or removed by the Governor whenever the Governor has in his judgment trustworthy information that the commissioner is insane or has absconded or grossly neglected his duties or is guilty of conduct plainly violative of his duties or the restrictions of Code Section 7-1-37.

(Ga. L. 1919, p. 135, art. 2, § 7; Code 1933, § 13-307; Code 1933, § 41A-203, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 2 Am. Jur. 2d, Administrative Law, § 45 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, § 139.

7-1-34. Vacancy in office of commissioner.

In the event there shall be a vacancy in the office caused by death, resignation, disability, disqualification, suspension, or removal of the commissioner, the senior deputy commissioner of banking and finance previously designated by the commissioner as provided in Code Section 7-1-35 shall exercise the powers and perform the duties of the commissioner until a successor is appointed and qualified to serve for the unexpired term of the commissioner.

(Ga. L. 1919, p. 135, art. 2, § 3; Code 1933, § 13-303; Code 1933, § 41A-204, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1211, § 1; Ga. L. 1997, p. 485, § 2.)

OPINIONS OF THE ATTORNEY GENERAL

Lack of deputy commissioner at time vacancy occurs. - In event of vacancy in office of superintendent of banks (now commissioner of banking and finance), the assistant superintendent (now deputy commissioner) shall act, or if there be none, the Governor shall appoint a superintendent who shall in turn appoint an assistant. 1948-49 Op. Att'y Gen. p. 16.

7-1-35. Deputy commissioners, examiners, and assistants.

  1. The commissioner shall appoint from time to time, with the right to discharge at will, a senior deputy commissioner of banking and finance. The commissioner may appoint additional deputy commissioners as needed. All deputy commissioners shall also be ex officio examiners. The commissioner may appoint such additional examiners and assistants as he or she may need to discharge in a proper manner the duties imposed upon the commissioner by law, subject to any applicable state laws or rules or regulations and within the limitations of the appropriation to the department as prescribed in this chapter. Hiring, promotion, and other personnel policies of the department shall be consistent with guidelines or directives of the state, shall be in writing, and shall be made available upon request to employees of the department.
  2. Within the limitations of its annual appropriation, the department may expend funds pursuant to the authority granted under Article VIII, Section VII, Paragraph I of the 1983 Constitution of Georgia necessary to the recruitment, training, and certification of a professional staff of financial examiners. The department may provide for the participation of examiners in such educational, training, and certification programs as the commissioner deems necessary to the continued qualification and recognition of the professional status of examiners. The department may recognize independent certification of professional qualifications as supplemental to the rules and regulations of the State Personnel Board in considering the personnel actions relative to its examiners.

    (Ga. L. 1919, p. 135, art. 2, §§ 10, 12; Ga. L. 1920, p. 102, § 1; Ga. L. 1922, p. 63, § 1; Code 1933, §§ 13-310, 13-312; Ga. L. 1943, p. 257, § 1; Ga. L. 1945, p. 403, § 1; Ga. L. 1947, p. 673, § 1a; Ga. L. 1949, p. 526, § 1; Ga. L. 1965, p. 540, § 3; Code 1933, § 41A-205, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1986, p. 458, § 2; Ga. L. 1989, p. 1211, § 2; Ga. L. 1996, p. 848, § 1; Ga. L. 1997, p. 485, § 3; Ga. L. 2005, p. 826, § 3/SB 82; Ga. L. 2009, p. 745, § 1/SB 97; Ga. L. 2012, p. 446, § 2-3/HB 642.)

Editor's notes. - Ga. L. 2012, p. 446, § 3-1/HB 642, not codified by the General Assembly, provides that: "Personnel, equipment, and facilities that were assigned to the State Personnel Administration as of June 30, 2012, shall be transferred to the Department of Administrative Services on the effective date of this Act." This Act became effective July 1, 2012.

Ga. L. 2012, p. 446, § 3-2/HB 642, not codified by the General Assembly, provides that: "Appropriations for functions which are transferred by this Act may be transferred as provided in Code Section 45-12-90."

OPINIONS OF THE ATTORNEY GENERAL

Classification of position. - Position of deputy commissioner of banking and finance is a position of unclassified service within the State Merit System. 1975 Op. Att'y Gen. No. U75-57.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 104.

C.J.S. - 9 C.J.S., Banks and Banking, § 139.

7-1-36. Oath of commissioner, deputy commissioner, and examiners.

  1. Before entering office, the commissioner shall take an oath before the Governor or one of the Justices of the Supreme Court to support the Constitution of the United States and the Constitution of Georgia and to execute faithfully the duties of his or her office, which oath shall be in writing and subscribed to by the commissioner and filed in the Governor's office. Before entering their respective offices, each deputy commissioner and examiner shall take an oath of office before the commissioner to support the Constitution of the United States and the Constitution of Georgia and to execute faithfully the duties of their respective offices which shall be in writing and subscribed by the deputy commissioner or examiner and filed with the department.
  2. The commissioner, each deputy commissioner, and each examiner shall:
    1. Faithfully discharge, execute, and perform all and singular the duties required of such officer and which may be required by the Constitution and laws of the State of Georgia;
    2. Faithfully account for all moneys that may be received by such officer from time to time by virtue of his office; and
    3. Safely deliver to the successor of such office all books, moneys, vouchers, accounts, and effects whatever belonging to said office.

      (Ga. L. 1919, p. 135, art. 2, §§ 6, 11; Code 1933, §§ 13-306, 13-311; Code 1933, § 41A-206, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1984, p. 22, § 7; Ga. L. 1989, p. 1211, § 3; Ga. L. 2016, p. 390, § 1-1/HB 811; Ga. L. 2017, p. 774, § 7/HB 323.)

The 2016 amendment, effective July 1, 2016, rewrote this Code section.

The 2017 amendment, effective May 9, 2017, part of an Act to revise, modernize, and correct the Code, revised punctuation in the first sentence of subsection (a).

Code Commission notes. - Pursuant to Code Section 28-9-5, in 2016, a period was added following "Governor's office" at the end of the first sentence of subsection (a).

JUDICIAL DECISIONS

Liability of commissioner. - In a suit against the superintendent of banks (now commissioner of banking and finance), and surety on the superintendent's bond for loss suffered by depositor by the superintendent's failure to discover insolvency of certain savings and loan company, the superintendent could not be held civilly liable for the superintendent's erroneous judgment that the superintendent had no supervisory powers over the corporation unless facts were alleged to show that the superintendent's judgment was willful, malicious, fraudulent, and corrupt. Gormley v. State, 54 Ga. App. 843 , 189 S.E. 288 (1936).

Stockholders have no recourse against commissioner. - Director of bank, and not superintendent of banks (now commissioner of banking and finance), is in charge of business and stockholders of a failed bank have no recourse against the superintendent of banks, or the superintendent's bond, because of the mismanagement of the directors and officers. Hill v. Fidelity & Deposit Co., 44 F.2d 624 (N.D. Ga. 1930).

7-1-37. Restrictions on commissioner, deputy commissioners, and examiners.

  1. Except as provided in subsections (c), (d), and (e) of this Code section, the commissioner, any deputy commissioner, any department employee with financial institution or licensee supervisory responsibilities, or any examiner employed by the department shall not directly or indirectly:
    1. Receive any money or property as a loan from or become indebted to any financial institution or from or to any director, officer, agent, employee, attorney, or subsidiary of a financial institution;
    2. Receive any money or property as a gift from any financial institution or from any director, officer, agent, employee, attorney, or subsidiary of a financial institution, unless consistent with the ethics in government policy of this state;
    3. Give any money or property as a gift to any financial institution or to any director, officer, agent, employee, attorney or subsidiary of a financial institution, unless consistent with the ethics in government policy of this state;
    4. Own any share in or securities of a financial institution or otherwise have an ownership interest in a financial institution; or
    5. Engage in the business of a financial institution.
  2. For purposes of this Code section and subject to subsection (c) of this Code section, the term "financial institution" shall include a bank holding company and any subsidiary of a bank holding company.
  3. Notwithstanding the provisions of subsection (a) of this Code section, the commissioner, any deputy commissioner, any department employee with financial institution or licensee supervisory responsibilities, or examiners employed by the department may borrow money from and otherwise deal with any financial institution or subsidiary thereof existing under the laws of the United States or of any state other than this state, provided the obligee financial institution or subsidiary is not examined or regulated by the department. For the purposes of this subsection, a financial institution shall not be considered regulated solely because it is required to file an exemption from licensing under Code Section 7-1-1001 or solely because it is owned or controlled by another bank or corporation which is or may be examined or regulated by the department. All extensions of credit, including but not limited to such permitted loans, which obligate the commissioner or any deputy commissioner to such a financial institution or subsidiary, directly or contingently by way of guaranty, endorsement, or otherwise, or which renew or modify existing obligations shall be reported by the individual concerned to the Attorney General in writing, within ten days after the execution thereof, showing the nature of the undertaking and the amount and terms of the loan or other transaction. All credit obligations of a similar nature to those set forth above on the part of any other department employee with financial institution or licensee supervisory responsibilities or examiner shall be reported to the commissioner within ten days after the execution thereof.
  4. Nothing in this Code section shall prohibit the commissioner, any deputy commissioner, any department employee with financial institution or licensee supervisory responsibilities, or any examiner of the department from maintaining a deposit in any financial institution, purchasing banking services other than credit services, or owning a single share in a credit union in the ordinary course of business and under rates and terms generally available to other customers of the financial institution. The provisions of this Code section shall not be applicable in the cases of a lender credit card obligation to a financial institution where the maximum outstanding credit may not exceed $10,000.00 nor to any other credit obligation fully secured by the pledge of a deposit account in the lending institution, provided that the financial institution is not within the employee's assigned examination authority and provided the rates and terms of all such obligations are not preferential in comparison to similar obligations of the financial institution's other customers. Such exempt obligations shall, however, be reported as provided in subsection (c) of this Code section, and the employee shall be disqualified from any dealings with the obligee financial institution.
    1. The commissioner, a deputy commissioner, a department employee with financial institution or licensee supervisory responsibilities, or an examiner of the department may be permitted to own securities of a financial institution under any of the following circumstances:
      1. A deputy commissioner, a department employee with financial institution or licensee supervisory responsibilities, or an examiner of the department may own such a security if the security was obtained prior to commencement of employment with the department;
      2. A deputy commissioner, a department employee with financial institution or licensee supervisory responsibilities, or an examiner of the department may own such a security if the ownership of the security was acquired through inheritance; gift; stock split or dividend; merger, acquisition, or other change in corporate structure; or otherwise without specific intent on the part of the employee to acquire the interest; and
      3. The commissioner, a deputy commissioner, a department employee with financial institution or licensee supervisory responsibilities, or an examiner of the department may own such a security if the security is part of an investment fund, provided that, upon initial or subsequent investment by the employee, excluding ordinary dividend reinvestment, the fund does not have invested, or indicate in its prospectus the intent to invest, more than 30 percent of its assets in the securities of one or more Federal Deposit Insurance Corporation insured depository institutions or Federal Deposit Insurance Corporation insured depository institution holding companies and the employee neither exercises control nor has the ability to exercise control over the financial interests held in the fund.
    2. In the case of permissible acquisitions pursuant to subparagraphs (A) and (B) of paragraph (1) of this subsection, the employee shall make a full, written disclosure to the commissioner within 30 days of beginning employment or acquiring the interest. The employee is disqualified from participating in or sharing information regarding any matter or activity that concerns the financial institution. Such disqualification must not, in the judgment of the commissioner, unduly interfere with the employee's duties.
    3. In the event any covered person inadvertently and without intent on his or her part acquires an interest in a security that is not allowed by this subsection, such security shall be disposed of within 90 days of acquisition.
  5. No examiner, which for the purposes of this Code section shall include a supervisor as defined by the department, may examine a financial institution to which he or she is indebted or of which he or she owns securities under the exceptions in subparagraphs (e)(1)(A) and (e)(1)(B) of this Code section, nor may an examiner obtain credit from a financial institution if he or she has examined such financial institution in the preceding 12 months. An examiner who wishes to borrow funds from any financial institution he or she has examined in the past five years must first obtain the written permission of the commissioner. This subsection is included as an additional precaution and is not intended to preclude the operation of any other applicable law or regulation.
  6. The commissioner, any deputy commissioner, any department employee with financial institution or licensee supervisory responsibility, or any examiner shall not directly or indirectly:
    1. Receive any money or property as a loan from any department licensee or any director, officer, agent, employee, or attorney of a department licensee, unless such employee does not examine or exercise supervisory responsibility over that licensee. Any debt owed by a deputy commissioner, department employee with financial institution or licensee supervisory responsibility, or examiner of a department licensee must be reported to the commissioner. Reporting by the commissioner shall be made to the Attorney General;
    2. Receive any money or property as a gift from any department licensee or any director, officer, agent, employee, or attorney of a department licensee, unless consistent with the ethics in government policy of this state;
    3. Give any money or property as a gift to any department licensee or any director, officer, agent, employee, or attorney of a department licensee, unless consistent with the ethics in government policy of this state; or
    4. Engage in the business of a department licensee.
  7. No director, officer, agent, employee, or attorney of a financial institution, individually or in his or her official capacity, shall knowingly participate in a violation of this Code section. However, nothing in this Code section shall restrict the right of the commissioner, any deputy commissioner, any department employee with financial institution or licensee supervisory responsibilities, or any examiner to deal as any other consumer with such director, officer, agent, employee, or attorney in the ordinary course of business in consumer areas of trade or commerce not regulated by the department and under terms and conditions which are not preferential.
  8. The commissioner, any deputy commissioner, any department employee with financial institution or licensee supervisory responsibilities, or any examiner employed by the department who shall violate or participate in a violation of this Code section shall be guilty of a misdemeanor. Violation of this Code section shall be grounds for removal from office.
  9. The commissioner may adopt additional supplementary administrative policies and departmental rules governing ethical conduct and conflicts of interest on the part of employees of the department and providing certain definitions and clarifications to effectuate the purposes of this Code section.

    (Ga. L. 1919, p. 135, art. 2, §§ 4, 10; Ga. L. 1919, p. 135, art. 20, § 6; Code 1933, §§ 13-304, 13-310, 13-9906; Code 1933, §§ 41A-207, 41A-9904, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 2; Ga. L. 1980, p. 919, § 1; Ga. L. 1983, p. 532, § 1; Ga. L. 1985, p. 149, § 7; Ga. L. 1995, p. 673, § 4; Ga. L. 1997, p. 485, § 4; Ga. L. 2002, p. 1220, § 2.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1988, "of this Code section" was added following "subsection (c)" at the end of subsection (d).

Pursuant to Code Section 28-9-5, in 2002, a comma was added following "licensee supervisory responsibilities" near the beginning of subparagraph (e)(1)(C).

RESEARCH REFERENCES

ALR. - Validity and enforceability of agreement with bank officer or employee individually in connection with bank accommodation, 41 A.L.R. 349 .

7-1-38. Commissioner's office expenses.

The commissioner shall be provided with suitable offices and equipment, the expense of which shall be paid by the state in the same manner as the expenses of other offices of the state government are paid.

(Ga. L. 1919, p. 135, art. 2, § 8; Ga. L. 1920, p. 102, § 1; Ga. L. 1925, p. 119, § 1; Code 1933, § 13-308; Ga. L. 1963, p. 369, § 1; Code 1933, § 41A-208, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-39. Seal of department; evidentiary effect.

The department shall adopt an official seal. Any paper executed under the seal of the department shall prima facie be deemed to have been executed by a duly authorized official of the department.

(Code 1933, § 41A-209, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-40. Delegation of authority by commissioner.

  1. Any authority, power, or duty vested in the commissioner or department by a provision of this chapter may be exercised, discharged, or performed by a deputy, assistant, examiner, or employee of the department acting in the commissioner's name and by his delegated authority. In the case of any matters involving the exercise of discretion, the delegation of authority shall be in writing. Any such delegation by the commissioner may be revoked in the same manner in which it was granted.
  2. The commissioner shall be responsible for the official acts of such persons who act in his name and by his authority.

    (Code 1933, § 13-324, enacted by Ga. L. 1973, p. 526, § 2; Code 1933, § 41A-210, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-41. Prescribing fees; payment procedure.

  1. The department may, by regulation, prescribe annual examination fees, license fees, registration fees, and supervision fees to be paid by the institutions and entities assigned to the department by this title for regulation, supervision, licensure, or registration. In addition, the department may, by regulation, prescribe reasonable application and related fees, special investigation fees, hearing fees, mortgage loan fees, and fees to provide copies of any book, account, report, or other paper filed in its office or for any certification thereof or for processing any papers as required by this title. Such fees may vary by type of institution regulated and nature of the work performed.
  2. The department, in its discretion, may require the payment of such fees in any manner deemed to be efficient, including collection through automated clearing-house arrangements or other electronic means, so that the state receives funds no later than the date the payment is required to be made.

    (Code 1933, § 41A-212, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 3; Ga. L. 1996, p. 848, § 2; Ga. L. 2002, p. 1220, § 3.)

7-1-42. Enforcement of payment.

In the event any financial institution shall fail or refuse to pay on demand any amount owed to the department, including, but not limited to, outstanding fees, the department may proceed through the Attorney General to collect the same by action at law.

(Ga. L. 1919, p. 135, art. 3, § 6; Code 1933, § 13-406; Ga. L. 1966, p. 692, § 23; Code 1933, § 41A-213, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 1-2/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted "any amount owed to the department, including, but not limited to, outstanding fees" for "the amount fixed as fees for examinations" in this Code section.

7-1-43. Disposition of fees collected; payment of expenses from appropriations.

Fees prescribed by this chapter shall be collected by the department and deposited with the Office of the State Treasurer. The department may, at its discretion, remit such amounts net of the cost of recovery, which cost may include fees paid to a collection agency or attorney for recovery of moneys due the department. All of the expenses incurred in connection with the conduct of the business of the department shall be paid out of the appropriations of funds to the department by the General Assembly. Such expenses shall include all expenses incurred as travel expenses by personnel of the department when away from their official station as assigned by the commissioner.

(Ga. L. 1919, p. 135, art. 2, §§ 13, 14; Code 1933, § 13-313; Code 1933, § 13-305, enacted by Ga. L. 1965, p. 540, § 1; Code 1933, § 41A-211, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1995, p. 673, § 5; Ga. L. 2003, p. 843, § 1; Ga. L. 2010, p. 863, § 2/SB 296.)

PART 3 O PERATIONS OF DEPARTMENT OF BANKING AND FINANCE

Law reviews. - For note discussing the interrelationship between the International Banking Act, the provisions of the Financial Institutions Code relating to domestic banking, and the Foreign Corporations Chapter of the Corporation Code in the regulation of international banking in Georgia and comparing Georgia provisions with those of New York and California, see 27 Mercer L. Rev. 827 (1976).

7-1-60. General scope of supervision.

Except where otherwise specifically provided, the department shall enforce and administer all laws of this state relating to financial institutions and shall exercise general supervision over financial institutions in accord with the underlying objectives of this chapter.

(Code 1933, § 41A-301, enacted by Ga. L. 1974, p. 705, § 1.)

Law reviews. - For article, "Business Associations," see 53 Mercer L. Rev. 109 (2001). For review of 1996 banking and finance legislation, see 13 Ga. St. U.L. Rev. 1.

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, §§ 11 et seq., 137.

7-1-61. Rules and regulations.

  1. The department shall have the authority to promulgate rules and regulations to effectuate the objectives or provisions of this chapter. Without limiting the generality of the foregoing, the department is expressly authorized to make rules and regulations, consistent with this chapter, relating to organization, operations, and powers of financial institutions to:
    1. Enable financial institutions existing under the laws of this state to compete fairly with financial institutions and others providing financial services in this state existing under the laws of the United States, other states, or foreign governments; or
    2. Protect financial institutions jeopardized or challenged by new economic or technological conditions or by significant changes in the legal environment.
  2. In the exercise of the discretion permitted by this Code section, the commissioner shall consider:
    1. The ability of financial institutions to exercise any additional powers in a safe and sound manner;
    2. The authority of any federally chartered bank, as the term "bank" is defined in Code Section 7-1-621, operating pursuant to federal law, regulation, or authoritative pronouncement;
    3. The powers of other entities providing financial services in this state; and
    4. Any specific limitations on financial institution operations or powers contained in this chapter.
  3. Rules and regulations promulgated by the department may provide for controls, registration, or restrictions reasonably necessary to:
    1. Prevent unfair or deceptive business practices which are prohibited under Code Section 10-1-393;
    2. Prevent deceptive or misleading business practices by financial services providers which may occur by way of alternate delivery systems for the provision of financial products and services such as the Internet or other telecommunication capabilities; or
    3. Prevent or control unfair or deceptive business practices which would operate to the detriment of any competing business or enterprise or to persons utilizing the services of any financial institution, its subsidiary, or affiliate.
  4. All rules and regulations shall be promulgated in accordance with Chapter 13 of Title 50, the "Georgia Administrative Procedure Act," including the requirements for hearing as stated in that chapter. Regulations issued under this or other provisions of this chapter may make appropriate distinctions between types of financial institutions and may be amended, modified, or repealed from time to time.

    (Code 1933, § 41A-302, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1249, § 1; Ga. L. 1995, p. 673, § 6; Ga. L. 1997, p. 485, § 5; Ga. L. 2000, p. 174, § 3; Ga. L. 2005, p. 826, § 4/SB 82; Ga. L. 2015, p. 344, § 3/HB 184.)

The 2015 amendment, effective July 1, 2015, deleted former subsection (e), which read: "(e) To provide parity with other federally insured financial institutions, the commissioner may, by specific order directed to an individual financial institution or category of financial institutions, modify or amend the following qualifying or limiting requirements imposed on financial institutions by this chapter:

"(1) Collateral requirements and limits on the amount of obligations owing to it from any one person or corporation;

"(2) Loan to value or other limitations in lending;

"(3) Limitations on the amount of investments in stock or other capital securities of a corporation or other entity;

"(4) Limitations on the amount of bank acceptances to be issued; and

"(5) If Georgia law has been determined to be federally preempted, other limitations or restrictions on financial institutions contained in this chapter.

"No such order will be issued unless the commissioner determines that such activity will not present undue safety and soundness risks to the financial institution or institutions involved. In making such a determination, the commissioner shall consider the financial condition and regulatory safety and soundness ratings of the institution or institutions affected and the ability of management to administer and supervise the activity. Any such order pursuant to this subsection will be available for public review."

Administrative Rules and Regulations. - Investment securities, Official Compilation of Rules and Regulations of State of Georgia, Department of Banking and Finance, Banks, Chapter 80-1-4.

Borrowed money, Official Compilation of Rules and Regulations of State of Georgia, Department of Banking and Finance, Banks, Chapter 80-1-9.

Public disclosure of information, Official Compilation of Rules and Regulations of State of Georgia, Department of Banking and Finance, Banks, Chapter 80-1-11.

RESEARCH REFERENCES

Am. Jur. 2d. - 2 Am. Jur. 2d, Administrative Law, § 52.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 10 et seq., 137. 73 C.J.S., Public Administrative Law and Procedure, §§ 112 et seq., 139.

7-1-61.1. Expansion of power for banks and credit unions; role of commissioner; documentation to legislative committees.

  1. For purposes of this Code section, the term "power" means any banking or corporate power, right, benefit, privilege, or immunity of a financial institution, the deposits of which are federally insured, as set forth in any federal statute or any regulation, ruling, circular, bulletin, order, or interpretation issued by the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, National Credit Union Administration, or Federal Reserve System.
  2. To provide parity with financial institutions whose deposits are federally insured, the commissioner may, by specific order directed to a category of banks or credit unions, grant any power conferred upon a financial institution, subject to the supervision of the federal government, to:
    1. State chartered banks and credit unions to enable such banks and credit unions to compete; and
    2. Subsidiaries of state chartered banks and credit unions to the same extent powers are granted to subsidiaries of national banks or federal credit unions to enable such subsidiaries of state chartered banks and credit unions to compete.
  3. No order provided for in subsection (b) of this Code section shall be issued unless the commissioner determines that such activity will not present undue safety and soundness risks to the banks or credit unions involved. In making such determination, the commissioner shall consider the financial condition and regulatory safety and soundness ratings of the banks or credit unions affected and the ability of management to administer and supervise the activity. The department shall make any order issued pursuant to this Code section available for public review.
  4. No later than ten days after the issuance of any order by the commissioner pursuant to this Code section, the commissioner shall provide a copy of such order to the chairpersons of the House Committee on Banks and Banking and Senate Banking and Financial Institutions Committee. (Code 1981, § 7-1-61.1 , enacted by Ga. L. 2015, p. 344, § 4/HB 184; Ga. L. 2018, p. 214, § 2/HB 780.)

Effective date. - This Code section became effective July 1, 2015.

The 2018 amendment, effective May 3, 2018, substituted "directed to a category" for "directed to an individual bank or credit union or category" in the introductory paragraph of subsection (b); and added subsection (d). See Editor's notes for applicability.

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

7-1-62. Accounting procedures.

The department may promulgate regulations concerning the manner in which the books of financial institutions will be maintained in order to assist the department in its examinations and other supervisory activities, provided that, in all events:

  1. A financial institution shall enter on its books a complete and accurate account of all of its assets, whether the assets are in its name or the name of others, at values which shall not, without the prior approval of the department, exceed the actual cost of the assets to the financial institution; and
  2. A financial institution shall enter on its books a complete and accurate account of its liabilities, its borrowings, and the security interests it has granted and shall maintain additional accounts for losses and expenses.

    (Code 1933, § 41A-303, enacted by Ga. L. 1974, p. 705, § 1.)

Cross references. - Authority of department to issue orders requiring financial institutions to open and keep such books as will allow the department to ascertain true conditions of financial institutions, § 7-1-91 .

7-1-63. Retention of records.

  1. The department shall issue regulations classifying records kept by financial institutions and prescribing the period, if any, for which records of each class shall be retained and the form in which such records shall be maintained. Such periods may be permanent or for a lesser term of years. In issuing such regulations, consideration shall be given to the objectives of this chapter and to:
    1. Evidentiary effect in actions at law and administrative proceedings in which the production of records of financial institutions might be necessary or desirable;
    2. State and federal statutes of limitation applicable to such actions or proceedings;
    3. Availability of information contained in the records of the financial institution from other sources;
    4. Requirements of electronic systems of transferring funds; and
    5. Other pertinent matters;

      so that financial institutions will be required to retain records for as short a period as is commensurate with interests of customers, shareholders, and the people of this state.

  2. The regulations of the department shall not require financial institutions to maintain originals of checks or items for the payment of money or original computer tapes or original records with respect to accounts which have been inactive for a period of 12 successive months. Where a financial institution employs computers, its records may consist of legible products of computer operations.

    (Ga. L. 1953, p. 70, § 3; Ga. L. 1966, p. 692, §§ 45-47; Code 1933, § 41A-304, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 4; Ga. L. 2011, p. 99, § 4/HB 24.)

Cross references. - Hearsay rule exceptions, § 24-8-803 .

Self authentication, § 24-9-902 .

Public records, § 24-10-1005 .

Editor's notes. - Ga. L. 2011, p. 99, § 101/HB 24, not codified by the General Assembly, provides that this Act shall apply to any motion made or hearing or trial commenced on or after January 1, 2013.

Law reviews. - For article, "Evidence," see 27 Ga. St. U.L. Rev. 1 (2011).

JUDICIAL DECISIONS

Applicability. - O.C.G.A. § 7-1-63 was not applicable in an action alleging that a bank improperly cashed certificates of deposit and a savings account. Emmett v. Regions Bank, 238 Ga. App. 455 , 518 S.E.2d 472 (1999).

7-1-64. Department examinations and investigations; disclosure of information or prior notice regarding examinations of financial institutions.

  1. Except as otherwise provided in subsection (b) of this Code section, the department shall examine all financial institutions at least once each year and may examine or investigate any financial institution more frequently at any time it deems such action necessary or desirable. At least once annually the examination shall consist of a comprehensive review of the accounts, records, and affairs of the institution.
  2. The department may, consistent with the objectives of this chapter and the purposes listed below, alter the examination frequency and scope as set out in subsection (a) of this Code section:
    1. To achieve cooperation and coordination with other state and federal regulatory authorities including but not limited to examination programs of banks or bank holding companies having multistate operations;
    2. To assure that appropriate time and attention are devoted to the supervision of troubled financial institutions; or
    3. To minimize the examination burden on well-managed financial institutions which have consistently been operated with safe and sound banking practices.
  3. In the case of a financial institution which is a member of the Federal Reserve System or whose deposits are insured by a public body of the United States, the department may accept, in lieu of any examination required by this Code section, examinations or reports thereof made pursuant to the Federal Reserve Act or statutes of the United States authorizing such insurance.
  4. Employees of the department shall not divulge any information or provide prior notice, directly or indirectly, to any officer, director, agent, representative, or employee of a financial institution concerning the time or date of examination of the financial institution except in accordance with internal policy prescribed by the commissioner. Employees violating the policy of the commissioner relating to information or prior notice concerning examinations shall be subject to immediate dismissal.

    (Ga. L. 1919, p. 135, art. 3, §§ 1, 2; Ga. L. 1925, p. 165, § 10; Ga. L. 1927, p. 344, § 3; Code 1933, §§ 13-401, 13-402, 25-122, 109-503; Ga. L. 1935, p. 114, § 1; Ga. L. 1937-38, Ex. Sess., p. 307, § 5; Ga. L. 1943, p. 279, § 1; Ga. L. 1945, p. 253, §§ 1, 2; Ga. L. 1956, p. 742, § 4; Ga. L. 1960, p. 977, § 1; Ga. L. 1960, p. 1175, § 1; Ga. L. 1962, p. 74, § 3; Ga. L. 1966, p. 692, §§ 18, 19; Ga. L. 1968, p. 465, § 8; Code 1933, § 41A-305, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1366, § 1; Ga. L. 1995, p. 673, § 7; Ga. L. 1997, p. 485, § 6.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1995, "are" was substituted for "is" in paragraph (b)(2).

U.S. Code. - The Federal Reserve Act, referred to in subsection (c) of this Code section, is codified generally throughout 12 U.S.C. See 12 U.S.C. § 226.

JUDICIAL DECISIONS

Liability of commissioner. - In a suit against the superintendent of banks (now commissioner of banking and finance), and surety on the superintendent's bond for loss suffered by the depositor by the superintendent's failure to discover insolvency of certain savings and loan companies, the superintendent could not be held civilly liable for the superintendent's erroneous judgment that the superintendent had no supervisory powers over the corporation unless facts were alleged to show that the superintendent's judgment was willful, malicious, fraudulent, and corrupt. Gormley v. State, 54 Ga. App. 843 , 189 S.E. 288 (1936).

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, § 1192, 1194.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 11 et seq., 137.

ALR. - Use or publication of reports of, or information obtained by, bank examiners, as affected by their alleged confidential character, 123 A.L.R. 1278 .

7-1-65. Examinations and investigations on request.

When requested in writing by the board of directors or holders of a majority of the shares of a financial institution, the department, at a time fixed by it, shall examine or investigate the affairs and condition of the financial institution. However, this provision shall not be construed to mean that such institution, directors, or shareholders shall have any greater right to require the department to disclose the results of such examination or investigation than they have in case of any examination or investigation at the insistence of the department nor shall the department be required under this Code section to make more than one examination per year of any financial institution.

(Code 1933, § 41A-306, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

ALR. - Use or publication of reports of, or information obtained by, bank examiners, as affected by their alleged confidential character, 123 A.L.R. 1278 .

7-1-66. Method of examination and investigations; special examiners; subpoenas.

  1. Examinations and investigations shall be made by the commissioner or by qualified examiners or employees empowered in writing by the department to make examinations or investigations. The department may, when the occasion requires, appoint special examiners and prescribe their duties and powers.
  2. Officials authorized to make examinations or investigations shall have the power and authority to administer oaths and to examine under oath any person (including any officer, director, agent, attorney, member, or employee of any financial institution) whose testimony may be relevant to the examination or investigation. Such officials shall have the authority and power to compel the appearance and attendance of any such person and the production by such person of pertinent books and papers, including books and papers to which the person has access because of his position with a financial institution, and for such purposes shall have the authority to issue a subpoena requiring the appearance and attendance of any such person or for the production of any pertinent books and papers.
  3. If any person shall fail or refuse to obey an order or subpoena issued by the department, a court of appropriate jurisdiction, upon application by the department, may issue an order requiring such person to appear before the court to show cause as to why he or she should not be adjudged in contempt and punished accordingly for refusal to obey the subpoena.

    (Ga. L. 1919, p. 135, art. 2, § 18; Ga. L. 1919, p. 135, art. 3, § 3; Ga. L. 1919, p. 135, art. 20, § 1; Code 1933, §§ 13-318, 13-403, 13-9901; Ga. L. 1966, p. 692, § 20; Code 1933, §§ 41A-307, 41A-9903, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1366, § 19; Ga. L. 2017, p. 193, § 2/HB 143.)

The 2017 amendment, effective June 1, 2017, added ", and for such purposes shall have the authority to issue a subpoena requiring the appearance and attendance of any such person or for the production of any pertinent books and papers" immediately preceding the period at the end of the last sentence of subsection (b); and substituted the present provisions of subsection (c) for the former provisions, which read: "If any person shall fail or refuse to appear or to testify or to produce books and papers after being ordered to do so pursuant to this Code section, such failure or refusal may be reported in writing to the principal court; and said court shall thereupon cause a subpoena to be issued requiring such person to attend, testify, and produce books and papers. For failure to obey such subpoena, the person may be adjudged in contempt and punished accordingly.".

Cross references. - Authority of department to issue orders requiring financial institutions to submit records and affairs to legally conducted examinations or investigations by department, § 7-1-91 .

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, § 1192, 1194.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 11 et seq., 137.

ALR. - Bank's liability, under state law, for disclosing financial information concerning depositor or customer, 81 A.L.R.4th 377.

7-1-67. Reports of examinations.

  1. Any official who shall make an examination pursuant to this chapter shall reduce the result thereof to writing in such form as shall be prescribed by the department. Such report shall contain a full, true, and correct statement of the condition of the financial institution in the case of a comprehensive examination or of the matter subject to inquiry in the case of other examinations.
  2. Each report shall be the property of the regulatory agency which generates such report; provided, however, that a copy of such report may be furnished to the examined financial institution for its internal, confidential use. A financial institution or any officer, director, or employee thereof shall not disclose a report or any portion of its contents. If a subpoena or discovery request is received for a report or any portion of its contents, the financial institution must deliver a copy of such subpoena or discovery request to the department immediately.

    (Ga. L. 1919, p. 135, art. 3, § 4; Code 1933, § 13-404; Ga. L. 1966, p. 692, § 21; Code 1933, § 41A-308, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1998, p. 795, § 4.)

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, §§ 11 et seq., 137.

ALR. - Use or publication of reports of, or information obtained by, bank examiners, as affected by their alleged confidential character, 123 A.L.R. 1278 .

7-1-68. Reports to department; penalty for noncompliance.

  1. The department may require reports on the condition of or any particular facts concerning any financial institution at any time the department deems it necessary or advisable.
  2. The form of all reports, the information to be contained in them, and the date on which they shall be due shall be prescribed by the department. The reports shall be verified by the oath or affirmation of the president, secretary, or other managing officer of the institution.
  3. Any financial institution which fails to prepare any report in accordance with this Code section, or fails to provide any facts or information requested under subsection (a) of this Code section, shall pay the department a penalty of $100.00 for each day after the time fixed by the department for filing such report, but the department may, in its discretion, relieve any financial institution from the payment of such penalty, in whole or in part, if good cause be shown. If a financial institution fails to pay a penalty from which it has not been relieved, the department may, through the Attorney General, maintain an action at law to recover it.

    (Ga. L. 1919, p. 135, art. 4, §§ 1, 2, 5; Ga. L. 1920, p. 102, § 1; Ga. L. 1925, p. 165, § 10; Ga. L. 1927, p. 344, § 3; Code 1933, §§ 13-501, 13-502, 25-122, 109-503; Ga. L. 1935, p. 114, § 1; Ga. L. 1937, p. 425, § 1; Ga. L. 1937-38, Ex. Sess., p. 307, § 5; Ga. L. 1943, p. 279, § 1; Ga. L. 1956, p. 742, § 4; Ga. L. 1960, p. 977, § 1; Ga. L. 1960, p. 1175, § 1; Ga. L. 1962, p. 74, § 3; Ga. L. 1968, p. 465, § 8; Code 1933, § 41A-309, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 5; Ga. L. 1981, p. 1366, § 2; Ga. L. 1995, p. 673, § 8; Ga. L. 1998, p. 795, § 5; Ga. L. 2009, p. 86, § 2/HB 141; Ga. L. 2016, p. 390, § 1-3/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted subsection (c), which read: "Every financial institution shall publish annually abstract summaries of two of its reports of condition designated for this purpose by the department and shall file proof of such publication with the department. Such publication shall be made only once in a newspaper of general circulation in the county of the main office of the institution. The department may waive this requirement, in whole or in part, with respect to financial institutions which make their financial statements readily available to the public, including their customer base, and with respect to a class of financial institutions which does not do business with the public generally and may limit the required publication to the customer base served by the institution."; redesignated former subsection (d) as present subsection (c), and, in subsection (c), in the first sentence, deleted "or publish" following "fails to prepare", deleted "or to furnish any proof of publication," following "any report" near the beginning, and deleted "making such publication, or furnishing such proof of publication," following "filing such report," in the middle.

OPINIONS OF THE ATTORNEY GENERAL

Publication required under former Code 1933, § 41A-309 (see now O.C.G.A. § 7-1-68 ) need not be an official organ designated pursuant to former Code 1933, §§ 39-1103 and 39-1107 (see now O.C.G.A. § 9-13-142 ). 1979 Op. Att'y Gen. No. U79-25.

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 28.

ALR. - Use or publication of reports of, or information obtained by, bank examiners, as affected by their alleged confidential character, 123 A.L.R. 1278 .

7-1-69. Retention of reports.

The reports of examinations and investigations made by the department and reports made by financial institutions shall be preserved by the department for a period of five years, after which they may be destroyed.

(Ga. L. 1919, p. 135, art. 2, § 19; Code 1933, § 13-319; Code 1933, § 41A-310, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-70. Disclosure of information.

  1. Records of the department, regardless of the medium by which stored, are confidential. Except as otherwise provided in this Code section, this chapter, or departmental rule or regulation, and, notwithstanding the provisions of Article 4 of Chapter 18 of Title 50, such records shall not be open to inspection by or made available to the public. The commissioner and all other officials and employees of the department shall not disclose facts and information obtained in the course of their duties, including information obtained from examinations, investigations, and reports as required or authorized in this part. The department may, however, provide by rule, regulation, or order for public access to certain records which, in the opinion of the commissioner, do not contain sensitive information and from which disclosure the public would benefit.
  2. Subject to the exceptions, safeguards, and limitations contained in subsection (c) of this Code section, the restrictions of subsection (a) of this Code section shall not apply to disclosures:
    1. Within the department or made to the Governor in the course of official duties;
    2. Required by law, including disclosures required by subpoena or other legal process of a court or administrative agency having competent jurisdiction in legal proceedings and, where applicable, when the financial institution is a party or where the information is not otherwise available upon direct subpoena of a financial institution;
    3. In prosecutions or other court actions to which the department or the commissioner is a party;
    4. Made to federal or state financial institution supervisory agencies, other federal or state regulatory agencies with legal authority over such institution, the United States Department of Justice (including the Federal Bureau of Investigation), the United States Department of the Treasury, the Georgia Bureau of Investigation, or state or local law enforcement authorities;
    5. Made to any officer, attorney, or director of the involved financial institution, made to any officer, attorney, or director of the involved financial institution's holding company, or with the written consent of said financial institution or holding company;
    6. Made in a publication of the department which is available to the general public;
    7. Of general economic and similar data considered by the department in regard to requests for new articles, new branches, changes in the location of facilities, or similar matters made to parties interested in the department's action in regard thereto; and
    8. Made to a financial institution concerning the past job performance of a prospective employee with the written consent of such prospective employee, provided such written consent shall not be required in circumstances provided for in Code Section 7-1-840.
  3. The following exceptions, safeguards, and limitations shall apply:
    1. Disclosures made under subsection (b) of this Code section shall be made, where appropriate, under safeguards designed to prevent further dissemination of confidential data; provided, however, that for disclosures of suspected criminal activity made under paragraph (4) of subsection (b) of this Code section, the confidentiality safeguards already in place within those agencies shall be considered adequate. Except for disclosures under paragraph (2) of subsection (b) of this Code section, the department shall not be required to make authorized disclosures where it deems such disclosures undesirable;
    2. All disclosures shall be limited to only those documents directly relevant to the inquiry or legal dispute at issue; and
    3. The documents listed below shall be considered absolutely privileged and confidential and shall be exempt from open inspection and not subject to disclosure by the department without a specific order of court pursuant to Code Section 7-1-90, which order specifically holds the public interest in the safety and soundness of the banking system and its regulation to be outweighed by other interests of justice. Such exempt documents shall include:
      1. Departmental internal investigations, documents, and notes which reflect the deliberative processes of employees;
      2. Opinions provided in confidence to the department regarding proposed new banks;
      3. Informal notes and memos of the department that are not purely factual in nature;
      4. Advisory opinions;
      5. Recommendations, summaries, and analyses that are utilized for departmental internal purposes and are not final orders or reports; and
      6. Other similar materials or notes.
  4. Notwithstanding any other provision of this Code section, the commissioner may, without waiving any privilege, authorize access to confidential supervisory information for any appropriate governmental, law enforcement, or other public purpose.
  5. Violation of this Code section shall be grounds for removal from office.

    (Code 1933, § 41A-311, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 6; Ga. L. 1982, p. 3, § 7; Ga. L. 1989, p. 1211, § 4; Ga. L. 1998, p. 795, § 6; Ga. L. 2002, p. 1220, § 4; Ga. L. 2003, p. 843, § 2.)

JUDICIAL DECISIONS

Cited in Gwinnett Com. Bank v. Flake, 151 Ga. App. 578 , 260 S.E.2d 523 (1979).

OPINIONS OF THE ATTORNEY GENERAL

Disclosure of deficiencies. - Department of Banking and Finance may report deficiencies uncovered during examination to local officials involved. To withhold knowledge of violations of law from officials who have placed public funds in a bank serves no legitimate interest of the bank and threatens serious injury to the public. 1979 Op. Att'y Gen. No. 79-12.

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, §§ 11 et seq., 137.

ALR. - Use or publication of reports of, or information obtained by, bank examiners, as affected by their alleged confidential character, 123 A.L.R. 1278 .

Bank's liability, under state law, for disclosing financial information concerning depositor or customer, 81 A.L.R.4th 377.

7-1-71. Removal of officers, directors, or employees.

  1. The department, by order of the commissioner, shall have the right to require the immediate suspension from office of any director, officer, or employee of any financial institution and to prohibit any such person's participation in the affairs of any financial institution if the department finds such person:
    1. To be dishonest, incompetent, or reckless in the management of the affairs of the financial institution;
    2. To have persistently violated the laws of this state;
    3. To have violated the lawful orders, regulations, or conditions of a written agreement of or with the department;
    4. To have been indicted for any crime involving moral turpitude or breach of trust;
    5. To have evidenced an inability to conduct his or her own financial affairs or the affairs of a company in which such individual owns a majority interest or has responsibility for financial matters, in a fiscally responsible, diligent, or lawful fashion; or
    6. To have engaged in any unsafe or unsound practice in connection with any insured depository institution or to have demonstrated willful or continuing disregard for the safety and soundness of a financial institution.
  2. A prohibition order, which prohibits an individual from participating in any capacity in the affairs of a financial institution, may be issued by the commissioner in connection with a suspension order issued under the authority of this Code section. Such prohibition order may provide that if an officer, director, or employee has been removed from office temporarily or permanently at a financial institution, he or she may also be prohibited from participating in any manner in the conduct of the affairs of any financial institution or any financial institution's affiliate regulated by the department during the time the prohibition order is in effect.
  3. The department shall serve written notice upon the party of its determination to suspend such person from office or prohibit such person from participating in the affairs of a financial institution pursuant to subsections (a) and (b) of this Code section.  A suspension order or a prohibition order shall be effective upon such service and shall specify whether the suspension is temporary, the duration and terms of the suspension if temporary, or if it is permanent.  The prohibition order shall be consistent in duration with the suspension order.
  4. Any person suspended or prohibited under this Code section may request his or her reinstatement in writing delivered to the department within ten days of his or her suspension or prohibition.  If such reinstatement is not requested, the director, officer, or employee shall be considered permanently removed and, if so ordered, permanently prohibited from participation in the affairs of any financial institution.
  5. Upon request for reinstatement, the department shall conduct an internal review of the matter during which such person has the opportunity to state his or her case to the commissioner.  The department shall deliver the findings of the hearing to such person.  If the person requests further review, the department may refer the matter to the Office of State Administrative Hearings under Chapter 13 of Title 50, the "Georgia Administrative Procedure Act," where a nonpublic hearing shall be held to review the department's decision.  The final decision of the department shall be conclusive, except as it may be subject to judicial review under Code Section 7-1-90.
  6. Any order issued pursuant to this Code section shall also be delivered to the financial institution with which the party was associated at the time such order was issued.

    (Ga. L. 1919, p. 135, art. 5, § 3; Code 1933, § 13-603; Code 1933, § 41A-312, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1983, p. 602, § 1; Ga. L. 1995, p. 673, § 9; Ga. L. 1997, p. 485, § 7; Ga. L. 2005, p. 826, § 5/SB 82; Ga. L. 2006, p. 72, § 7/SB 465; Ga. L. 2018, p. 214, § 3/HB 780.)

The 2018 amendment, effective May 3, 2018, inserted "or any financial institution's affiliate regulated by the department" near the end of the second sentence of subsection (b). See Editor's notes for applicability.

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

RESEARCH REFERENCES

Am. Jur. 2d. - 2 Am. Jur. 2d, Administrative Law, §§ 41, 45, 47 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 11 et seq., 137.

7-1-72. Regulation of persons performing services for financial institutions.

  1. Notwithstanding any other provisions of law to the contrary and consistent with the objectives of this chapter as set forth in Code Section 7-1-3 and subject to the procedures provided in regulations of the department, a financial institution may provide financial services to its customers either directly or through employment of duly licensed persons, provided that such financial institution or its licensed employee or agent has qualified under other laws otherwise applicable to other providers of such financial services.
  2. Where financial services are being performed by a person or corporation for a financial institution, such person or corporation shall be subject to:
    1. Examination and investigation by the department to the same extent as if the services were performed by the financial institution on its own premises;
    2. Regulation by the department in regard to such services to the same extent as if such services were being performed by the financial institution for its own internal benefit or as an extension of the range of financial services products offered to customers of the financial institution; and
    3. All enforcement proceedings made available to the department in this title.
  3. In the event of conflicting statutory responsibilities, except as otherwise provided by law, the department shall not grant licenses to providers of financial services to or through financial institutions. The department shall be the responsible authority in reviewing, authorizing, or otherwise regulating, consistent with this chapter, the contractual relationship entered into by financial institutions for the provision of such services or incidental to application for further licensing.
  4. For purposes of this Code section, "financial services" shall include, but is not limited to, business and consumer financial record keeping, investments, planning and advisory assistance, surety, brokerage, data processing, electronic fund transfers, information services, and protective services performed for a financial institution which are normally performed by the financial institution for its own benefit or provided to the customers of the financial institution incidental to its conduct of the banking business. The department may further define "financial services" to include other activities of a financial nature which it determines to be consistent with the safe and sound operation of a banking business, not otherwise in violation of this chapter, and in the public interest.
  5. The department may, by regulation, prescribe fees to be paid for examinations of a person or corporation that performs financial services for a financial institution.
  6. Notwithstanding Code Section 7-1-70, the department may furnish a copy of any report of a financial service provider prepared by the department to the financial institution serviced by the financial service provider.

    (Code 1933, § 13-411, enacted by Ga. L. 1973, p. 526, § 3; Code 1933, § 41A-313, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 7; Ga. L. 1987, p. 1586, § 3; Ga. L. 2004, p. 458, § 1; Ga. L. 2017, p. 193, § 3/HB 143.)

The 2017 amendment, effective June 1, 2017, in subsection (a), inserted "any" and inserted "to the contrary" near the beginning, and inserted a comma following "licensed persons" and inserted "that" following "provided" in the middle; in subsection (b), substituted "to the same extent as if the services were performed by the financial institution on its own premises;" for "relative to character, reputation, and financial stability; and" in paragraph (b)(1), added "; and" at the end of paragraph (b)(2), and added paragraph (b)(3); substituted "data processing, electronic fund transfers, information services," for "information," in the middle of the first sentence of subsection (d); and added subsections (e) and (f).

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, §§ 5, 7.

7-1-73. Regulation of affiliates.

The department may examine or investigate any affiliate of a financial institution for the purpose of determining the condition of the financial institution to the same extent and in the same manner as it may examine or investigate the financial institution itself.

(Code 1933, § 13-411, enacted by Ga. L. 1973, p. 526, § 3; Code 1933, § 41A-314, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 8.)

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, §§ 5, 7.

7-1-74. Annual report of department.

For each calendar year the department shall compile and publish in print or electronically an annual report in such form and containing such information as it may determine necessary to summarize reasonably its operations. The report may contain recommendations which the department may have for changes in the laws governing financial institutions.

(Ga. L. 1919, p. 135, art. 2, §§ 15, 16, 17; Ga. L. 1919, p. 135, art. 7, § 28; Ga. L. 1920, p. 102, § 1; Ga. L. 1922, p. 63, § 1; Ga. L. 1925, p. 119, § 1; Code 1933, §§ 13-315, 13-316, 13-317; Code 1933, § 41A-315, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1997, p. 485, § 8; Ga. L. 2010, p. 838, § 10/SB 388.)

7-1-75. Discretion of department.

Whenever in this chapter the department is authorized but not required to take any action, the taking of such action shall be within the discretion of the commissioner or his duly authorized deputy. The department shall not be required to grant opportunity for hearing except where such hearing is specifically required by this chapter or Chapter 13 of Title 50, the "Georgia Administrative Procedure Act." The department shall maintain accurate memoranda or transcripts of all hearings conducted by the department pursuant to this Code section.

(Code 1933, § 41A-316, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-76. Department may act after time limit without resubmittal; withdrawal of applications and requests; imposition of conditions; nullification.

  1. Failure of the department to act within any of the time limits established by this chapter or regulations issued pursuant thereto shall not deprive the department of jurisdiction thereafter to act in regard to the matter involved without need for resubmittal of any application, request, or similar action.
  2. Any action, application, or request requiring department approval under this chapter may be withdrawn by the applicant prior to department action thereon without prejudice to the applicant's right to resubmit such application at a later date. If such application has been forwarded to the department through the Secretary of State, the department shall notify the Secretary of State of any such withdrawal and that the application or request is no longer pending.
  3. The department may impose conditions on any approval, including but not limited to conditions designed to address competitive, financial, managerial, safety and soundness, convenience and needs, compliance, and other concerns, to ensure that such approval is consistent with the provisions of this chapter.
  4. The department may nullify a decision on any request, action, or application if:
    1. The department becomes aware of any material misrepresentation or omission by the applicant;
    2. The department is not promptly informed by the applicant of a subsequent material change in circumstances;
    3. The decision is contrary to law, regulation, or departmental policy; or
    4. The decision was granted due to clerical or administrative error or was based on a material mistake of law or fact.

      (Code 1933, § 41A-317, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1998, p. 795, § 7.)

7-1-77. Approval by commissioner of state rules and regulations affecting financial institutions.

Any rule, regulation, order, or administrative directive issued by a state official, agency, or entity which is intended to be applicable to banks, banking associations, bank holding companies, savings and loan associations, credit unions, or companies engaged in selling money orders or any other company or financial institution under the supervision of the commissioner and required to report to the commissioner or subject to rules and regulations issued by the commissioner shall be effective as to any such company or financial institution only after the rule, regulation, order, or other directive has been approved in writing by the commissioner. Nothing in this Code section shall be construed to modify, limit, or otherwise restrict the authority of the department to conduct an examination, bring a civil or administrative action, or otherwise enforce state or federal laws against a financial institution.

(Code 1933, § 41A-318, enacted by Ga. L. 1979, p. 950, § 1; Ga. L. 2016, p. 390, § 7-3/HB 811.)

The 2016 amendment, effective July 1, 2016, in the first sentence, deleted "or federal" following "issued by a state" near the beginning, deleted "building and loan associations and" following "bank holding companies," near the middle, and added the second sentence.

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, §§ 11 et seq., 137.

7-1-78. Agreements with other supervisory or regulatory authorities.

  1. The department may, at its discretion, enter into cooperative or reciprocal agreements with other supervisory or regulatory authorities or law enforcement and may furnish to such entities information contained in the examinations, reports, and institution files, provided that the information is to be used for confidential, regulatory purposes.
  2. Furnishing information as permitted by this Code section shall not be deemed to change the confidential character of the information furnished.
  3. The department may accept reports of examination and other records from such entities in lieu of conducting its own examination.
  4. Any examination reports, reports of investigation, or other information obtained from such entities shall be deemed the property of the providing entity and not available for public review. Any requests for such information shall be made to the providing entity.
  5. The department may take such actions as are reasonably necessary, either independently or with such entities, to facilitate the regulation of financial services providers doing business in this state. (Code 1981, § 7-1-78 , enacted by Ga. L. 1995, p. 673, § 10; Ga. L. 2004, p. 458, § 2; Ga. L. 2015, p. 344, § 5/HB 184.)

The 2015 amendment, effective July 1, 2015, in subsection (a), inserted "supervisory or", inserted "or law enforcement", substituted "entities" for "authorities", and inserted "that"; substituted "entities" for "authorities" in subsection (c); added subsection (d); redesignated former subsection (d) as present subsection (e); and substituted "entities" for "regulatory agencies" in the middle of subsection (e).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 19 et seq.

7-1-79. Discretionary expedited approval process; considerations.

  1. The department may determine that formal approvals for certain transactions or activities to be conducted by its regulated entities are not necessary but may be replaced by a discretionary expedited approval process to begin with written notice to the department by the entity which describes the transaction or activity in a form and with a specificity acceptable to the department. For such instances, the department shall promulgate rules and regulations consistent with the authority provided to it in this chapter.
  2. In the exercise of the discretion permitted by this Code section, the commissioner shall consider:
    1. Whether the transaction or activity poses unacceptable safety and soundness risks;
    2. Whether the transaction or activity is warranted only for financially strong and well-managed institutions, as such institutions are further defined in department regulations;
    3. Whether the transaction or activity is necessary to reduce the burden on financial institutions or other entities which the department regulates;
    4. Whether the transaction or activity will assist regulated entities in remaining competitive and responsive to both economic and consumer demands; and
    5. Whether the transaction or activity is consistent with the objectives of this Code section. (Code 1981, § 7-1-79 , enacted by Ga. L. 1997, p. 485, § 9.)

PART 4 P ROCEEDINGS INVOLVING THE DEPARTMENT OF BANKING AND FINANCE

7-1-90. Judicial review of department actions.

  1. Any final action of the department or refusal of the department to act may be subject to judicial review by any person or corporation affected by such action. Such action shall be brought within 60 days of the final action or refusal of action by the department as a special statutory proceeding in the county in which the affected person or corporation resides or is domiciled if within this state (which in the case of a corporation shall be the county of its registered office if it has such an office) or in Fulton County if the affected person or corporation resides or is domiciled outside of this state. The review shall be conducted by the court without a jury. The court shall not substitute its judgment for that of the department but may:
    1. Compel department action unlawfully withheld; or
    2. Hold unlawful and set aside department action found to be:
      1. In violation of constitutional or statutory provision;
      2. In excess of statutory authority;
      3. Made upon unlawful procedure; or
      4. Arbitrary, capricious, or otherwise in abuse of discretion,

        provided that any action reviewable under Chapter 13 of Title 50, the "Georgia Administrative Procedure Act," or through the injunction procedure of Code Section 7-1-155 shall be reviewed under that chapter or Code section and not under this Code section.

  2. Appeals from all final orders and judgments entered by the superior court under this Code section may be taken to the Court of Appeals or the Supreme Court in the same manner as in other cases.

    (Code 1933, § 41A-401, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 9; Ga. L. 1981, p. 1366, § 3.)

JUDICIAL DECISIONS

Cited in Commercial Bank v. Department of Banking & Fin., 244 Ga. 172 , 259 S.E.2d 435 (1979); Department of Banking & Fin. v. Independent Ins. Agents of Ga., Inc., 158 Ga. App. 556 , 281 S.E.2d 265 (1981).

RESEARCH REFERENCES

C.J.S. - 73A C.J.S., Public Administrative Law and Procedure, §§ 315, 317.

7-1-91. Orders by department; enforcement; civil penalty.

  1. Whenever it shall appear to the department that the capital stock of a financial institution has been reduced below the minimum required by law or below the amount required by its articles, the department may issue a written order directing such corporation to restore the deficiency within such period as shall be specified in the order.
  2. Whenever it shall appear to the department that any financial institution is not keeping its books and accounts in such manner as to enable the department, with reasonable facility, to ascertain the true condition of the financial institution, the department may issue a written order requiring such financial institution, within such period as shall be specified in the order, to open and keep such books as the department may, in its discretion, reasonably determine are essential for the purpose of keeping accurate and convenient records of the transactions and accounts of such financial institution.
  3. Whenever any financial institution shall refuse to submit its records and affairs to a legally conducted examination or investigation by the department, the department may issue a written order requiring such financial institution to permit the commissioner or other duly authorized examiner to make such examination or investigation, within such period as shall be specified in the order.
  4. Whenever it shall appear to the department that any financial institution has violated its articles or any law of this state or any order or regulation of the department or that any financial institution is conducting business in an unsafe or unauthorized manner, the department may issue a written order requiring the financial institution to cease and desist from such unsafe and unauthorized practices.
  5. Whenever a financial institution shall fail to comply with the terms of an order of the department which has been properly issued under the circumstances, the department, upon notice of three days to the financial institution, may, through the Attorney General, petition the principal court for an order directing the financial institution to obey the order of the department within such period as shall be fixed by the court. Upon the filing of such petition, the court shall allow a rule to show cause why it should not be granted. Whenever, after a hearing upon the merits or after failure of the financial institution to appear when ordered, it shall appear that the order of the department was properly issued, the court shall grant the petition of the department.
  6. Any financial institution which violates the terms of any order issued pursuant to this Code section shall be liable for a civil penalty not to exceed $1,000.00. Each day during which the violation continues shall constitute a separate offense. In determining the amount of penalty, the department shall take into account the appropriateness of the penalty relative to the size of the financial resources of the institution, the good faith efforts of the financial institution to comply with the order, the gravity of the violation, the history of previous violations by the financial institution, and such other factors or circumstances as shall have contributed to the violation. The department may at its discretion compromise, modify, or refund any penalty which is subject to imposition or has been imposed pursuant to this Code section. The financial institution or other person assessed as provided in this subsection shall have the right to request a hearing into the matter within ten days after notification of the assessment has been served upon the financial institution involved; otherwise, such penalty shall be final except as to judicial review as provided in Code Section 7-1-90.
  7. All penalties recovered by the department pursuant to this Code section shall be paid into the state treasury to the credit of the general fund; provided, however, that the department at its discretion may remit such amounts recovered, net of the cost of recovery, in the same manner as prescribed for judgments received through derivative actions pursuant to the provisions of Code Section 7-1-441.
  8. The term "financial institution" as used in this Code section shall include a bank holding company as defined in Code Section 7-1-605 and those entities required to be licensed pursuant to Article 4A of this chapter and any officer, director, employee, agent, or other person participating in the conduct of the affairs of the financial institution subject to the orders issued pursuant to this Code section.

    (Ga. L. 1919, p. 135, art. 5, § 1; Code 1933, § 13-601; Code 1933, § 41A-402, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 10; Ga. L. 1985, p. 258, § 2; Ga. L. 1998, p. 795, § 8; Ga. L. 2009, p. 86, § 3/HB 141; Ga. L. 2017, p. 193, § 4/HB 143.)

The 2017 amendment, effective June 1, 2017, deleted "or that its net assets are less than the amount of its capital stock" following "required by its articles" in the middle of subsection (a).

Cross references. - Issuance of subpoenas for production of books and papers pursuant to examinations and investigations of financial institutions, § 7-1-66 .

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1985, a comma was deleted following "written order" in subsection (b), and "institution" was substituted for "institutions" the last time that word appears in the third sentence of subsection (f).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 286.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 11 et seq., 28, 137. 73A C.J.S., Public Administrative Law and Procedure, § 481 et seq.

ALR. - Bank's duty to customer or depositor not to disclose information as to his financial condition, 92 A.L.R.2d 900.

Bank's liability, under state law, for disclosing financial information concerning depositor or customer, 81 A.L.R.4th 377.

7-1-92. Forfeiture proceedings.

  1. Articles of financial institutions existing under the laws of this state are subject to forfeiture:
    1. In the case of an institution subject to such requirements, for failure to file its annual report with the Secretary of State or its annual license or occupation tax return within the time required by law;
    2. For failure to maintain a registered office in this state as required by the provisions of Title 14, relating to corporations, or by Code Section 7-1-132;
    3. For having procured its articles through fraud;
    4. For failure to organize and proceed to do business within a period of 24 months from the date of the certificate of incorporation;
    5. For failure to obey a final court order issued pursuant to subsection (a) of Code Section 7-1-91 within the time specified in such order; or
    6. Where, because of violation of law or its articles or the unsafe condition or manner of operation of the financial institution, its continued existence is likely to injure the public or the institution's creditors or depositors.
  2. Where such grounds exist, the department, through the Attorney General and in the name of the state, is authorized to institute quo warranto or other appropriate proceedings in the principal court to vacate and forfeit the articles of any financial institution.
  3. Where the articles of any financial institution shall be forfeited, the department shall, if it has not already done so, take charge of the business and assets of such institution and proceed to liquidate it in the same manner as is herein provided in cases where the department takes possession of a financial institution directly.
  4. No action to forfeit the articles of any financial institution shall be brought except as provided herein, but any person or corporation shall have the right to submit to the department any facts which under the law would authorize the forfeiture of the articles of a financial institution.
  5. On and after April 1, 1975, the provisions of Title 14, relating to forfeiture, shall not be applicable to financial institutions.

    (Ga. L. 1919, p. 135, art. 15, §§ 1-4; Ga. L. 1925, p. 165, § 10; Code 1933, §§ 13-1601, 13-1602, 13-1603, 13-1604, 25-122; Ga. L. 1935, p. 114, § 1; Ga. L. 1937-38, Ex. Sess., p. 307, § 7; Ga. L. 1943, p. 279, § 1; Ga. L. 1949, p. 442, § 1; Ga. L. 1956, p. 742, § 4; Ga. L. 1960, p. 977, § 1; Ga. L. 1962, p. 74, § 3; Ga. L. 1968, p. 465, § 8; Code 1933, § 41A-403, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 11.)

Cross references. - Declaration by Secretary of State of forfeiture of charter of Secretary of State corporations, § 14-4-160 .

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, §§ 167 et seq., 529.

7-1-93. Injunction and other actions by department.

The department may bring an appropriate civil action to enforce any provision of this chapter or regulations issued hereunder, whether by injunction or otherwise, in the superior court of this state having jurisdiction over one or more of the defendants.

(Code 1933, § 13-208, enacted by Ga. L. 1960, p. 67, § 7; Ga. L. 1970, p. 954, § 6; Code 1933, § 41A-404, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

C.J.S. - 73A C.J.S., Public Administrative Law and Procedure, §§ 481, 483.

7-1-94. Evidential value of results of examinations or investigations; editing out of information tending to undermine public confidence in financial institution.

When the record of any examination or investigation of a financial institution by the department or the report by the examiner or employee of the department who conducted such examination or investigation is admissible in evidence under Title 24, the department, with the permission of the court, may edit out of the record or report any portion thereof which is not pertinent to the issue in question before the court or which would tend unnecessarily to affect adversely the public confidence in the financial institution.

(Ga. L. 1919, p. 135, art. 2, § 20; Ga. L. 1919, p. 135, art. 3, § 10; Ga. L. 1920, p. 102, § 1; Code 1933, §§ 13-320, 13-410; Ga. L. 1966, p. 692, § 27; Code 1933, § 41A-405, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 12; Ga. L. 2011, p. 99, § 5/HB 24.)

Cross references. - Hearsay rule exceptions, § 24-8-803 .

Self authentication, § 24-9-902 .

Public records, § 24-10-1005 .

Editor's notes. - Ga. L. 2011, p. 99, § 101/HB 24, not codified by the General Assembly, provides that this Act shall apply to any motion made or hearing or trial commenced on or after January 1, 2013.

Law reviews. - For article, "Evidence," see 27 Ga. St. U.L. Rev. 1 (2011). For article on the 2011 amendment of this Code section, see 28 Ga. St. U.L. Rev. 1 (2011).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 108.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1192, 1194.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 11 et seq., 137.

7-1-95. Admissibility of department's certificates and copies.

Reserved. Repealed by Ga. L. 2011, p. 99, § 6/HB 24, effective January 1, 2013.

Editor's notes. - This Code section was based on Ga. L. 1974, p. 705, § 1.

Ga. L. 2011, p. 99, § 101/HB 24, not codified by the General Assembly, provides that this Act shall apply to any motion made or hearing or trial commenced on or after January 1, 2013.

Ga. L. 2015, p. 5, § 7/HB 90, effective March 13, 2015, part of an Act to revise, modernize, and correct the Code, reserved the designation of this Code section.

Law reviews. - For article on the 2011 repeal of this Code section, see 28 Ga. St. U.L. Rev. 1 (2011).

7-1-96. Liability on bonds for nonperformance of duty.

Reserved. Repealed by Ga. L. 2016, p. 390, § 1-4/HB 811, effective July 1, 2016.

Editor's notes. - This Code section was based on Ga. L. 1919, p. 135, art. 2, § 21; Code 1933, § 13-321; Code 1933, § 41A-407, enacted by Ga. L. 1974, p. 705, § 1.

7-1-97. Costs of actions by or against department.

Reserved. Repealed by Ga. L. 2016, p. 390, § 1-4/HB 811, effective July 1, 2016.

Editor's notes. - This Code section was based on Ga. L. 1919, p. 135, art. 2, § 22; Ga. L. 1931, p. 7, § 91; Code 1933, § 13-322; Code 1933, § 41A-408, enacted by Ga. L. 1974, p. 705, § 1.

7-1-98. Department of Law to advise department.

It shall be the duty of the Department of Law to advise the department on any question of law submitted by it.

(Ga. L. 1919, p. 135, art. 2, § 23; Ga. L. 1931, p. 7, § 91; Code 1933, § 13-323; Code 1933, § 41A-409, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-99. Duties and responsibilities of department regarding interest and usury complaints; advisory opinions; effect.

  1. Except as provided in Chapter 3 of this title, as amended, and Chapter 22 of Title 33, as amended, the department is designated as the appropriate agency of this state to receive and investigate complaints or allegations regarding violations of the interest and usury laws of this state. In processing such matters, the department may refer complaints or allegations to other state or federal officials or agencies which have jurisdiction over the lender involved for investigation or other action.
    1. The department, in consultation with the Department of Law, may render and publish advisory opinions for the assistance and guidance of financial institutions as defined in this chapter.
    2. Reliance in good faith upon an opinion issued as provided in paragraph (1) of this subsection shall constitute prima-facie evidence of good faith on the part of any person charged with any violation, resulting from the reliance, which subjects him to forfeiture or other sanctions imposed by the interest and usury laws. The provisions of this paragraph shall apply even if, following the reliance, the opinion is amended, rescinded, or determined by any judicial or other authority to be invalid.

      (Code 1933, § 41A-411, enacted by Ga. L. 1979, p. 951, § 1; Ga. L. 1989, p. 14, § 7.)

Law reviews. - For article surveying 1979 legislative developments in commercial law, see 31 Mercer L. Rev. 13 (1979).

RESEARCH REFERENCES

ALR. - Usury in connection with loan calling for variable interest rate, 18 A.L.R.4th 1068.

Constitutionality, construction, and effect of statutes relating to inspection, dissolution and liquidation of building and loan associations, 78 A.L.R. 1090 .

PART 5 P ERMISSIVE CLOSING DAYS, EMERGENCY CLOSINGS, BUSINESS RESTRICTIONS, AND VOLUNTARY LIQUIDATIONS

Cross references. - Taking of possession of the business and property of financial institutions by department, § 7-1-150 et seq.

Dissolution of business corporations generally, § 14-2-1401 et seq.

Forfeiture of charter and dissolution of Secretary of State corporations generally, § 14-4-160 et seq.

7-1-110. Permissive closing days; deferral of business conducted on Saturday.

Any financial institution may remain closed one day each week in addition to Sundays and other legal holidays; and any act authorized, required, or permitted to be performed at or by any such financial institution on a day when it is closed may be performed on the next succeeding business day; and no liability or loss of rights of any kind shall result from the delay. Saturday shall not be construed to be a business day and any business conducted on Saturday may be deferred to the next succeeding business day, provided such deferral is applicable to all business conducted by said financial institution on that day and is in accordance with a resolution adopted by the board of directors of the institution. Customers of any financial institution adopting such a deferral policy shall be notified of any such deferral of business by prominent notice posted in the lobby of the financial institution and by circularization in regular statement mailings at least 30 days prior to the effective date of any such deferral policy. Any financial institution changing its permissive closing day, temporarily or otherwise, shall post a notice of the change and the effective date thereof in a conspicuous place at each location affected by the change at least 30 days preceding the date of the change. Notwithstanding the foregoing, credit unions serving a limited membership base may establish uniform business hours and days consistent with the needs of their membership.

(Code 1933, § 41A-501, enacted by Ga. L. 1978, p. 1714, § 2; Ga. L. 1983, p. 602, § 2.)

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 225.

7-1-110.1. Posting notice of intent to close banking location.

Except in the case of an emergency closing, before a financial institution may close a banking location, it must post at such location in a conspicuous place at least 30 days in advance of such closing a notice of intent to close. Such notice must remain posted for at least 30 consecutive days. Customers of a banking location shall be considered to have received notice if the requirements of this Code section have been met.

(Code 1981, § 7-1-110.1 , enacted by Ga. L. 1999, p. 674, § 1.)

7-1-111. Emergency closings.

Whenever it appears to the Governor that the welfare of this state or any region thereof or the welfare and security of any financial institution or the lives of the employees of the financial institution or the safety of the funds of depositors and property of the shareholders are endangered or placed in jeopardy by any impending or existing emergency or other catastrophe, including, but not limited to, economic crises, hurricanes, tornadoes, fire hazards, disruption or failure of utility, transportation, communication, or information systems, or civil disorders, the Governor may proclaim that an emergency exists and such state of emergency proclamation shall authorize financial institutions to elect to close. The Governor may also proclaim that any financial institution or type of financial institution shall be subject to special regulation as herein provided until the Governor, by a like proclamation, declares the period of such emergency to have terminated. The department may declare emergencies in specific cases for cause shown, and its declaration shall remain in effect until terminated by the Governor or the commissioner, whichever occurs first.

(Code 1933, § 14-1811, enacted by Ga. L. 1971, p. 812, § 1; Code 1933, § 41A-501, enacted by Ga. L. 1974, p. 705, § 1; Code 1933, § 41A-502, enacted by Ga. L. 1978, p. 1714, § 4; Ga. L. 1999, p. 674, § 1; Ga. L. 2015, p. 344, § 6/HB 184; Ga. L. 2016, p. 390, § 1-5/HB 811.)

The 2015 amendment, effective July 1, 2015, in the first sentence, substituted "this state" for "the state" near the beginning and substituted "an emergency exists, which shall authorize the emergency closing of any impacted financial institutions." for "a financial emergency exists and" at the end; added "The Governor may also proclaim" at the beginning of the second sentence; and substituted "may declare emergencies" for "may also declare financial emergencies" near the beginning of the last sentence.

The 2016 amendment, effective July 1, 2016, substituted "exists and such state of emergency proclamation shall authorize financial institutions to elect to close" for "exists, which shall authorize the emergency closing of any impacted financial institutions" near the end of the first sentence of this Code section.

RESEARCH REFERENCES

ALR. - Statute relating to closing of bank and assessment of stockholders as subject to constitutional objection of conferring judicial power upon administrative or executive officers, 78 A.L.R. 774 .

Legal questions presented by the reopening of closed bank, 80 A.L.R. 1487 ; 99 A.L.R. 1217 .

Legal aspects and consequences of declaration of "bank holiday," 86 A.L.R. 1138 ; 95 A.L.R. 934 .

7-1-111.1. Posting notice of intent to close banking location.

Repealed by Ga. L. 1999, p. 674, § 1, effective July 1, 1999.

Editor's notes. - This Code section was based on Code 1981, § 7-1-111.1 , enacted by Ga. L. 1998, p. 795, § 9. For present comparable provisions, see Code Section 7-1-110.1 .

7-1-112. Business restrictions.

  1. During the period of or as a result of any financial emergency proclaimed by the Governor or declared by the department, or during any impending or existing emergency situation as described in Code Section 7-1-111, the department, in addition to all of the powers conferred upon it by law, shall have the authority to order any one or more financial institutions to restrict all or any part of their business and to limit or postpone for any length of time the payment of any amount or proportion of the deposits in any of the departments of the financial institutions as it may deem necessary or expedient. The department may further regulate the payments of such financial institutions as to time and amount, as in its opinion the interest of the public or of such financial institutions or the depositors thereof may require.
  2. No liability or loss of any rights of any kind shall be incurred by any financial institution during any emergency period declared by the Governor or the department by reason of the delay in the payment of any item or by the return or transmission of any item or document if such delay is caused by orders of the Governor or the department, interruption of communication facilities, suspension of payments by another financial institution, war or emergency conditions, or other circumstances beyond the control of the financial institution if it exercises such diligence as the circumstances require.

    (Code 1933, § 14-1812, enacted by Ga. L. 1971, p. 812, § 2; Code 1933, § 41A-501, enacted by Ga. L. 1974, p. 705, § 1; Code 1933, § 41A-503, enacted by Ga. L. 1978, p. 1714, § 5; Ga. L. 1999, p. 674, § 2.)

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 129.

7-1-113. Voluntary dissolution prior to commencement of business; failure to properly file articles of dissolution; power of department to seek dissolution.

  1. A financial institution which has not transacted any business as a financial institution other than organizational business may propose to dissolve by the affirmative vote of shareholders entitled to cast at least two-thirds of the votes which all shareholders are entitled to cast on the plan and by delivering to the department articles of dissolution which shall be executed by two duly authorized officers or shareholders under the seal of the financial institution and which shall contain:
    1. The date of incorporation of the financial institution;
    2. A statement that it has not transacted any business as a financial institution other than organizational business;
    3. A statement that all liabilities of the financial institution have been paid or provided for;
    4. A statement that all amounts received on account of capital stock, paid-in capital, and expense fund, less amounts disbursed for expenses, have been returned to the persons entitled thereto; and
    5. The number of shares entitled to vote on the dissolution and the number of shares voted for and against it, respectively.
  2. The articles of dissolution shall be delivered to the department together with the filing fee required by Code Section 7-1-862. If the department is satisfied that the financial institution has not conducted any business other than organizational business and if it finds that the articles of dissolution satisfy the requirements of this chapter, it shall deliver them with its written approval to the Secretary of State and notify the financial institution of its action. If the department shall disapprove the articles of dissolution, it shall give written notice to the financial institution of its disapproval and a general statement of the reasons for its decision. The decision of the department shall be conclusive, except as it may be subject to judicial review under Code Section 7-1-90.
  3. If the department determines that a financial institution has not conducted any business other than organizational business and if articles of dissolution satisfying the requirements of this chapter are not delivered to the department together with the filing fee as required by Code Section 7-1-862, the department may make written demand upon the financial institution to immediately provide articles of dissolution or to provide cause why such dissolution should not be pursued directly by the department. If the financial institution fails to provide articles of dissolution as required within 60 days from the date of demand by the department, the department may seek dissolution of the financial institution in organization directly from the Secretary of State's office.

    (Code 1933, § 41A-502, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 13; Code 1933, § 41A-504, as redesignated by Ga. L. 1978, p. 1714, § 3; Ga. L. 1993, p. 917, § 1; Ga. L. 2011, p. 518, § 2/HB 239; Ga. L. 2015, p. 344, § 7/HB 184.)

The 2015 amendment, effective July 1, 2015, deleted "in duplicate" following "delivered" in the first sentence of subsections (b) and (c) and deleted a comma following "business and" in the second sentence of subsection (b) and the first sentence of subsection (c).

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1020, 1182.

C.J.S. - 9 C.J.S., Banks and Banking, § 596 et seq.

7-1-114. Voluntary dissolution after commencement of business.

  1. A financial institution which has commenced business may elect to dissolve voluntarily upon:
    1. Adoption by the vote required of its shareholders under subsection (b) of this Code section of:
      1. A plan of dissolution involving both a provision for assumption of its liabilities by another financial institution and a provision for continuance of its business if such assumption of its liabilities is not effected; or
      2. Any other plan of dissolution providing for full payment of its liabilities; and
    2. Approval by the department of the plan of dissolution after application for approval thereof in a manner prescribed by the department.
  2. Adoption of the plan by the shareholders of the financial institution shall require the affirmative vote of the shareholders entitled to cast at least two-thirds of the votes which all shareholders are entitled to cast on the plan and, if any class of shareholders is entitled to vote on the plan as a class, of the holders of at least two-thirds of the outstanding shares of such class, provided, in the case of a credit union, adoption of the plan may be made by the affirmative vote of at least two-thirds of the members present and entitled to vote at a meeting duly called for that purpose.
  3. Upon receipt of an application for approval of a plan of dissolution, the department shall conduct such investigation as it may deem necessary to determine whether:
    1. The plan satisfies the requirements of this chapter;
    2. The plan adequately protects the interests of depositors, other creditors, and shareholders; and
    3. If the plan involves an assumption of liabilities by another financial institution, such assumption would be consistent with adequate and sound banking and in the public interest on the basis of factors substantially similar to those set forth in Code Section 7-1-534.
  4. Within 90 days after receipt of the application, the department shall approve or disapprove the application on the basis of its investigation and shall immediately give to the financial institution written notice of its decision and, in the event of disapproval, a general statement of the reasons for its decision. The decision of the department shall be conclusive, except as it may be subject to judicial review under Code Section 7-1-90.

    (Ga. L. 1919, p. 135, art. 14, §§ 1, 2, 10; Code 1933, §§ 13-1501, 13-1502, 13-1510; Ga. L. 1967, p. 597, § 1; Code 1933, § 41A-503, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1977, p. 730, § 2; Code 1933, § 41A-505, as redesignated by Ga. L. 1978, p. 1714, § 3.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 207 et seq.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1020, 1182.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 596 et seq.

ALR. - Trust or preference in respect of money placed in bank for purpose of transaction with third person where bank subsequently becomes insolvent, 31 A.L.R. 472 ; 93 A.L.R. 881 .

Right of creditors or stockholders of insolvent bank in charge of liquidating officer who refuses or fails to enforce liability of third persons to bank, to maintain action for that purpose, and conditions of such right, 116 A.L.R. 783 .

7-1-115. Winding up voluntary dissolution proceedings.

  1. The board of directors shall have full power to wind up and settle the affairs of a financial institution in voluntary dissolution proceedings.
  2. Within 30 days after the department's approval of voluntary liquidation and dissolution, the financial institution shall give notice of its dissolution:
    1. By mail to each depositor and creditor (except those as to whom the liability of the financial institution has been assumed by another financial institution pursuant to the plan), including a statement of the amount shown by the books of the financial institution to be due to such depositor or creditor and a demand that any claim for a greater amount be filed with the financial institution before a specified date at least 60 days after the date of notice;
    2. By mail to each lessee of a safe-deposit box and each customer for whom property is held in safe deposit (except those as to whom the liability of the financial institution has been assumed by another financial institution pursuant to the plan), including a demand that all property held in a safe-deposit box or held in safe deposit by the financial institution be withdrawn by the person entitled thereto before a specified date at least 60 days after the date of the notice;
    3. By mail to each person interested in funds held in a fiduciary account or other representative capacity;
    4. By a conspicuous posting at each office of the financial institution; and
    5. By such publication as the department may prescribe.
  3. As soon as feasible after the department's approval of voluntary liquidation and dissolution, the financial institution shall resign all of its fiduciary appointments and take such action as may be necessary to settle its fiduciary accounts.
  4. Except where liabilities are to be assumed by another financial institution:
    1. All claims of depositors and creditors shall be paid promptly after the date specified in the notice given under paragraph (1) of subsection (b) of this Code section, and unearned portions of rentals for safe-deposit boxes shall be rebated to the lessee thereof;
    2. Safe-deposit boxes whose contents have not been removed after the date specified in the notice given under paragraph (2) of subsection (b) of this Code section shall be opened under the supervision of the department and the contents placed in sealed packages which, together with unclaimed property held by the financial institution in safe deposit, shall be transmitted to the department to be held by it subject to Article 5 of Chapter 12 of Title 44, provided that the department while holding such property may take such actions as it deems appropriate to protect the interests of the owner including reducing such property to cash;
    3. After payment of amounts due to all known depositors and creditors, unclaimed amounts due to depositors and creditors shall be paid through the department and held by it subject to Article 5 of Chapter 12 of Title 44; and
    4. Assets remaining after the performance of all obligations of the financial institution under this subsection and subsection (c) of this Code section shall be distributed to its shareholders according to their respective rights and preferences. Partial distributions to shareholders may be made prior to such time only if and to the extent approved by the department.
  5. During the course of dissolution proceedings, the financial institution shall make such reports as the department may require and shall continue to be subject to the provisions of this chapter concerning examinations and investigations of financial institutions. Furthermore, during the course of a voluntary dissolution, the financial institution with the written permission of the department may elect to use provisions of Article 14 of Chapter 2 of Title 14 that are not in conflict with this chapter.
  6. If, at any time during the course of dissolution proceedings, the department finds that the assets of the financial institution will not be sufficient to discharge its obligations, the department may then or at any time thereafter take possession of the business and property of the financial institution and complete the dissolution in accordance with this chapter.

    (Ga. L. 1919, p. 135, art. 14, §§ 3-6; Code 1933, §§ 13-1504, 13-1505, 13-1506; Ga. L. 1967, p. 597, § 1; Code 1933, § 41A-504, enacted by Ga. L. 1974, p. 705, § 1; Code 1933, § 41A-506, as redesignated by Ga. L. 1978, p. 1714, § 3; Ga. L. 1989, p. 14, § 7; Ga. L. 2003, p. 843, § 3.)

OPINIONS OF THE ATTORNEY GENERAL

Disposition of proceeds of accounts not claimed during voluntary liquidation. - Proceeds of accounts not claimed during a voluntary liquidation of a financial institution pursuant to former Code 1933, § 41A-506 (see now O.C.G.A. § 7-1-115 ) pass to the custody of the Department of Banking and Finance for ultimate disbursement pursuant to the former Disposition of Unclaimed Property Act (see now O.C.G.A. § 44-12-190 et seq.). 1975 Op. Att'y Gen. No. 75-135.

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1020, 1182.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 164, 165.

ALR. - Right of creditors or stockholders of insolvent bank in charge of liquidating officer who refuses or fails to enforce liability of third persons to bank, to maintain action for that purpose, and conditions of such right, 116 A.L.R. 783 .

Bank's or safe deposit company's liability for denying access to box, 4 A.L.R.3d 1462.

7-1-116. Articles of dissolution where business commenced; procedure if not filed.

  1. When all the liabilities of the financial institution have been discharged and all of its remaining assets have been distributed to its shareholders pursuant to Code Section 7-1-115 or its liabilities have been assumed by another financial institution, the articles of dissolution shall be signed by two duly authorized officers of the financial institution under its seal and shall contain:
    1. The name of the financial institution and the post office address of its principal place of business;
    2. A statement that the department has previously approved a plan to dissolve the institution and the date on which such approval was transmitted to the Secretary of State;
    3. A statement that all liabilities of the financial institution have been discharged and that the remaining assets of the financial institution have been distributed to its shareholders or that its liabilities have been assumed as provided in this chapter; and
    4. A statement that there are no actions pending against the financial institution.
  2. The articles of dissolution shall be delivered to the department together with the filing fee required by Code Section 7-1-862. If the department finds that the articles satisfy the requirements of this chapter, it shall deliver its written approval to the Secretary of State with a copy of the articles of dissolution attached.
  3. Where a financial institution fails to file articles of dissolution within 180 days after the department determines that dissolution proceedings have been completed as provided in this part, the department may cause notice to be published in accordance with this chapter to the effect that persons having claims against the financial institution should notify the department within 30 days of the date of initial publication. If the department receives no such notifications or if claims are otherwise satisfied, the department shall notify the Secretary of State that the articles of incorporation or charter are no longer valid and should be promptly canceled of record in the offices of the Secretary of State.

    (Ga. L. 1919, p. 135, art. 14, §§ 7, 9; Code 1933, §§ 13-1507, 13-1509; Ga. L. 1967, p. 597, § 1; Code 1933, § 41A-505, enacted by Ga. L. 1974, p. 705, § 1; Code 1933, § 41A-507, as redesignated by Ga. L. 1978, p. 1714, § 3; Ga. L. 1980, p. 972, § 3; Ga. L. 1993, p. 917, § 2; Ga. L. 2015, p. 344, § 8/HB 184.)

The 2015 amendment, effective July 1, 2015, deleted "in duplicate" following "department" in the first sentence of subsection (b).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 207 et seq.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1020, 1182.

7-1-117. Certificate of dissolution.

If all applicable fees, charges, and taxes required by law have been paid upon the receipt of the department's approval, under Code Section 7-1-113 or 7-1-116, of the articles of dissolution, the Secretary of State shall immediately issue to the financial institution a certificate of dissolution with the approved articles of dissolution attached thereto and shall retain a copy of such certificate, the approval of the department, and the articles; and the existence of the financial institution shall cease.

(Ga. L. 1919, p. 135, art. 14, § 12; Code 1933, § 13-1512; Ga. L. 1967, p. 597, § 1; Code 1933, § 41A-506, enacted by Ga. L. 1974, p. 705, § 1; Code 1933, § 41A-508, as redesignated by Ga. L. 1978, p. 1714, § 3.)

PART 6 N AMES, REGISTERED OFFICES, AND ADVERTISING

RESEARCH REFERENCES

ALR. - Duty of depositor to report loss or theft of unsigned check, 26 A.L.R. 613 .

7-1-130. Permissible names.

  1. The name of a financial institution shall not contain the words "Government," "Official," "Federal," "National," or "United States" or any abbreviation of any such words and shall not in the opinion of the department:
    1. Be indistinguishable from the corporate name of another financial institution conducting a banking business in this state as reflected in the records of the department; or
    2. Contain any word which may lead to the conclusion that the financial institution is authorized to perform any act or conduct any business which it is unauthorized or forbidden to perform by law, its articles, or otherwise.
  2. A financial institution may, without regard to subsection (a) of this Code section, use:
    1. Its name in use on April 1, 1975;
    2. A name in use on April 1, 1975, by another financial institution which is adopted by:
      1. A financial institution which is the resulting institution in a plan of merger or consolidation to which the institution using the name is a party; or
      2. A financial institution which is incorporated under this chapter in pursuance of a plan of segregating the banking business and the trust business of the institution using the name; or
    3. A name of another financial institution already transacting business with the consent of the latter institution, provided that the names are distinguishable in the records of the Secretary of State.

      (Code 1933, § 41A-601, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1998, p. 795, § 10.)

Cross references. - Further restrictions on use of names by banks and trust companies, § 7-1-243 .

Restriction on use of terms "savings and loan," "building and loan," etc., § 7-1-779 .

Permissible corporate names generally, § 14-2-401 .

Use of corporate names by Secretary of State corporations, §§ 14-4-22 , 14-4-25 .

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 183.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 43, 530.

7-1-131. Reservation of name.

  1. The exclusive right to use a corporate name permitted to be used by a financial institution may be reserved by a person intending to incorporate such an institution, by a corporation intending to engage in business in this state as a financial institution, by a financial institution intending to change its name, or by a national bank, a federal credit union, or a savings and loan association intending to convert into a financial institution organized under the laws of this state.
  2. Such reservation may be made by filing with the department a letter form application to reserve a specified name. If the department concludes that the use of the name complies with the requirements of Code Section 7-1-130, is otherwise consistent with the purposes and provisions of this chapter, and is distinguishable upon the records of the Secretary of State from the name of any other corporation, limited partnership, or professional association, it shall approve the name and notify the Secretary of State to issue such name reservation.
  3. The right to the exclusive use of a name reserved pursuant to this Code section may be transferred to anyone who would be entitled to reserve such name under this Code section except for such prior reservation by filing with the department a notice of the transfer which shall be executed by the transferor who reserved the name and which shall set forth the name and address of the transferee. The department shall send a copy of such notice to the Secretary of State.
  4. Notwithstanding any other provisions of law, the process set forth in this Code section shall be the exclusive process for reserving the corporate name of a financial institution.

    (Code 1933, § 41A-602, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 14; Ga. L. 1978, p. 1717, § 2; Ga. L. 1989, p. 1257, § 1; Ga. L. 1998, p. 795, § 11.)

Cross references. - Use of corporate names by Secretary of State corporations, §§ 14-4-22 , 14-4-25 .

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 183.

7-1-132. Registered agent and office.

  1. Every financial institution shall continuously maintain a registered agent and a registered office. Such agent and office shall be located in a county in this state where the financial institution is authorized to conduct its general business; and, in the case of financial institutions subject to Chapter 2 or 3 of Title 14, such agent and office shall be the same as is required under those chapters.
  2. Not later than September 30, 1998, every financial institution shall file with the department a statement designating the name of its registered agent and the place of its registered office by street, post office address, and county. In the event of the failure of an institution to file said statement, the registered agent shall be the chief executive officer of the bank and the registered office of the institution shall be the business address where the chief executive officer is located.
  3. A financial institution may change, and a new financial institution may establish, its registered agent and the location of its registered office by filing a statement with the department designating the name of the new registered agent or the street, post office address, and county of its new registered office or both, provided that no change in the registered agent or office shall affect actions or proceedings commenced before the time of said change.
  4. Nothing contained in this Code section shall affect the obligation of a financial institution to file information with the Secretary of State.

    (Code 1933, § 41A-603, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1998, p. 795, § 12.)

Cross references. - Maintenance of office in state by international bank agency not transacting a banking business in state, § 7-1-721 .

7-1-133. Prohibited advertising.

  1. No person or corporation doing business in this state shall advertise in or through any newspaper, radio, television, letters, circulars, billheads, or in any way or through any medium seeking to induce any person to purchase an instrument which is purported to be insured or guaranteed in a manner comparable to an insured deposit or share account in any financial institution authorized to have such deposits or accounts when in fact such instrument does not possess comparable insurance coverage as determined by the department. Whenever any person, firm, or corporation doing business in this state shall compare, in any such advertising media, an investment or a return on an investment, except an investment or return on an investment in the form of a deposit or share account, to a deposit or share account or a return on a deposit or share account in an authorized financial institution, it shall be clearly stated in such advertising or solicitation that the investment is not a deposit insured by a public body of the United States or of this state.
  2. No person or corporation shall use the terms "savings," "savings account," "deposit," or "withdrawal" or any equivalent thereof in any advertisement as above described in subsection (a) of this Code section indicating reference to instruments issued by or to be issued by the person or corporation.

    (Code 1933, § 13-204.2, enacted by Ga. L. 1973, p. 534, § 1; Code 1933, § 41A-604, enacted by Ga. L. 1974, p. 705, § 1.)

Cross references. - Duty of bank to post notice if deposit insurance maintained by bank is less than amounts insured by Federal Deposit Insurance Corporation, § 7-1-244 .

False advertising generally, § 10-1-420 et seq.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 68, 107, 111, 419, 420.

7-1-134. Unfair competition, unfair trade practice, and trade name and trademark laws unaffected.

Nothing in this chapter shall abrogate or limit the law as to unfair competition or unfair trade practice nor derogate from the common law or principles of equity or the statutes of this state or of the United States with respect to the right to acquire and protect trade names and trademarks.

(Code 1933, § 41A-605, enacted by Ga. L. 1974, p. 705, § 1.)

Cross references. - Deceptive or unfair trade practices generally, § 10-1-370 et seq.

PART 7 R ECEIVERSHIP POWERS AND PROCEDURES GENERALLY

RESEARCH REFERENCES

ALR. - Trust or preference in respect of money placed in bank for purpose of transaction with third person where bank subsequently becomes insolvent, 32 A.L.R. 472 ; 93 A.L.R. 881 .

Right of savings bank to liquidate voluntarily and close business, 69 A.L.R. 1255 .

Time when suit may be brought on bond of officer taking charge of insolvent bank, 85 A.L.R. 964 .

Balance due other banks on clearing house settlement as preferred claim against insolvent bank, 44 A.L.R. 1535 .

When bank deemed insolvent, or "hopelessly" insolvent, in civil cases, 85 A.L.R. 811 .

Bank conservators, 107 A.L.R. 1431 .

7-1-150. Taking of possession by department; cumulative remedies.

  1. The department may in its discretion take possession of the business and property of any financial institution whenever such financial institution:
    1. Is insolvent or in an unsafe or unsound condition to transact its business;
    2. Has generally suspended payment of its obligations, without authority of law;
    3. Has violated any court order, statute, rule, or regulation, or its articles and the department determines that its continued control of its own affairs threatens injury to the public, the financial community, or its depositors and other creditors; or
    4. Requests the department, by its board of directors, to take possession for the benefit of depositors, other creditors, and shareholders.
  2. The right of the department to take possession of a financial institution shall be in addition to and cumulative with all other rights, remedies, and powers of the department. The department may, in its discretion before or after taking possession, petition the principal court for appointment of a receiver pursuant to subsection (c) of Code Section 7-1-151.

    (Ga. L. 1919, p. 135, art. 7, § 1; Ga. L. 1925, p. 165, § 10; Code 1933, §§ 13-801, 13-802, 25-122; Ga. L. 1935, p. 114, § 1; Ga. L. 1937-38, Ex. Sess., p. 307, § 7; Ga. L. 1943, p. 279, § 1; Ga. L. 1956, p. 742, § 4; Ga. L. 1960, p. 977, § 1; Ga. L. 1962, p. 74, § 3; Ga. L. 1967, p. 597, § 2; Ga. L. 1968, p. 465, § 8; Code 1933, § 41A-701, enacted by Ga. L. 1974, p. 705, § 1.)

JUDICIAL DECISIONS

Exercises of discretion not interfered with absent gross abuse. - Under banking laws of this state, the superintendent of banks (now commissioner of banking and finance), is vested with broad discretion in supervision of banks and in determining when a particular bank should be closed for purpose of liquidation; the superintendent's discretion in such matters will not be interfered with by the court, unless that discretion has been exercised arbitrarily or capriciously and thus grossly abused. McGinty v. Gormley, 181 Ga. 644 , 183 S.E. 804 (1935).

Injunctive relief to enjoin interference with department's possession. - Court of equity will enjoin any unauthorized interference with possession of superintendent of banks (now department of banking and finance) of assets of insolvent bank. Especially will injunction in such case lie when the plaintiff also contests the justness of the laborers' liens sought to be enforced against the grantor in the security deed and property therein conveyed. Bennett v. Green, 156 Ga. 572 , 119 S.E. 620 (1923).

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, §§ 132, 133.

ALR. - Balance due other banks on clearing house settlement as preferred claim against insolvent bank, 44 A.L.R. 1535 .

When bank deemed insolvent, or "hopelessly" insolvent, in civil cases, 85 A.L.R. 811 .

Bank conservators, 107 A.L.R. 1431 .

7-1-151. Status of department as receiver; restrictions on appointment.

  1. Upon taking possession of a financial institution, the department shall automatically become the receiver of said institution with all rights, powers, and duties conferred by this chapter and, to the extent not in conflict with this chapter, all rights, powers, and duties of a receiver appointed pursuant to Chapters 5 and 8 of Title 9, relating to injunctions and receivers.
  2. Except as provided in subsection (c) of this Code section, no court shall appoint anyone but the department as receiver of a financial institution. Whenever any court, at the instance of the department, a depositor, a shareholder, or other person entitled by law to institute such proceedings, shall determine that a receiver should be appointed, for any reason whatsoever, it shall appoint the department as such receiver. When thus appointed receiver by a court, the department shall serve in the same manner and with the same limitations and shall have the same rights, powers, and duties as when it becomes receiver by operation of law and without appointment by any court. No court shall impose upon the department as receiver any duties or restrictions in conflict with this chapter.
  3. In any proceeding for the appointment of a receiver of an institution whose deposits or shares are insured by a public body of the United States, the court may upon the recommendation of the department (whether or not the department is a party) appoint said public body or its administrator as receiver.  If said public body or its administrator accepts the appointment, it or he or she shall have all the rights, powers, and duties of the department as receiver under this chapter and all the rights, powers, and duties as conferred by other applicable law. The public body or its administrator may act as receiver without bond.

    (Code 1933, § 41A-702, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2005, p. 826, § 6/SB 82.)

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, § 1032 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, § 136.

ALR. - Bank conservators, 107 A.L.R. 1431 .

7-1-152. General assignment prohibited; taking of possession upon request.

No financial institution shall make a general assignment of its business and property for the benefit of its creditors by the appointment of an assignee or a trustee or otherwise. In lieu of the power to make an assignment for the benefit of creditors, a financial institution may request the department to take possession as provided in this part. In such cases, the department shall take possession and become receiver in the same manner and subject to the same provisions of this chapter as when it takes possession of the business and property of a financial institution without the request of such financial institution.

(Ga. L. 1919, p. 135, art. 7, §§ 2, 4; Code 1933, § 13-804; Code 1933, § 41A-703, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-153. Posting of notice of taking possession.

The department, upon taking possession of the business and property of a financial institution as receiver, shall post notice of such fact on the front door of all offices of the institution open to the public for the transaction of business in person.

(Code 1933, § 41A-704, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 134.

7-1-154. Certificate of possession; naming deputy receiver.

The department shall immediately after taking possession file with the principal court a certificate to be known as the certificate of possession, setting forth the facts on the basis of which it has taken possession. The certificate shall state the name of the deputy receiver, if any, whom the department, pursuant to this chapter, appoints to take charge of the affairs of the financial institution, together with the duties of such deputy receiver. If the department does not appoint a deputy receiver prior to the date of the filing of the certificate of possession or if it appoints a new deputy receiver or an additional one or if it adds to the duties of the deputy receiver, it shall file a supplement to the certificate of possession setting forth such acts. The certificate of possession and any supplement thereto shall be listed in the judgment index in the name of the financial institution as defendant and of the department as plaintiff.

(Ga. L. 1919, p. 135, art. 7, § 5; Ga. L. 1927, p. 195, § 2; Code 1933, § 13-805; Code 1933, § 41A-705, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-155. Injunction to restrain department.

Any financial institution of whose business or property the department has taken possession as receiver may, at any time within ten days after the department has become receiver, apply to the principal court for an order requiring the department to show cause why it should not be enjoined from continuing as receiver. Service may be made in such action by serving the commissioner personally or by leaving a copy with the deputy in charge of his or her office in the department or by serving the deputy receiver appointed by the department to manage the affairs of such financial institution. The court shall, after a hearing upon the merits, either dismiss the application or order the department to surrender to the financial institution possession of its business and property; but no such injunction shall issue where the department has been appointed receiver by action of a court of competent jurisdiction or by action of the financial institution itself, in accordance with this chapter. Such application for injunction may in the discretion of the court be heard at any time after service as provided in this Code section, with the right by either party to appeal, as in other cases of applications for temporary injunction.

(Ga. L. 1919, p. 135, art. 7, § 8; Code 1933, § 13-810; Code 1933, § 41A-706, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 883, § 3-3/HB 927.)

The 2016 amendment, effective January 1, 2017, in the second sentence, inserted "or her" following "of his"; and, in the last sentence, substituted "by either party to appeal, as in other cases of applications for temporary injunction" for "to either party by appeal, as in other cases of applications for temporary injunction, to carry said case to the Supreme Court for review". See Editor's notes for applicability.

Editor's notes. - Ga. L. 2016, p. 883, § 1-1/HB 927, not codified by the General Assembly, provides that: "This Act shall be known and may be cited as the 'Appellate Jurisdiction Reform Act of 2016.'"

Ga. L. 2016, p. 883, § 6-1/HB 927, not codified by the General Assembly, provides that: "Part III of this Act shall become effective on January 1, 2017, and shall apply to cases in which a notice of appeal or application to appeal is filed on or after such date."

Law reviews. - For article on the 2016 amendment of this Code section, see 33 Georgia St. U.L. Rev. 205 (2016).

7-1-156. Supervision of department by court.

  1. Except as otherwise provided in this chapter, the department, when it has taken possession of a financial institution, shall be responsible to the principal court and not to any other court. All actions against the department or any official of it involving a financial institution which is or has been in the department's possession shall be brought in the principal court.
  2. The principal court shall sit as a court of equity. It shall have the power, upon petition of the department, to make and enforce any appropriate order to enable the department, with the utmost dispatch, to discharge its duties in connection with the business and property of any financial institution of which it has taken possession.
  3. The court shall grant to any party against whom an order is sought the right to appear, within ten days after notice is given, to show cause why the order should not be made. The court shall have the power, at the end of the ten-day period, ex parte if the other party does not appear to show cause, or upon the merits if the party does appear, to issue the aforementioned order.
  4. Whenever this chapter empowers the department as receiver to take any action with the leave of court, the department shall give the financial institution and its creditors, depositors, and shareholders ten days' notice of its proposed action before seeking the approval of the court, provided that the court may, upon cause shown, shorten the time or dispense with such notice or direct that it be sent to only specified parties. In determining what, if any, notice shall be provided, the court may consider, among other factors, the necessity for immediate action in the interest of the financial institution as a whole and whether the interests of potential addressees are actually at stake. Where parties object to the proposed action of the department, the court shall allow them an opportunity to present their views appropriate to the nature of the case.

    (Ga. L. 1927, p. 195, § 15-A; Code 1933, § 13-809; Code 1933, § 41A-707, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 15.)

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 134.

7-1-157. General powers of department in possession.

  1. The department in possession shall be vested with all the rights, powers, and duties of such financial institution; with the title or the right to possession of all property to which the financial institution has title or the right to possession, including debts due, and liens and other security therefor; and with the financial institution's rights of action or redemption. This shall be so whether such property and debts due, such liens or other security therefor, or such rights of action or redemption are held in the name of such financial institution or in the name of some other corporation or person.
  2. The department shall be the representative of the creditors of the financial institution and shall be entitled, as such, to have vacated and set aside, for the benefit of the creditors, any judgment, execution, attachment, sequestration, payment, security interest, assignment, transfer, conveyance, or encumbrance which could have been avoided by any of the creditors or by which one creditor is given a preference over another. As used in this subsection, the term "preference" means all transfers of the assets of a financial institution made or suffered, either after or in contemplation of insolvency, for the purpose of allowing a creditor to gain more than his ratable share of the assets of the institution as determined by Code Section 7-1-202.
  3. The department is authorized to collect all moneys due to the financial institution and to do such other acts as are necessary to conserve its assets and business. In exercising its power as receiver, the department shall give first consideration to the interests of depositors and other creditors as a whole and shall give consideration to the interests of shareholders and other owners only when depositors and other creditors have received or are assured of full payment of their claims.
  4. The department as receiver shall have the power to execute in its name or in the name of the financial institution any instrument necessary or proper to effectuate its powers or perform its duties as receiver. Any instrument executed in the name of the institution pursuant to the authority given by this subsection shall be valid and effectual for all purposes as though executed by proper officers of the institution by authority of its board of directors or other governing body.

    (Ga. L. 1919, p. 135, art. 7, § 3; Ga. L. 1922, p. 63, § 1; Code 1933, §§ 13-803, 13-808; Code 1933, § 41A-708, enacted by Ga. L. 1974, p. 705, § 1.)

JUDICIAL DECISIONS

Collection of debts. - While superintendent (now department) has possession of bank only superintendent or an authorized agent may collect debts. Bennett v. Simmons, 30 Ga. App. 529 , 118 S.E. 493 (1923).

Cited in HWA Props., Inc. v. Cmty. & S. Bank, 322 Ga. App. 877 , 746 S.E.2d 609 (2013).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 104.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 132 et seq., 148.

ALR. - Bank conservators, 107 A.L.R. 1431 .

7-1-158. Appointment of deputy receivers, counsel, and other assistants.

The department may appoint one or more official agents, to be known as deputy receivers, to assist it in the management, reorganization, consolidation, liquidation, or distribution of the assets and affairs of any financial institution of which it has taken possession as receiver. The department may delegate to each deputy receiver any duty imposed upon or any right or power granted to it as receiver. The department may also employ such other assistants as it deems necessary, including such assistant attorneys general or other attorneys as may be appointed by the Attorney General or independently retained by the department in connection with the receivership. The department may also retain, to assist it in the management, reorganization, consolidation, liquidation, or distribution, any officer or other employee of the financial institution of which it has taken possession.

(Ga. L. 1919, p. 135, art. 7, § 9; Ga. L. 1931, p. 7, § 91; Code 1933, §§ 13-811, 13-812; Code 1933, § 41A-709, enacted by Ga. L. 1974, p. 705, § 1.)

JUDICIAL DECISIONS

Designation of agent to perform duties connected with liquidation. - Although the superintendent (now department) is not required to transfer bank assets and affairs to the superintendent's office, the superintendent is not expected to be present at all times at the office of the bank, either in person or by agent clothed with the superintendent's power. The superintendent may designate an agent to perform such duties connected with liquidation as the superintendent could do personally. Bennett v. Simmons, 30 Ga. App. 529 , 118 S.E. 493 (1923).

Department may surrender bank to bank's officers rather than appoint agent. - Circumstances of a particular case may not demand appointment of such agent. The superintendent (now department) may conclude to surrender the bank to the bank's officers. Bennett v. Simmons, 30 Ga. 529 , 118 S.E. 493 (1923).

Authority to make collections. - Fact that some person is, during superintendent's (now department's) control, in building or office of bank, engaged in work upon the bank's books or papers, does not, without more, establish that the person has authority to make collections. This is true for the reason, among others, that the superintendent may employ such attorneys or others as may be necessary in liquidation and distribution of the assets. Bennett v. Simmons, 30 Ga. App. 529 , 118 S.E. 493 (1923).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 104.

ALR. - Bank conservators, 107 A.L.R. 1431 .

7-1-159. Suspension or continuation of business.

The department is authorized, upon taking possession of the business and property of a financial institution as receiver, to continue or to suspend the business for such period as it may deem necessary to enable it to determine whether to surrender such possession to the financial institution, to authorize a merger or consolidation, to liquidate the affairs of such financial institution, or to take such other action as is authorized by law.

(Code 1933, § 41A-710, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 104.

C.J.S. - 9 C.J.S., Banks and Banking, § 132.

7-1-160. Determination to liquidate; filing of supplemental certificate.

The department shall, within six months after the date on which it takes possession of any financial institution as receiver, determine whether or not to liquidate the business and property and distribute the assets of the financial institution. If it shall determine to liquidate, it shall forthwith file with the principal court a supplement to the certificate of possession, setting forth this determination. The department shall then proceed to liquidate the affairs of the financial institution with as much dispatch as shall appear to be expedient under the circumstances.

(Code 1933, § 41A-711, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, § 1182.

C.J.S. - 9 C.J.S., Banks and Banking, § 132.

7-1-161. Powers and duties of department before and after determination to liquidate.

Except where otherwise specifically provided, all powers and duties granted by this chapter to the department in possession of the business and property of a financial institution as receiver may be exercised by it both before and after its formal determination, pursuant to this chapter, to liquidate the affairs of such financial institution.

(Code 1933, § 41A-712, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, §§ 132, 136, 139.

7-1-162. Inventory and appraisement.

  1. When the department has taken possession of the business and property of a financial institution as receiver, it shall forthwith prepare a complete and detailed inventory of the assets of such financial institution. The inventory shall be verified by oath or affirmation of the commissioner or other person making it.
  2. As soon as expedient after taking possession, the department shall cause a complete appraisement of the assets of the financial institution to be made, in duplicate, under oath or affirmation, by not less than two nor more than three disinterested appraisers selected by it. Such appraisement shall be included upon the same document or documents as the inventory. The value of the assets shall be computed in the appraisement as of the date on which the department took possession.
  3. The original and duplicate of the inventory and appraisement shall be filed in the office of the commissioner. However, if the commissioner shall determine, in accordance with this chapter, to liquidate the affairs of the financial institution, he shall immediately, after the determination to liquidate, file the duplicate inventory and appraisement with the principal court.
  4. When the department takes possession of business and property of a financial institution which in the two immediately preceding reports of condition filed in accordance with subsection (a) of Code Section 7-1-68 reported assets of less than $150,000.00, the department shall not be required to secure an appraisement of the assets of the financial institution under subsection (b) of this Code section or to file an appraisement of the assets with a determination to liquidate under subsection (c) of this Code section, unless the principal court, upon application by a shareholder or creditor, shall otherwise order.

    (Ga. L. 1919, p. 135, art. 7, § 12; Code 1933, § 13-814; Code 1933, § 41A-713, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1976, p. 1681, § 1.)

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 780 et seq.

7-1-163. Notice to holders of assets; power of court to order transfer.

  1. Upon becoming receiver, the department shall forthwith give notice in writing of such fact to all corporations and persons having custody or possession of any assets or other property of the financial institution in receivership or of any other property with respect to which such institution has a right to possession or custody for any purpose whatsoever.
  2. The principal court shall have the power, except in cases where a jury trial is requested, upon petition of the department, to order any corporation or person which has custody or possession of assets or other property to which such financial institution shall have the right of custody or possession, for any reason whatsoever, to transfer or convey such property to the department and to execute and deliver any instrument necessary to accomplish that purpose.
  3. Any person aggrieved by an order of the court may request a jury trial to determine the validity of his claim.

    (Ga. L. 1919, p. 135, art. 7, § 5; Ga. L. 1927, p. 195, § 2; Code 1933, § 13-805; Code 1933, § 41A-714, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-164. Power of department to borrow money.

The department may, without leave of court, borrow money from any federal or state public body or from any person or corporation and grant as security therefor any real or personal property of the financial institution for the purpose of facilitating the liquidation, reorganization, or rehabilitation of the financial institution. The repayment of money borrowed under this Code section and interest thereon shall be considered an expense of administration under Code Sections 7-1-197 and 7-1-202.

(Code 1933, § 41A-715, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, § 1083.

C.J.S. - 9 C.J.S., Banks and Banking, § 141.

ALR. - Power of receiver or liquidating officer of insolvent bank or trust company to borrow and pledge assets and power of court to authorize him to do so, 91 A.L.R. 1119 .

7-1-165. Surrender of burdensome assets.

The department may, with leave of court, surrender to the financial institution real or personal property which it finds to be burdensome and of no advantage to the depositors or other creditors of the institution. It may likewise, with leave of court, convey title to any holder of a mortgage, security deed, security interest, or a lien against property in its possession, where it shall appear that to continue to hold such property is burdensome and of no advantage to the financial institution, its depositors, or other creditors.

(Code 1933, § 41A-716, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-166. Compromise of claims; extension of mortgages or notes.

  1. The department may, with leave of court, compound or compromise any debt, claim, or judgment due to the financial institution in receivership and discontinue any action or other proceeding pending therefor.
  2. The department may, without leave of court, enter into an agreement in writing upon such terms as shall seem reasonable to it to extend, for a period not to exceed three years, the maturity of any mortgage or security deed obligation in its possession. However, the department shall not enter into any agreement extending any such obligation which shall have been pledged by the financial institution of which it is in possession as receiver unless it shall first obtain the written consent of the pledgee of such mortgage to such extension. The department may likewise renew or extend, for limited periods, other notes and drafts held by the financial institution.

    (Ga. L. 1919, p. 135, art. 7, § 7; Ga. L. 1922, p. 63, § 1; Code 1933, §§ 13-807, 13-808; Code 1933, § 41A-717, enacted by Ga. L. 1974, p. 705, § 1.)

JUDICIAL DECISIONS

Conclusiveness of order granting application to settle doubtful claim. - Order of judge of superior court granted on application of state superintendent of banks (now commissioner of banking and finance), authorizing settlement of bad or doubtful claims, is conclusive on all the parties to the proceeding, including the bank, until set aside in a manner prescribed by law for setting aside judgments. Rucker v. Upshaw, 199 Ga. 529 , 34 S.E.2d 602 (1945).

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, § 1083.

C.J.S. - 9 C.J.S., Banks and Banking, § 139.

7-1-167. Payment of mortgages and liens; protection of equities.

The department may, with leave of court, pay off all mortgages, security deeds, security agreements, and liens of or upon any real or personal property which belong to the financial institution. It may, without leave of court, purchase, at a judicial sale or at any sale authorized by an order of a court of competent jurisdiction, any real or personal property in order to protect any equity which the financial institution has in such real or personal property.

(Ga. L. 1922, p. 63, § 1; Code 1933, § 13-808; Code 1933, § 41A-718, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-168. Sales of real property.

The department may, with leave of and upon the terms and conditions prescribed by the court, sell any real property of the financial institution of which it is in possession as receiver. The order of the court authorizing such sale shall state whether the sale shall be entirely for cash or partly for cash and partly for evidences of indebtedness and whether it shall be public or private. Each such sale of real property shall be confirmed by the court if all the terms and conditions of its order authorizing such sale have been complied with. If the real property is located in this state but in a county other than the county of the principal court, the department shall file a certified copy of all orders relating to the property in the office of the clerk of the superior court of the county where the real property is located.

(Ga. L. 1919, p. 135, art. 7, § 7; Code 1933, § 13-807; Code 1933, § 41A-719, enacted by Ga. L. 1974, p. 705, § 1.)

JUDICIAL DECISIONS

Cited in FDIC v. Dye, 642 F.2d 837 (5th Cir. 1981).

7-1-169. Leases of property.

The department may, without leave of court, enter into leases for a period not to exceed one year of real or personal property belonging to the financial institution in receivership. It may, with leave of court, enter into such leases for a period not to exceed ten years, upon the terms and under the conditions prescribed by the order of the court.

(Code 1933, § 41A-720, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 139.

7-1-170. Sales or exchanges of securities; sales of liens or personal property.

  1. The department may, without leave of court, sell on any stock exchange or otherwise, at such times and in such manner as it may deem advisable, listed or unlisted securities which belong to the financial institution in receivership.
  2. The department may, without leave of court, exchange listed or unlisted securities for other securities of the corporation issuing the securities or of a corporation which has merged or consolidated with or has taken over such corporation.
  3. The department may, without leave of court, sell any mortgage or other lien upon real property or any judgment, at such times and in such manner as it shall deem to be advisable.
  4. Except as otherwise specifically provided by this chapter, the department may, without leave of court, sell:
    1. At public sale; or
    2. At private sale, for a net consideration not below the amount at which such personal property has been valued in the appraisement required by this chapter,

      any personal property which belongs to the financial institution in receivership or which such financial institution has the power to sell. It may, with leave of court, sell such personal property at private sale upon such terms and under such conditions as the court shall prescribe to be commercially reasonable.

      (Ga. L. 1919, p. 135, art. 7, § 7; Code 1933, § 13-807; Code 1933, § 41A-721, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 142.

7-1-171. Deposit of moneys by department.

All moneys received by the department as receiver of a financial institution except those moneys necessary to administer the liquidation shall be deposited by it in interest-bearing accounts with one or more institutions authorized by law to receive deposits and subject to the supervision of either federal or state regulatory authorities. It shall require of such depository security therefor, in such amount and of such nature as the department shall deem adequate.

(Ga. L. 1919, p. 135, art. 7, § 22; Code 1933, § 13-824; Code 1933, § 41A-722, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-172. Disposition of property in safe-deposit vault or held for safekeeping.

  1. The department may, any time after taking possession of a financial institution as receiver, give written notice to anyone claiming or appearing on the books of such financial institution to be the owner or to be entitled to the possession of any personal property left with such financial institution as bailee for safekeeping or depository for hire and to anyone appearing on the books of the financial institution to be the lessee of any safe, vault, or safe-deposit box, notifying such bailor, depositor, or lessee, respectively, to remove all such personal property within the period fixed by the notice, provided that such period shall in no case be less than 60 days after the date of the notice.
  2. At the expiration of such period, if the lessee of a safe, vault, or safe-deposit box has not removed the contents thereof, the department may open such safe, vault, or safe-deposit box in the presence of a notary public not an officer or employee of the financial institution or of the department. The contents, if any, of such safe, vault, or safe-deposit box shall then be sealed and marked by such notary with the name and address of the lessee in whose name such safe, vault, or safe-deposit box appeared on the books of the financial institution and with a list and description of the property therein. The department shall hold such property until it is delivered to the owner or those claiming through him or is disposed of under Article 5 of Chapter 12 of Title 44 and, while holding such property may take such action as it deems appropriate to protect the interest of the owner therein, including reducing the property to cash.
  3. The department shall follow the same procedure and have the same powers with regard to the property left with the financial institution as bailee for safekeeping or depository for hire and not called for within the period specified by the notice.
  4. The contract of bailment, deposit, or lease, if any, shall be considered at an end upon the date designated by the commissioner for the removal of the property therein. The amount of unearned rent or charges, if any, paid by the bailor, depositor, or lessee, shall become a debt of the financial institution.

    (Code 1933, § 41A-723, enacted by Ga. L. 1974, p. 705, § 1.)

Cross references. - Disposition by banks and trust companies of adverse claims to deposits and property held in safe deposit, § 7-1-353 .

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, § 1013.

ALR. - Levy upon or garnishment of contents of safe deposit box, 19 A.L.R. 863 ; 39 A.L.R. 1215 .

Liability for loss of contents of safe-deposit box, 42 A.L.R. 1304 ; 133 A.L.R. 279 .

Rights of owners of securities deposited in bank upon its insolvency, 84 A.L.R. 1534 ; 126 A.L.R. 625 .

Presumption as to ownership of property in safe deposit box, 101 A.L.R. 832 .

Presumption and burden of proof, in action or proceeding against bank or its liquidator, as to reasons or justification for failure to return subject of special deposit on demand, 119 A.L.R. 831 .

Bank's or safe deposit company's liability for denying access to box, 4 A.L.R.3d 1462.

7-1-173. Bringing or defending actions.

  1. For the purpose of executing any of the powers and performing any of the duties respectively conferred or imposed upon it, as receiver, by this chapter, the department may, in its name as receiver of such financial institution, prosecute any action at law or in equity in any court of this state or of any other state or in any federal court, whether or not such action is pending on behalf of the financial institution at the time it takes possession. It may likewise defend any action at law or in equity pending against the financial institution at the time it takes possession. The department may, in its name as receiver of a corporation, institute and maintain any action which any director, officer, or such corporation or any shareholder or creditor thereof could have instituted or maintained.
  2. Notwithstanding the provisions of other laws to the contrary, the statute of limitations on all causes of action which may accrue to any financial institution over whose affairs the department is receiver shall be extended for a period of six months.

    (Ga. L. 1922, p. 63, § 1; Code 1933, § 13-808; Code 1933, § 41A-724, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1984, p. 949, § 2.)

JUDICIAL DECISIONS

Constitutionality. - See Shannon v. Mobley, 166 Ga. 430 , 143 S.E. 582 (1928).

Section is confined to matters relating to bank's assets. - Statute does not give to superintendent of banks (now department of banking and finance) any authority to prosecute any cause of action which is vested by law in the bank or in the bank's stockholders or the creditors thereof. The section is in terms confined to such matters as relate to the assets of bank as such, debts and liabilities due to the bank in the bank's corporate capacity. Hines v. Wilson, 164 Ga. 888 , 139 S.E. 802 (1927).

Action against directors causing insolvency lies by superintendent (now department), not by stockholders. Hinton v. Mobley, 167 Ga. 60 , 144 S.E. 738 (1928).

Tax lien on realty. - Realty sold by department pursuant to court order carries with the realty any outstanding tax lien. Stephens v. First Nat'l Bank, 166 Ga. 380 , 143 S.E. 386 (1928).

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, § 1083.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 617, 632, 633.

ALR. - Right of creditors or stockholders of insolvent bank in charge of liquidating officer who refuses or fails to enforce liability of third persons to bank, to maintain action for that purpose, and conditions of such right, 97 A.L.R. 169 ; 116 A.L.R. 783 .

7-1-174. Surrender of possession by department prior to final liquidation; special liquidations and reorganizations.

  1. The department may, upon conditions approved by it, surrender possession of a financial institution in receivership at any time prior to final liquidation and distribution under the following circumstances:
    1. It may surrender possession to the financial institution itself when it finds the institution to be in a safe and sound condition to resume its business; or
    2. It may surrender to the financial institution itself or to any other corporation or person possession of all or part of the business, property, moneys, credits, or other assets of the financial institution in receivership, to permit to be carried into effect a special plan of liquidation, reorganization, or rehabilitation under the requirements of this Code section.
  2. Before the department may surrender possession of any of the assets of a financial institution pursuant to a special plan of liquidation, such plan shall have been approved by the principal court and a majority of creditors (including depositors) of the institution, both as to number of creditors and as to the amount of claims.
  3. Before the department may surrender possession of any of the assets of a financial institution pursuant to a special plan of reorganization or rehabilitation, such plan shall have the same approvals as required under subsection (b) of this Code section and, in addition, shall be approved by the affirmative vote of the holders of a majority of shares entitled to vote thereon.
  4. Whenever the department shall surrender possession under this Code section, it shall forthwith file with the principal court a supplement to the certificate of possession, setting forth in detail all the conditions and purposes of such surrender. This supplement shall be indexed in a manner which will, insofar as necessary, satisfy the prior record of the certificate of possession.
  5. Whenever the department shall, under this Code section, surrender possession of the entire business and property of a financial institution in receivership, it shall file in the principal court an account, which shall correspond to any other final account under this chapter. Such account shall be subject to exceptions by shareholders, or depositors, or other creditors, and to confirmation by the court, in the same manner as is provided by this chapter for any account filed by the department as receiver.

    (Code 1933, § 41A-725, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 136.

7-1-175. Ability of department to reject executory contract or lease of financial institution in receivership.

Within 180 days after the department takes possession of a financial institution, the department, as receiver, may at its election reject any executory contract to which the financial institution is party without further liability to the financial institution or the receiver or may reject any obligation of the financial institution as a lessee of real or personal property. The department's election to reject a lease creates no claim for rent other than rent accrued to the date of termination or for actual damages, if any, for such termination, not to exceed the equivalent of six months' payment.

(Code 1981, § 7-1-175 , enacted by Ga. L. 1984, p. 949, § 3.)

7-1-176. Sale of assets of financial institution in receivership.

  1. Whenever the department as receiver, with leave of court as provided in Code Section 7-1-156, undertakes to sell all or part of the assets of a financial institution in its possession in consideration of the assumption by the purchaser of the liabilities due to depositors and other creditors other than the holders of subordinated securities, the department shall be under no further obligation to file any inventory, appraisement, partial accounting, or deliver any notice to creditors other than holders of subordinated securities until the filing of the final accounting unless otherwise directed by the court.
  2. Notwithstanding any other law to the contrary, in facilitation of a purchase of assets and assumption of liabilities as described in subsection (a) of this Code section, all or any part of the assets may be sold to the deposit insurer for the financial institution in liquidation notwithstanding such insurer's capacity as receiver or deputy receiver of the financial institution. Such insurer as receiver or deputy receiver may also borrow from itself in its corporate capacity any amounts necessary to facilitate the assumption of deposit liabilities by an existing financial institution or a newly chartered financial institution, assigning any part or all of the assets of the closed bank as security for such loan. (Code 1981, § 7-1-176 , enacted by Ga. L. 1984, p. 949, § 4.)

PART 8 C LAIMS, PRIORITIES, AND ACCOUNTING IN RECEIVERSHIPS

RESEARCH REFERENCES

Liability for Torts Committed in Repossession, 42 POF355.

ALR. - Trust or preference in respect of money placed in bank for purpose of transaction with third person where bank subsequently becomes insolvent, 31 A.L.R. 472 ; 93 A.L.R. 881 .

Prerogative right of county or other political subdivision to preference in assets of insolvent, 52 A.L.R. 755 ; 90 A.L.R. 208 .

Character of service contemplated by statutes giving a lien or preference, in event of insolvency, to servants, employees, laborers, etc., 54 A.L.R. 567 .

Right of one indebted to insolvent bank to setoff deposits which he has made as trustee, 55 A.L.R. 822 .

Election of remedies or estoppel as regards claims against insolvent bank, 69 A.L.R. 456 .

Insolvency of bank guaranty fund as affecting rights or obligations of member banks and their depositors, 78 A.L.R. 808 .

Construction and effect of statutes or constitutional provisions in relation to priority or preference of deposits in assets of insolvent bank or trust company, 86 A.L.R. 1310 ; 93 A.L.R. 1017 .

Rights against receiver or other liquidating officer of bank as to paper deposited before but not collected at the time bank closed its doors, 94 A.L.R. 1395 .

Character or class of claims protected by deposit by foreign corporation as condition of doing business, and rank or priority of such claims, 104 A.L.R. 748 .

Rights and preferences in respect of assets of insolvent bank as affected by its division into departments, 114 A.L.R. 680 .

Rights of owners of securities deposited in bank, upon its insolvency, 126 A.L.R. 625 .

7-1-190. Preservation of assets; proceedings in lieu of attachment, execution, or repossession.

  1. The status of all parties shall become fixed on the date the department takes possession of a financial institution. No corporation or person shall thereafter acquire any lien or charge against the financial institution for so long as it remains in receivership, provided that nothing in this Code section or elsewhere in this chapter shall be construed to impair any preferred claim arising pursuant to Code Section 11-4-214.
  2. No execution, attachment, or repossession (whether by action or otherwise) shall issue or be proceeded with against any assets owned by or in the custody or possession of a financial institution in receivership. In lieu of the right to issue an attachment or execution against assets of or lawfully in the possession or custody of the financial institution, a plaintiff may proceed by giving written notice of his claim to the department or to the deputy receiver of such financial institution; and he shall thereafter prove his claim in the regular manner prescribed by this chapter. If, in filing its account, the department rejects the claimed right to execution or attachment, the court shall adjudicate the matter as in the case of other disputed claims.

    (Ga. L. 1919, p. 135, art. 7, § 3; Code 1933, § 13-803; Code 1933, § 41A-801, enacted by Ga. L. 1974, p. 705, § 1.)

JUDICIAL DECISIONS

Purpose of Ga. L. 1919, p. 135 (see O.C.G.A. § 7-1-190 ) is to protect possession of assets of bank by superintendent (now department) from interference by any legal proceedings, such as one for receivership, by levy of process upon such assets, or any proceedings by which possession of the superintendent would be disturbed. Berrien County Bank v. Alexander, 154 Ga. 775 , 115 S.E. 648 (1923); Bennett v. Green, 156 Ga. 572 , 119 S.E. 620 (1923).

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 182.

ALR. - Deposits on interest as waiver of state's priority, 42 A.L.R. 1296 .

Trust or preference in assets of insolvent bank in respect of proceeds of collection as affected by notice or instructions with respect to collection, 90 A.L.R. 6 .

Bank conservators, 107 A.L.R. 1431 .

Rights and preferences in respect of assets of insolvent bank as affected by its division into departments, 114 A.L.R. 680 .

Payment of depositor's debt to insolvent bank against which deposit might otherwise have been set off as affecting depositor's equivalent rights, 139 A.L.R. 723 ; 162 A.L.R. 1175 .

7-1-191. Exclusivity of claims procedure; effect of receivership on pending actions.

All claims against the financial institution, action upon which has not been commenced prior to the time the department took possession, shall be presented in the regular manner provided by this chapter for the presentation of claims. Neither a depositor or other creditor of the financial institution nor any other claimant may maintain any action at law or in equity upon such claim, except by regular method provided by this chapter for exceptions to the accounting of the department as receiver. However, an action for the return of specific property or property with respect to which the plaintiff holds a perfected security interest or security title which could have been recovered by the plaintiff from the financial institution in receivership may be maintained in the principal court against the department in its name as receiver of the financial institution. All actions pending against the financial institution when the department takes possession shall be automatically stayed during the receivership, provided that all such actions, except those specified in subsection (b) of Code Section 7-1-190, may proceed with prior approval of the principal court.

(Code 1933, § 41A-802, enacted by Ga. L. 1974, p. 705, § 1.)

JUDICIAL DECISIONS

Remedy exclusive. - Under state law, procedure provided in O.C.G.A. Ch. 1, T. 7 is an exclusive remedy. FDIC v. Willis, 497 F. Supp. 272 (S.D. Ga. 1980).

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, § 1115.

C.J.S. - 9 C.J.S., Banks and Banking, § 190.

ALR. - Right of creditors or stockholders of insolvent bank in charge of liquidating officer who refuses or fails to enforce liability of third persons to bank, to maintain action for that purpose, and conditions of such right, 97 A.L.R. 169 ; 116 A.L.R. 783 .

7-1-192. Notice to depositors and other creditors to present claims.

  1. After filing a supplement to the certificate of possession setting forth its determination to liquidate the affairs of a financial institution in receivership, the department shall forthwith give notice of such determination to all corporations or persons who appear upon the books of the financial institution as depositors or other creditors or who are otherwise known to the department to be or who claim to be depositors or other creditors or who have given notice to the department claiming a right of execution or attachment against any assets owned by or legally in the custody or possession of the financial institution.
  2. The notice to depositors shall state the amount which the books or other records of the financial institution show to be due to such depositor. It shall also state that unless such depositor shall, within a specified time, present to the department his bank statement or passbook or other evidence of his account showing a different amount to be due or unless such depositor shall, within a specified time from the date of such notice, otherwise prove in the manner provided by this chapter that a different amount is due, the amount shown to be due by the books of the financial institution will be conclusively presumed to be correct unless the court, pursuant to this chapter, grants him an extension of time.
  3. The notice to each creditor, other than a depositor, shall inform such creditor that he must present his claim in the manner provided by this chapter within a specified time from the date of such notice or else be permanently barred from sharing in any distribution of the assets of the financial institution unless the court, pursuant to this chapter, grants him an extension of time.
  4. The department shall also advertise, in the manner prescribed by this chapter, its determination to liquidate the financial institution. Such advertisement shall state that the department has filed an inventory and appraisement of the assets of the institution and shall designate the superior court with which such documents have been filed and shall describe the legal consequences to depositors and other creditors of failure to prove those claims within the time set in the notice. For purposes of this advertisement and other notices or advertisements required hereunder, the department may, to the extent it deems appropriate, describe shareholders of credit unions as such, not by use of the defined term "depositors" used in this chapter.
  5. The department shall specify as the last day upon which depositors and other creditors can prove their claims a date at least 30 days after the date of the sending of such notice to depositors and creditors. However, claims based upon deficiencies in, or surcharges with respect to, assets which such financial institution held in a fiduciary capacity may be proved at any time within six months after the appointment of a substituted fiduciary of the estate of which such assets were a part and the adjudication of the account of such estate by the competent court.

    (Ga. L. 1919, p. 135, art. 7, § 13; Code 1933, §§ 13-815, 13-816; Code 1933, § 41A-803, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 7-4/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "building and loan associations and" following "shareholders of" in the third sentence of subsection (d).

JUDICIAL DECISIONS

Cited in Jones v. FDIC, 151 Ga. App. 619 , 260 S.E.2d 751 (1979); FDIC v. Jones, 161 Ga. App. 867 , 291 S.E.2d 70 (1982).

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, § 1115.

7-1-193. Proof of claims of depositors.

  1. Any depositor who disagrees with the amount shown by the books or other records of the financial institution to be due to him shall prove his claim by presenting his bank statement or passbook or other documentary indication of indebtedness to the department within the time and in the manner designated by the department pursuant to this chapter. Any such depositor who shall not have received or shall have lost his bank statement or passbook or other documentary evidence or who shall believe that the amount shown to be due him by such bank statement or passbook or other documentary evidence is incorrect shall, within the time designated by the department, present his claim to the department by whatever method, including affidavits, the department shall designate.
  2. Any depositor who shall not present his claim within the designated time and in the manner provided by this Code section shall be bound by the amount appearing to be due to him upon the books or records of the financial institution or, where the name of such depositor does not appear at all upon the books or records of the financial institution or appears on such books or records but with no balance appearing to be due to him by the financial institution, shall be permanently barred from sharing in any distribution of the assets of the financial institution. However, the principal court may, upon petition and adequate cause shown, permit any depositor to file his claim at a later date, but no claim shall in any event be allowed to be filed after the last day for the filing of exceptions to the first account of the department.
  3. This Code section shall not, however, be construed to deprive any depositor of any right of action at law or in equity which he may have against an officer or employee or former officer or employee of the financial institution or upon the bond of such officer or employee or former officer or employee for any act committed by such officer or employee which resulted in such depositor's name not appearing upon the books of the financial institution or appearing upon them but being credited with an amount below that actually due.
  4. The department shall prescribe the form for the proof of claim of all depositors and for an affidavit as to the truth of statements therein to be included with the claim. Whenever requested by any such depositor to prepare such proof of claim or to take the affidavit thereto, the department may do so without any charge to such depositor if the department concludes that it would be burdensome or difficult for the depositor to prepare the proof.

    (Ga. L. 1919, p. 135, art. 7, § 18; Ga. L. 1925, p. 119, § 1; Code 1933, § 13-820; Code 1933, § 41A-804, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 643.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1098, 1116.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 152 et seq., 214.

ALR. - Right of depositor to rescind, or to claim a trust in respect of a deposit because of insolvency of bank when it was made, 20 A.L.R. 1206 ; 81 A.L.R. 1078 .

Admissibility of extrinsic evidence to explain or contradict bank deposit slips, deposit entries in passbooks, certificates of deposit, or similar instruments, 42 A.L.R.2d 600.

7-1-194. Proof of claims of creditors.

Creditors other than depositors shall not share in any distribution of the assets of the financial institution unless the creditor or his designated representative shall, within the time and in the manner specified by the department pursuant to this chapter, present to the department a statement of his claim, together with a copy of any book entries pertaining thereto, any evidence of indebtedness or other instrument received as evidence thereof, the details with respect to any collateral or agreement of pledge received in connection therewith, and a description of any insurance pertaining thereto. The department shall prescribe the form for the proof of claim of creditors and for affidavit as to the truth of statements therein to be included with the claim. However, the court may, upon petition and adequate cause shown, permit any creditor to file his claim upon a later date, but no claim shall in any event be allowed to be filed after the last day for the filing of exceptions to the first account of the department.

(Ga. L. 1919, p. 135, art. 7, § 18; Ga. L. 1925, p. 119, § 1; Code 1933, § 13-820; Code 1933, § 41A-805, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1098, 1116.

ALR. - Balance due other banks on clearing house settlement as preferred claim against insolvent bank, 44 A.L.R. 1535 .

Election of remedies or estoppel as regards claims against insolvent bank, 69 A.L.R. 456 .

7-1-195. Allowance of claims.

For the purposes of the accounting provided for in this chapter, the department shall allow the claims of depositors for the amounts shown to be due to them upon the books or other records of the financial institution (unless it determines such books or records to be in error) or for such other amounts as they shall, within the time and in the manner provided by this chapter, prove to the satisfaction of the department are due to them. It shall likewise allow the claims of all other creditors, when presented within the time and in the manner provided by this chapter, if it shall be satisfied that the amounts claimed are rightfully due. In allowing claims, the department may change their rank to that which it determines to be proper and may reduce them by exercise of the financial institution's right of setoff against the claimant. It shall reject all other claims of depositors and other creditors.

(Ga. L. 1919, p. 135, art. 7, § 15; Ga. L. 1927, p. 195, § 4; Code 1933, § 13-817; Code 1933, § 41A-806, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1098, 1116.

C.J.S. - 9 C.J.S., Banks and Banking, § 152 et seq.

ALR. - Election of remedies or estoppel as regards claims against insolvent bank, 69 A.L.R. 456 .

Right to set off deposit in insolvent bank against indebtedness to bank, 97 A.L.R. 588 .

7-1-196. Advance payment of dividends to depositors.

  1. After filing a supplement to the certificate of possession setting forth its determination to liquidate the affairs of the financial institution, the department may, without leave of court and without filing an account, make an advance payment of a dividend to all depositors the amounts of whose claims, as they appear upon the books or other records of the financial institution, are undisputed. The dividend shall be calculated as if the claims of all other depositors, as they appear upon the books or other records of the financial institution, and the claims of all creditors or other corporations or persons who assert priority over or parity with depositors in the order of distribution of the assets, were valid and uncontested.
  2. However, the department shall not make such an advance payment of a dividend to any depositor until it shall have set aside an amount sufficient to pay in full the claims of all creditors or other corporations or persons asserting or entitled to priority over depositors in the order of distribution and to pay the proportionate dividend on the amounts claimed by the other depositors and by any creditors or other corporations or persons who are entitled to or who claim parity with depositors in the order of distribution provided for by law. The department shall likewise set aside, before making such advance payment, such amount as it shall deem necessary for the expenses of administration of the receivership.

    (Ga. L. 1919, p. 135, art. 7, § 21; Code 1933, § 13-823; Code 1933, § 41A-807, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, § 1117.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 188, 196.

7-1-197. Expenses of administration.

Any reasonable expenditure made by the department as receiver of a financial institution, including any expense incurred in the management, reorganization, consolidation, liquidation, or distribution of the assets and affairs of the financial institution, any payment of a loan or interest thereon under Code Section 7-1-164, and any compensation paid to the deputy receiver, attorneys, or any other person employed to assist the department in such management, reorganization, consolidation, liquidation, or distribution shall be paid out of the assets of the financial institution, provided it is included in any partial or final account filed by the department pursuant to this chapter and is approved by the principal court in which such account is filed. Where such expenses are incurred or such compensation is paid for the benefit of the estate of more than one financial institution in the possession of the department as receiver, an equitable portion of such expenses or compensation shall be paid out of the assets of each financial institution on whose behalf such expenditures were incurred or paid.

(Ga. L. 1919, p. 135, art. 7, § 23; Ga. L. 1925, p. 119, § 1; Ga. L. 1931, p. 7, § 91; Code 1933, § 13-825; Code 1933, § 41A-808, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1084, 1121.

C.J.S. - 9 C.J.S., Banks and Banking, § 674 et seq.

7-1-198. Filing or ordering partial or final account; notice of filing; exceptions.

  1. At any time after the expiration of the period fixed by the department for the presentation of claims, it may file a partial account of its administration of the business and property of the financial institution, duly verified under oath or affirmation, with the principal court. If the department does not file its first account within one year after it takes possession of a financial institution, any depositor, other creditor, or shareholder of such financial institution may petition the court to order the department to file an account. The court may, in its discretion, grant or refuse the petition. Whenever it becomes economically advisable to wind up finally the affairs of a financial institution in liquidation, the department shall file with the principal court its final account, duly verified under oath or affirmation. The clerk of the principal court shall not be under any duty to recopy or otherwise to record any account and shall make no charge except the regular fee for filing such or similar papers.
  2. The account shall present the department's administration of the estate, including a statement of all receipts or expenditures, a list of all claims which have been allowed, and a separate list of claims which have been objected to or are disputed, showing as to all depositors and other creditors, their names and addresses, the amounts due or claimed to be due to them, and any priorities in the order of distribution granted to or claimed by them. A final account need not present matters previously settled incident to partial accounts.
  3. The department shall forthwith give written or printed notice of the filing of an account to all corporations or persons whom it knows to be, or who claim to be depositors or other creditors or who have given to it notice claiming a right of attachment or execution. Such notice shall also state that unless an exception to the account or to any item therein is filed with the principal court within 30 days from the date of the filing thereof, it will be confirmed absolutely. The department shall also advertise such notice in a newspaper or newspapers as provided in this chapter, stating the date upon which it has filed its partial or final account and that all exceptions to the account must be filed within 30 days from the date of the filing of the account. The department shall forthwith file with the court, under oath or affirmation, a statement that it has, in the manner provided by this chapter, sent both the notice of its determination to liquidate and the notice of its filing of an account to all corporations or persons entitled thereto. The department shall also file the proofs of publication of the advertisements required by this Code section.
  4. Any corporation or person who is or who claims to be a depositor, other creditor, or shareholder of a financial institution or who has given to the department notice of his claim to the right of execution or attachment or who asserts any other type of claim against a financial institution may, within 30 days after the filing of an account by the department, file in the principal court specific exceptions in writing, under oath or affirmation, to such account or to any item therein. Notice of any exception to an individual item in an account shall forthwith be personally served upon or sent by registered or certified mail or statutory overnight delivery to the corporation or person whose claim is thus objected to or his counsel and also the department or the deputy receiver managing the affairs of the particular financial institution or the counsel of either. Affidavit of the serving or sending of such notice shall forthwith be filed with the court.
  5. Whenever an exception is filed to any expenditure made by the department as an expense of administration, the department shall keep an accurate record of the salaries and other expenses properly incurred by it in the contesting of such exception. If the exception is overruled and the expenditure is sustained, the court may, in its discretion, assess such expenses and salaries, together with the regular costs provided by law, upon the depositor, other creditor, or shareholder filing such exception.

    (Ga. L. 1919, p. 135, art. 7, §§ 15-17; Ga. L. 1927, p. 195, §§ 4, 4A; Code 1933, §§ 13-817, 13-818, 13-819; Code 1933, § 41A-809, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2000, p. 1589, § 3.)

Editor's notes. - Ga. L. 2000, p. 1589, § 16, not codified by the General Assembly, provides that the amendment to this Code section is applicable with respect to notices delivered on or after July 1, 2000.

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, §§ 152 et seq., 176, 214.

7-1-199. Adjudication of rejected claims and exceptions to account.

  1. If any claim has been rejected by the department or any exception has been filed to the account or to any item thereof, the principal court shall, as soon as expedient after the expiration of the period for the filing of exceptions to the account, fix a date for hearing in court arguments on all rejected claims and all exceptions to the account or to any item thereof. The department shall give notice of such hearing to all corporations or persons whose claims have been rejected by the department or objected to in the manner provided by this chapter. It shall likewise give notice to all corporations or persons who have filed exceptions to the account or to any item thereof. Such notice shall set forth, insofar as possible, the reasons for the rejection of the claim or the nature of the exception to the item of the account and shall state that all parties whose claims are rejected or objected to must appear in the principal court upon the date fixed by the court to prove their claims or they will be bound by the ex parte decision of the court.
  2. The principal court in which the account is filed shall itself hear arguments upon any rejected claim or upon any exception to an account, or to any item thereof, upon the date fixed by it for this purpose. The court shall itself decide, without delay, all matters in controversy. If any party does not appear in court on the day fixed, the court shall conduct the hearing ex parte and shall render its decision upon the merits as they appear after such hearing.

    (Code 1933, § 41A-810, enacted by Ga. L. 1974, p. 705, § 1.)

JUDICIAL DECISIONS

Editor's notes. - In light of the similarity of the statutory provisions, decisions under former Ga. L. 1919, p. 135 are included in the annotations for this Code section.

Remedy exclusive. - Under state law, the procedure provided in O.C.G.A. Ch. 1, T. 7 is an exclusive remedy. FDIC v. Willis, 497 F. Supp. 272 (S.D. Ga. 1980).

Prerequisite to suit under Ga. L. 1919, p. 135. - When the superintendent (now department) has given the required notice as to the presentment of claims, a suit cannot be brought against the bank upon any claim, unless the claim, with sworn proof thereof, has been filed with the superintendent of banks or office of bank and been rejected by the superintendent, and unless the suit be brought as required by Ga. L. 1919, p. 135 (see now O.C.G.A. § 7-1-199 ). Berrien County Bank v. Alexander, 28 Ga. App. 55 , 110 S.E. 311 (1922) (decided under former Ga. L. 1919, p. 135).

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, §§ 152 et seq., 192, 214.

7-1-200. Confirmation of account; distribution of dividends; final disposition of assets insufficient for distribution; cancellation of articles.

  1. If the department has approved all depositors' claims, as proved by them pursuant to this chapter or if not proved as they appear upon the books or other records of the financial institution and if no exception has been filed to an account or to any item thereof within 30 days after the filing of such account by the department, the principal court shall confirm the account absolutely. If any funds are available for distribution, the department shall then declare and pay out of such funds a partial or a final dividend, according to the priorities established by law. If the department has rejected any deposit or claim or if any exception has been filed, the court shall confirm the account as to all other matters and claims. The department may then declare and pay out of the funds available for distribution, if any, a dividend, according to the priorities established by law. The dividend shall be calculated as if all deposits and other claims were valid and approved. The department, before paying any such dividend, shall set apart funds or assets sufficient to pay required distribution on any claim still being asserted which has been rejected or reduced in priority by the department or to which an exception has been filed if the amount and the priority claimed were sustained by the court. If any such claim shall be determined by the court to be valid, the department shall pay to the corporation or person entitled thereto the dividend which has been set apart in the manner provided by this Code section. If any such claim shall be determined by the court to be invalid, the dividend which has been set apart in the manner provided by this Code section shall be distributed in the order of the priorities established by law to those whose claims have been approved by the court; provided, however, that any final determination as to disputed claims may be appealed as provided by law and payments may be withheld pending the results of the appeal.
  2. The confirmation of any account after the adjudication of all claims therein which have been rejected or reduced in priority by the department or to which exceptions have been filed and of all other exceptions to such account shall be conclusive as to all matters therein. Except as otherwise provided in this chapter, no claim of any depositor or other creditor shall be valid if not listed and approved in the first account which has been filed. The confirmation of the final account and distribution thereunder shall discharge the department, the commissioner, the deputy receiver, any other employee, and the legal counsel, as well as the surety for any of them, from all further civil liability for any act done in an official capacity with respect to the receivership.
  3. Upon confirmation of the final account the department may impound the balance of the assets, including real property, remaining in its hands and shall not be obligated to sell such assets or actively to collect on the impounded assets. With regard to said assets, including real estate and including after-discovered assets, it shall, however, retain all of its powers to receive payment for them or, with leave of court, to adjust or compromise them. After its final accounting and discharge, the department shall have power to make further distribution to the creditors, depositors, and shareholders when, in its opinion, sufficient funds are realized to justify such distribution after deducting reasonable costs for collection, preservation, and distribution. If the department is of the opinion that the funds collected or probably to be collected will be insufficient to make a distribution practicable and that all interested claimants will not in the future have their claims satisfied, it shall, after deducting reasonable costs for collection and preservation, hold the remainder of such property subject to Article 5 of Chapter 12 of Title 44. Thereafter, the articles of incorporation or charter shall no longer be valid and the department shall notify the Secretary of State that the receivership has been concluded. The Secretary of State shall promptly cancel such articles or charter of record in that office.

    (Ga. L. 1919, p. 135, art. 7, § 21; Code 1933, § 13-823; Code 1933, § 41A-811, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1980, p. 972, § 4.)

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, § 1117.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 152 et seq., 214.

7-1-201. Unclaimed dividends.

Whenever a dividend remains unclaimed six months after it has been declared and the department is unable to locate the depositor or other claimant to whom said dividend was payable, the dividend shall become a part of the general assets of the financial institution and be distributed as other assets.

(Ga. L. 1919, p. 135, art. 7, § 24; Ga. L. 1925, p. 119, § 1; Code 1933, § 13-826; Code 1933, § 41A-812, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-202. Order of payment of liabilities; secured or preferred claims and liens.

  1. In the distribution of the assets of a financial institution which is liquidated or dissolved, whether under this chapter or by any other method, the order of payment of liabilities of the financial institution in the event that its assets are insufficient to pay in full all its liabilities for which claims are duly made shall be:
    1. First, the payment of costs and expenses of administration of the liquidation or dissolution;
    2. Second, the payment of debts due depositors;
    3. Third, the payment of all state taxes;
    4. Fourth, judgments;
    5. Fifth, contractual obligations;
    6. Sixth, unliquidated claims for damages and the like;
    7. Seventh, capital securities.
  2. Nothing in this chapter shall impair the validity or the priority otherwise accorded by law to any security interest, security title, preferred claim arising under Code Section 11-4-214, or any lien arising by force of law; provided, however, any of the foregoing may be delayed in payment by the principal court until costs of administration including loans or interest payments under Code Section 7-1-164 or the costs of selling or otherwise disposing of assets under this chapter have been met in any case where the principal court determines that the claimant of the security interest, security title, preferred claim, or lien has expressly or impliedly consented to the administrative activities involved or has benefited from such activities.

    (Ga. L. 1919, p. 135, art. 7, § 19; Ga. L. 1925, p. 119, § 1; Ga. L. 1927, p. 195, § 5; Ga. L. 1931, p. 7, § 91; Code 1933, § 13-821; Code 1933, § 41A-813, enacted by Ga. L. 1974, p. 705, § 1.)

Cross references. - Priority of payment of notes, debentures, etc., issued by a bank or trust company which becomes insolvent or is liquidated, § 7-1-419 .

JUDICIAL DECISIONS

Georgia Law 1927, p. 195, § 5 (see now O.C.G.A. § 7-1-202 ) does not violate Ga. Const. 1976, Art. VII, Sec. I, Para. IV (see now Ga. Const. 1983, Art. VII, Sec. II) even though the statute fixes the priority of other claims relative to taxes. Baggett v. Mobley, 171 Ga. 268 , 155 S.E. 334 (1930).

Georgia Law 1927, p. 195, § 5 (see now O.C.G.A. § 7-1-202 ) does not violate Ga. Const. 1976, Art. VII, Sec. I, Para. III (see now Ga. Const. 1983, Art. VII, Sec. I, Para. III) since the statute does not affect the uniformity of taxes in any way, the statute does not in any way change or make less uniform the rate of taxes fixed upon the same class of subject, nor does the statute affect ad valorem taxes on all property subject to taxes within territorial limits of the state; even though the statute fixes the priority of other claims relative to taxes. Baggett v. Mobley, 171 Ga. 268 , 155 S.E. 334 (1930).

Order of distribution of insolvent bank. - Order of distribution of assets upon insolvency of a bank which grants payment of debts due depositors priority over payment of state taxes is not an unconstitutional violation of Ga. Const. 1976, Art. VII, Sec. I, Paras. I, III, IV (see now Ga. Const. 1983, Art. VII, Sec. I, Paras. I, III and Art. VII, Sec. II). Felton v. McArthur, 173 Ga. 465 , 160 S.E. 419 (1931).

Statute is general law. - Ga. L. 1927, p. 195, § 5 (see now O.C.G.A. § 7-1-202 ) does not violate Ga. Const. 1976, Art. I, Sec. II, Para. VII (see now Ga. Const. 1983, Art. III, Sec. VI, Para. IV) and is a general law and not a special law; and it was competent for the legislature to pass this general law without violating this provision of the constitution. Felton v. McArthur, 173 Ga. 465 , 160 S.E. 419 (1931).

Georgia Law 1927, p. 195, § 5 does not attempt to exempt property from taxation. - Georgia Law 1927, p. 195, § 5 (see now O.C.G.A. § 7-1-202 ) may render execution issued by tax collector unfruitful, in view of fact that claims which are given priority may exhaust property classed among assets of the bank; but no attempt is made by the statute to exempt property from taxation; even though the statute fixes priority of other claims relative to taxes. Baggett v. Mobley, 171 Ga. 268 , 155 S.E. 334 (1930).

Priorities set by Ga. L. 1927, p. 195, § 5 supersede O.C.G.A. §§ 48-5-28 and 48-2-56 . - Priorities of payment established by Ga. L. 1927, p. 195, § 5, (see now O.C.G.A. § 7-1-202 ) which allow payment to depositors before payments of state taxes supersede the provisions of former Code 1933, §§ 92-5707 (see now O.C.G.A. § 48-5-28 ) and 92-5708 (see now O.C.G.A. §§ 48-2-56 and 48-5-28) which make tax collection a priority above other debts. Felton v. McArthur, 173 Ga. 465 , 160 S.E. 419 (1931).

Property in possession of liquidating agent of bank cannot be levied upon. Gormley v. Askew, 176 Ga. 210 , 167 S.E. 600 (1933).

Equity will enjoin levy on fieri facias against insolvent bank. - Equity will enjoin tax collector and sheriff from trying to enforce by levy and sale collection of tax fieri facias against insolvent bank taken over by superintendent of banks (now commissioner of banking and finance) for liquidation. Gormley v. Askew, 176 Ga. 210 , 167 S.E. 600 (1933).

"Debts due depositors" must mean all depositors and there are several kinds. There are general deposits, special deposits, and deposits for specific purposes. Gormley v. Board of Comm'rs of Rds. & Revenues, 178 Ga. 439 , 173 S.E. 667 (1934).

Effect of liquidation upon liability on checks deposited for collection. - When principal-agent relationship exists between the bank and the depositor for purpose of collecting a check and an agency ceases due to the failure of the bank and takeover of the bank by the superintendent of banks (now commissioner of banking and finance), the check and the check's proceeds are property of the depositor and not subject to the provisions of this section. Hogansville Banking Co. v. Ware, 171 Ga. 167 , 155 S.E. 4 (1930).

Ad valorem taxes on bank's assets are not administrative obligation or expense incurred by receiver but are a charge imposed by the sovereign. Taxes are referred to as expenses of administration only because it is a duty of the receiver to pay the taxes. Tharpe v. Gormley, 184 Ga. 605 , 192 S.E. 211 (1937).

Taxes payable only after expenses of liquidation and claims of depositors. - State taxes are payable only after all costs and expenses of the administration of the liquidation or dissolution, and the payment of the claims of depositors. Roberts v. Gunter, 251 Ga. 276 , 304 S.E.2d 369 (1983).

Waiver of state's right to first collect taxes extends to assets. - If, in administration of assets of insolvent bank, the superintendent of banks (now commissioner of banking and finance), comes into possession of deeds given to the bank conveying title to the land, leaving debtor to bank owner of a mere equity in premises conveyed, the state's waiver of the state's right to first collect the state's taxes (in favor of depositors' claims), as embodied in Ga. L. 1927, p. 195, § 5, naturally extends so as to include such taxes as are a liability upon the assets in the hands of the superintendent of banks. Gormley v. Askew, 176 Ga. 210 , 167 S.E. 600 (1933).

OPINIONS OF THE ATTORNEY GENERAL

Credit union acting as receiver violates section by preferring unsecured creditor. - Credit union deposit insurance corporation, acting as receiver or deputy receiver of member credit union, cannot purchase an unsecured note with the assets of the credit union since such purchase would give an unsecured creditor priority over the depositors and other more senior claimants. 1977 Op. Att'y Gen. No. 77-7.

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1120, 1124.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 152 et seq., 214.

ALR. - Right of owner of check which the drawee bank held for him at time it closed its doors, to a preference, 17 A.L.R. 196 .

Right of depositor to rescind, or to claim a trust in respect of a deposit because of insolvency of bank when it was made, 20 A.L.R. 1206 ; 81 A.L.R. 1078 .

Balance due other banks on clearing house settlement as preferred claim against insolvent bank, 44 A.L.R. 1535 .

Right, in absence of statute, to preference in respect of deposit of public funds in insolvent bank, 51 A.L.R. 1336 ; 65 A.L.R. 690 ; 90 A.L.R. 184 ; 103 A.L.R. 621 ; 167 A.L.R. 640 .

Prerogative right of county or other political subdivision to preference in assets of insolvent, 52 A.L.R. 755 ; 90 A.L.R. 208 .

Trust or preference in assets of insolvent bank or trust company in respect of funds which it held as executor, administrator, or testamentary trustee, 56 A.L.R. 806 ; 83 A.L.R. 1110 ; 94 A.L.R. 1123 .

Deposit of funds except from claims of creditors of depositor, as entitled to preference out of the assets of insolvent depositee, 71 A.L.R. 1181 .

Right of holder of cashier's check to preference out of assets of insolvent banks, 73 A.L.R. 66 ; 95 A.L.R. 676 .

Right of depositor to preference in assets of insolvent bank because dissuaded by bank officials or employees from withdrawing deposit after insolvency, 80 A.L.R. 795 .

Rights and preference in respect of assets of insolvent bank or trust company as affected by its division into departments, 81 A.L.R. 1479 ; 89 A.L.R. 1218 ; 114 A.L.R. 680 .

Constitutionality of statute relating to preferences in assets of insolvent bank, 83 A.L.R. 1080 .

Garnishment of deposit by depositor's creditor as entitling latter to trust or preference out of assets of insolvent garnishee bank, 83 A.L.R. 1085 .

Preference in assets of insolvent bank in respect of deposits of veterans' compensation or war-risk insurance proceeds or pension money, 83 A.L.R. 1089 ; 84 A.L.R. 1530 .

Trust or preference in assets of insolvent bank or trust company in respect of deposit by receiver, 83 A.L.R. 1097 .

Trust or preference in assets of insolvent bank or trust company as to deposits by trustee in bankruptcy, 83 A.L.R. 1105 .

Trust or preference in assets of insolvent bank or trust company in respect of funds which it held as executor, administrator, or testamentary trustee, 83 A.L.R. 1110 ; 94 A.L.R. 1123 .

Waiver of right of government to preference in the assets of insolvent debtor by taking security, 83 A.L.R. 1119 .

Right of surety who discharges obligation due to government to be subrogated to priority or preference of latter, 83 A.L.R. 1131 .

Rights of owners of securities deposited in bank upon its insolvency, 84 A.L.R. 1534 ; 126 A.L.R. 625 .

Construction and effect of statutes or constitutional provisions in relation to priority or preference of deposits in assets of insolvent bank or trust company, 86 A.L.R. 1310 ; 93 A.L.R. 1017 .

State's prerogative right of preference at common law, 90 A.L.R. 184 ; 167 A.L.R. 640 .

Prerogative right of county or other political subdivision to preference in assets of insolvent, 90 A.L.R. 208 .

Right of holder of cashier's check to preference out of assets of insolvent bank, 95 A.L.R. 676 .

Trust or preference in assets of insolvent bank in respect of money deposited or left on deposit pursuant to agreement of bank to purchase bonds or make other investment for depositor, 105 A.L.R. 516 .

7-1-203. Subrogation of insurer of deposits or shares.

Where the deposits or shares of a financial institution are insured by a federal public body or otherwise, the claims of depositors shall be subrogated in favor of said insurer to the extent that it pays or makes available for payment claims of such depositors against the financial institution, provided that the rights of such depositors to receive dividends or other distributions upon that portion of their claims not made available for payment shall not be affected by such subrogation.

(Code 1933, § 41A-814, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-204. Liquidation of excess assets by trustees.

If any unliquidated assets remain in the department's possession after the filing and confirmation of its final account, the payment in full of the claims of all depositors, creditors, and other claimants which have been approved by the court and the distribution to shareholders of any cash balance remaining thereafter, it shall call a meeting of all the shareholders of the financial institution by giving them written notice at least 30 days before the day fixed for the meeting. At such meeting, the shareholders shall elect by ballot a trustee or trustees, who shall complete the liquidation. A majority of the shares present in person or by proxy shall be necessary to elect such trustee or trustees. The department shall file a certified copy of the minutes of said meeting with the principal court. If no trustee is elected in this manner on the day designated, the department shall petition the principal court for the appointment of a trustee or trustees. The trustee or trustees who are thus elected by the shareholders or appointed by the court shall give bond to the state, in such amount, with such surety, and under such conditions as the court may direct. The department shall then transfer to such trustee or trustees all the assets of the financial institution which are still in its possession. After such transfer by the department to a trustee or trustees for the benefit of the shareholders, the financial institution shall have no corporate powers or privileges whatsoever, except that its shareholders may elect a successor trustee or trustees upon death, removal, or inability of the first trustee or trustees to act. The trustee or trustees shall not succeed to any powers or privileges except such as shall be necessary to the liquidation of the remaining assets which have been transferred to such trustee or trustees by the department.

(Ga. L. 1919, p. 135, art. 7, §§ 24-27; Code 1933, §§ 13-827, 13-828, 13-829; Code 1933, § 41A-815, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-205. Destruction of records.

The department is authorized to destroy all records of the financial institution of which it was in possession as receiver and all records of such receivership at the expiration of six years from the date of the absolute confirmation of its final account, except where any provision of this chapter expressly provides a different method for the disposition of the records or a longer period for their preservation.

(Code 1933, § 41A-816, enacted by Ga. L. 1974, p. 705, § 1.)

PART 9 R ECEIVERSHIP PROCEDURES INVOLVING TRUST OR POOLED ASSETS

RESEARCH REFERENCES

ALR. - Trust or preference in respect of money placed in bank for purpose of transaction with third person where bank subsequently becomes insolvent, 31 A.L.R. 472 ; 93 A.L.R. 881 .

Trust or preference in respect of money used to purchase exchange or to be transmitted, 57 A.L.R. 1168 ; 84 A.L.R. 1470 ; 93 A.L.R. 938 ; 101 A.L.R. 631 .

Trust or preference in, or lien upon, assets of insolvent bank or trust company in respect of funds which it held as executor, administrator, or testamentary trustee, 94 A.L.R. 1123 .

7-1-220. Definitions and applicability.

  1. As used in this part, the term:
    1. "Pooled assets" means mortgages, securities, or other assets comprising any mortgage or securities pool operated by such financial institution (whether said assets are held in the name of the institution or a nominee therefor) or with respect to which undivided interests have been created, regardless of whether or not the financial institution is technically a trustee and regardless of whether or not certificates of participation have been issued with respect thereto.
    2. "Trust assets" means all assets held by financial institutions as trustee, administrator, executor, guardian, or in a similar fiduciary capacity but shall not include assets held by the commercial department of the financial institution or "pooled assets" as defined in paragraph (1) of this subsection.
  2. In the event of conflict, this part and not other parts of this article or other articles of this chapter shall control as to the trust assets and the pooled assets of any financial institution in receivership.

    (Code 1933, § 41A-901, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-221. Status of department in relation to trust and pooled assets.

  1. Upon taking possession of a financial institution, the department shall hold trust and pooled assets separate from the assets of the financial institution itself. Trust and pooled assets shall not be available for distribution to depositors, other creditors, or shareholders.
  2. The department as receiver shall have all rights, powers, and duties of the financial institution in regard to trust and pooled assets, including title to the assets and the right to administer them.

    (Code 1933, § 41A-902, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-222. Jurisdiction of court over trust and pooled assets.

The principal court shall have exclusive jurisdiction over all matters concerning trust and pooled assets during the period that such assets are held by the department as receiver.

(Code 1933, § 41A-903, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-223. Substituted trustee or manager for trust and pooled assets.

  1. Upon determining to liquidate a financial institution or if it otherwise deems it advisable, the department shall:
    1. With leave of court, transfer all of the trust assets or all of the pooled assets or all of both types of assets to another financial institution which shall assume the responsibilities of the institution in receivership in regard to such assets and act as substituted trustee or manager; or
    2. Give written notice, insofar as the giving of such notice is practicable, to all parties interested in trust or pooled assets that they must within 30 days after the giving of notice apply for the appointment of a substituted trustee or manager to take over the trust or pooled assets. In the event that no such application is made with respect to particular trust assets or pooled assets, the department shall itself apply for appointment of a substituted trustee or manager. Upon application by an interested party or parties or by the department, the court shall appoint as successor trustee or manager that person or corporation best able, in its judgment, to protect the interests of those interested in particular trust or pooled assets. The successor trustees or managers shall have all rights, powers, and duties of the financial institution in regard to the trust or pooled assets committed to them except as these relationships may be modified by the court in accordance with law.
  2. Nothing in this Code section or Code Section 7-1-222 shall be construed to impair any right of the grantor or beneficiaries of trust or pooled assets under applicable instruments or otherwise to secure or provide for the appointment of a substituted trustee or manager.

    (Code 1933, § 41A-904, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-224. Transfers to substituted trustee or manager without accounting.

In the event that the department and a substituted trustee or manager agree as to the identity and amount of the trust or pooled assets to be paid to the substituted trustee or manager and the substituted trustee or manager waives in writing the right to an accounting, then the department may transfer the trust or pooled assets to the substituted trustee or manager and will thereupon (together with the financial institution) be discharged from all liability or responsibility in connection with the trust or pooled assets.

(Code 1933, § 41A-905, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-225. Transfers to substituted trustee or manager with accounting; deficiencies.

Except as authorized by Code Section 7-1-224, the department shall, upon appointment of a substituted trustee or manager, file a full account with the appropriate court setting forth its administration of the trust or pooled assets and shall, upon the order of the court, transfer the trust or pooled assets to the substituted trustee or manager. Whenever the court shall determine that there is a deficiency in regard to the trust or pooled assets or that the financial institution is liable for a surcharge in connection therewith, the amount thereof shall constitute a claim against the financial institution. Such claim shall be filed in the manner of other claims with the principal court within 30 days of a final adjudication with respect to the amount thereof.

(Code 1933, § 41A-906, enacted by Ga. L. 1974, p. 705, § 1.)

PART 10 C HANGE IN CONTROL OF FINANCIAL INSTITUTIONS

Cross references. - Requirement that department approve of merger or consolidation of state banks or trust companies, § 7-1-534 .

Requirement that department approve mergers, consolidations, and other activities involving national banks, § 7-1-550 et seq.

7-1-230. Definitions.

As used in this part, the term:

  1. "Control" means the power directly or indirectly to direct the management or policies of a financial institution or to vote 25 percent or more of any class of voting securities of a financial institution.
  2. "Person" means an individual or a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, or any other form of entity not specifically listed in this paragraph.

    (Code 1933, § 41A-1005, enacted by Ga. L. 1980, p. 1076, § 1.)

7-1-231. Acquisition of control without permission prohibited.

It shall be unlawful for a person, acting directly or indirectly or through concert with one or more persons, to acquire control of any financial institution through a purchase, assignment, pledge, or other disposition of voting stock of such institution, except with the approval of the department or as otherwise permitted by this part.

(Code 1933, § 41A-1001, enacted by Ga. L. 1980, p. 1076, § 1.)

Cross references. - Requirement that department be notified of change in ownership of or right to vote outstanding shares of bank or trust company which will result in control or change in control of the bank or trust company, § 7-1-236 .

7-1-232. Notice of proposed acquisition required; approval or disapproval by department; judicial review.

  1. For purposes of this Code section, the term "financial institution" shall include any "bank holding company" as that term is defined in subsection (a) of Code Section 7-1-605.
  2. The department shall be given at least 60 days' prior written notice of any such proposed acquisition. If the department does not issue a notice disapproving the proposed acquisition within that time or extend the period during which a disapproval may issue for another 30 days, the proposed acquisition shall stand approved. The period for disapproval may be further extended only if the department determines that any acquiring party has not furnished all the information required under Code Section 7-1-233 or that in its judgment any material information submitted is substantially inaccurate. An acquisition may be made prior to expiration of the disapproval period if the department issues written notice of its intent not to disapprove the action.
  3. Within three days after its decision to disapprove any proposed acquisition, the department shall notify the acquiring party in writing of the disapproval. Such notice shall provide a statement of the basis for the disapproval.
  4. Within ten days of receipt of such notice of disapproval, the acquiring party may request a hearing on the proposed acquisition. At the conclusion thereof, the department shall by order approve or disapprove the proposed acquisition on the basis of the record made at such hearing.
  5. Any person whose proposed acquisition is disapproved after a department hearing under this Code section may obtain review in accordance with Code Section 7-1-90.

    (Code 1933, § 41A-1002, enacted by Ga. L. 1980, p. 1076, § 1.)

Cross references. - Time for giving notice to department of change in control of bank or trust company resulting from change in ownership of or right to vote outstanding shares of the bank or trust company, § 7-1-236 .

7-1-233. Contents of notice.

Except as otherwise provided by regulation of the department, a notice filed pursuant to Code Section 7-1-232 shall contain the following information:

  1. The identity, personal history, business background, and experience of each person by whom or on whose behalf the acquisition is to be made, including his material business activities and affiliations during the past five years and a description of any material pending legal or administrative proceedings in which he is a party and any criminal indictment or conviction of such person by a state or federal court;
  2. A statement of the assets and liabilities of each person by whom or on whose behalf the acquisition is to be made, as of the end of the fiscal year for each of the five fiscal years immediately preceding the date of the notice, together with related statements of income and source and application of funds for each of the fiscal years then concluded, all prepared in accordance with generally accepted accounting principles consistently applied, and an interim statement of the assets and liabilities for each such person, together with related statements of income and source and application of funds, as of a date not more than 90 days prior to the date of the filing of the notice;
  3. The terms and conditions of the proposed acquisition and the manner in which the acquisition is to be made;
  4. The identity, source, and amount of the funds or other considerations used or to be used in making the acquisition and, if any part of these funds or other considerations has been or is to be borrowed or otherwise obtained for the purpose of making the acquisition, a description of the transaction, the names of the parties, and any arrangements, agreements, or understandings with such persons;
  5. Any plans or proposals which any acquiring party making the acquisition may have to liquidate the bank, to sell its assets or merge it with any company, or to make any other major change in its business or corporate structure or management;
  6. The identification of any person employed, retained, or to be compensated by the acquiring party or by any person on his behalf to make solicitations or recommendations to stockholders for the purpose of assisting in the acquisition and a brief description of the terms of such employment, retainer, or arrangement for compensation;
  7. Copies of all invitations or tenders or advertisements making a tender offer to stockholders for purchase of their stock to be used in connection with the proposed acquisition; and
  8. Any additional relevant information in such forms as the department may require by regulation or by specific request in connection with any particular notice.

    (Code 1933, § 41A-1003, enacted by Ga. L. 1980, p. 1076, § 1.)

7-1-234. Grounds for disapproving proposal.

The department may disapprove any proposed acquisition if:

  1. The proposed acquisition of control would result in a monopoly or would be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking in any part of this state;
  2. The effect of the proposed acquisition of control in any section of this state may be substantially to lessen competition or to tend to create a monopoly or the proposed acquisition of control would in any other manner be in restraint of trade and the anticompetitive effects of the proposed acquisition of control are not clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served;
  3. The financial condition of any acquiring person is such as might jeopardize the financial stability of the bank or prejudice the interests of the depositors of the bank;
  4. The competence, experience, or integrity of any acquiring person or of any of the proposed management personnel indicates that it would not be in the interest of the depositors of the bank or in the interest of the public to permit such person to control the bank; or
  5. Any acquiring person neglects, fails, or refuses to furnish the department all the information required by it.

    (Code 1933, § 41A-1004, enacted by Ga. L. 1980, p. 1076, § 1.)

7-1-235. Part inapplicable to bank holding company transactions.

This part shall not apply to a transaction subject to Code Sections 7-1-605 through 7-1-608, relating to bank holding companies.

(Code 1933, § 41A-1006, enacted by Ga. L. 1980, p. 1076, § 1; Ga. L. 1984, p. 22, § 7.)

7-1-236. Report of change in control.

Whenever a change occurs in the ownership of or right to vote the outstanding shares of any bank or trust company which will result in the control or a change in the control of the bank or trust company, the president or other officer of such bank or trust company shall, within ten days after knowledge thereof, report such facts to the department. As used in this Code section, the term "control" means the power to direct or cause, directly or indirectly, the direction of the management or policies of the institution. If there is any doubt as to whether a change in the ownership or voting rights of such shares is sufficient to result in control thereof or to effect a change in the control thereof, such doubt shall be resolved in favor of reporting the facts to the department.

(Code 1933, § 13-2006, enacted by Ga. L. 1965, p. 524, § 1; Code 1933, § 41A-2013, enacted by Ga. L. 1974, p. 705, § 1; Code 1981, § 7-1-442; Code 1981, § 7-1-236 , as redesignated by Ga. L. 1986, p. 458, § 3.)

Cross references. - Procedure for giving notice to department of proposed change in control of financial institution, § 7-1-230 et seq.

Editor's notes. - Ga. L. 1986, p. 458, § 3, redesignated former Code Section 7-1-442 as present Code Section 7-1-236.

PART 11 C OSTS ON JUDICIAL PROCESS

7-1-237. Reimbursement of costs incurred in answering subpoena, garnishment, or order; subpoena to be answered within five days.

Any financial institution shall be reimbursed by the requesting party for costs which are reasonably necessary and which have been directly incurred in searching for, reproducing, or transporting books, papers, records, or other data of a customer required or requested to be produced pursuant to a lawful subpoena, summons, warrant, garnishment, attachment, request for the production of documents, or court order where the financial institution is not a party to the action. Except as may otherwise be ordered by a judge of the court issuing the same, a financial institution shall have five business days from service of a subpoena within which to produce any books, papers, or records ordered produced pursuant to such subpoena. In the case of a garnishment or attachment of funds held by the financial institution, such reimbursement may be deducted prior to remission of such funds in response to the garnishment or attachment. Rates and conditions under which reimbursement may be made under this Code section shall be prescribed by regulations of the department.

(Code 1981, § 7-1-237 , enacted by Ga. L. 1983, p. 602, § 3; Ga. L. 1985, p. 1467, § 1; Ga. L. 1987, p. 805, § 1.)

RESEARCH REFERENCES

ALR. - Bank's liability, under state law, for disclosing financial information concerning depositor or customer, 81 A.L.R.4th 377.

PART 12 D EPOSITS OF DECEASED DEPOSITORS

7-1-239. Payment of large deposits of deceased intestate depositors; deposit of sums held for deceased intestate residents; affidavit included with application for deposit.

  1. Except as provided in subsection (b) of this Code section and in Article 8 of this chapter, whenever any person dies intestate having a deposit of not more than $10,000.00 in a financial institution, such financial institution shall be authorized to pay the proceeds of such deposit directly to the following persons:
    1. To the surviving spouse;
    2. If no surviving spouse, to the children pro rata;
    3. If no children or surviving spouse, to the father and mother pro rata; or
    4. If none of the above, then to the brothers and sisters of the decedent pro rata.
  2. Except as provided in Article 8 of this chapter, if no application for the deposit is made by any person named in subsection (a) of this Code section within 90 days from the death of the intestate depositor, the financial institution shall be authorized to apply not more than $10,000.00 of the deposit of such deceased depositor in payment of the funeral expenses and expenses of the last illness of such deceased depositor upon the receipt of itemized statements of such expenses and the affidavit of the providers of such services that the itemized statements are true and correct and have not been paid. The financial institution shall pay such expenses in the order received after the death of the depositor.
  3. Payments pursuant to subsections (a) and (b) of this Code section shall operate as a complete acquittal and discharge to the financial institution of liability from any suit, claim, or demand of whatever nature by any heir, distributee, creditor of the decedent, or any other person. Such payment is authorized to be made as provided in this Code section without the necessity of administration of the estate of the decedent or without the necessity of obtaining an order that no administration is necessary.
  4. In any case in which a deceased depositor has more than $10,000.00 on deposit in a financial institution, such financial institution shall be authorized to pay any amount up to $10,000.00 to any of the persons authorized by this Code section to receive said deposit. The payment shall only act as a full and final acquittance of liability up to the amount paid by the financial institution and shall not act as a full and final acquittance to the financial institution of all liability.
  5. Notwithstanding any other provisions of law to the contrary, when any person dies intestate as a resident of this state and any person is left in possession of moneys belonging to the decedent, which moneys do not exceed $10,000.00, such person shall deposit such moneys into a savings account in the name of the decedent in a financial institution located in the area of the decedent's residence. Such account shall be managed in accordance with the signature contract in effect at the financial institution at the time the account is opened. Any financial institution receiving such deposits is authorized to pay the proceeds in accordance with subsections (a), (b), (c), and (d) of this Code section.
  6. As used in this Code section, the term "financial institution" includes any federally chartered financial institution.
  7. Application by any claimant or claimants entitled in this Code section to receive deposits at a financial institution shall include an affidavit by the claimant or claimants which states that they qualify as the proper relation to the decedent as specified in this Code section and that the claimant or claimants know of no other corresponding claimant or claimants to such deposit. The financial institution may rely on a properly executed affidavit in disbursing the funds according to this Code section. (Code 1981, § 7-1-239 , enacted by Ga. L. 1983, p. 661, § 1; Ga. L. 1985, p. 1241, § 1; Ga. L. 1986, p. 887, § 1; Ga. L. 1996, p. 848, § 3.)

Law reviews. - For article surveying trust and estate law in 1984-1985, see 37 Mercer L. Rev. 443 (1985). For annual survey of law of wills, trusts, and administration of estates, see 38 Mercer L. Rev. 417 (1986). For annual survey article discussing wills, trusts and administration of estates, see 52 Mercer L. Rev. 481 (2000).

7-1-239.1. Payment of checks or instruments payable to deceased intestate persons; affidavit included with application for payment.

  1. Whenever any person dies intestate having possession of or a right to possession of a check or other instrument payable to such deceased person and the amount of the check or instrument does not exceed $10,000.00, the financial institution on which the check or instrument is drawn shall be authorized to accept and redeem the check or instrument by payment to the following persons:
    1. To the surviving spouse;
    2. If no surviving spouse, to the children pro rata;
    3. If no children or surviving spouse, to the father and mother pro rata; or
    4. If none of the above, then to the brothers and sisters of the decedent pro rata.
  2. If a check or other instrument is payable to more than one person, it may be accepted and redeemed as provided in subsection (a) of this Code section only if it has been endorsed by each payee other than the decedent.
  3. Payments made pursuant to this Code section shall operate as a complete acquittal and discharge to the financial institution of liability from any suit, claim, or demand of whatever nature by any heir, distributee, creditor of the decedent, or any other person. Such payment is authorized to be made as provided in this Code section without the necessity of administration of the estate of the decedent and without the necessity of obtaining an order that no administration is necessary.
  4. As used in this Code section, the term "financial institution" includes any federally chartered financial institution.
  5. Application by any claimant or claimants entitled in this Code section to receive payments of checks or other instruments at a financial institution upon which such instrument is drawn shall include an affidavit by the claimant or claimants which states that they qualify as the proper relation to the decedent as specified in this Code section and that the claimant or claimants know of no other corresponding claimant or claimants to such funds. The financial institution may rely on a properly executed affidavit in disbursing the funds according to this Code section. (Code 1981, § 7-1-239.1 , enacted by Ga. L. 1985, p. 1241, § 2; Ga. L. 1996, p. 848, § 4.)

PART 13 B ANK FEES

7-1-239.5. Fee for instruments drawn on other institutions.

Repealed by Ga. L. 2016, p. 390, § 2-2/HB 811, effective July 1, 2016.

Editor's notes. - Ga. L. 2017, p. 774, § 7/HB 323, part of an Act to revise, modernize, and correct the Code, repealed the reservation of this Code section.

This Code section was based on Code 1981, § 7-1-239.5 , enacted by Ga. L. 1997, p. 572, § 1.

7-1-239.6. Convenience fees.

A financial institution or mortgage lender, as such term is defined by Code Section 7-1-1000, may charge a convenience fee provided that such fee is permissible in accordance with Code Section 13-1-15. For purposes of this Code section, the term "convenience fee" means any additional amount imposed to a consumer at the time of a transaction for the election of making a payment by electronic means. A convenience fee may include, but is not limited to, any fee charged for payment to an account with the assistance of a live representative or agent of the financial institution or mortgage lender, by telephone, using a voice response unit, or other electronic means. A convenience fee does not include a discount offered by a lender or merchant to a person for payment by cash, check, or similar means.

(Code 1981, § 7-1-239.6 , enacted by Ga. L. 2017, p. 193, § 5/HB 143.)

Effective date. - This Code section became effective June 1, 2017.

ARTICLE 2 BANKS AND TRUST COMPANIES

Law reviews. - For survey article on business associations, see 34 Mercer L. Rev. 13 (1982).

OPINIONS OF THE ATTORNEY GENERAL

Investment programs offered jointly by banks and brokerage firms. - Brokerage firm is not prohibited, by virtue of O.C.G.A. Art. 2, Ch. 1, T. 7 and O.C.G.A. § 7-1-241 , from offering, in conjunction with a bank, an investment program whereby the brokerage permits customers to maintain special accounts and receives and transmits money in connection with such accounts. 1981 Op. Att'y Gen. No. 81-59.

RESEARCH REFERENCES

ALR. - Bank to which paper is sent for collection of principal or interest as agent of obligor, 55 A.L.R. 1168 .

Effect of appointment of conservator for bank, 91 A.L.R. 234 ; 92 A.L.R. 1258 ; 107 A.L.R. 1431 .

Legal questions presented by the reopening of closed bank, 99 A.L.R. 1217 .

State banks, insurance companies, or building and loan associations, which are members of federal reserve bank or similar federal agency, or national banks, as within state social security or Unemployment Compensation Act, 165 A.L.R. 1250 .

PART 1 G ENERAL MATTERS

Cross references. - Limitations on legislature's powers, Ga. Const. 1983, Art. III, Sec. VI, Para. V.

Secretary of State corporations, T. 14, C. 4.

Forgery and criminal issuance of bad checks, § 16-9-1 et seq.

Criminal penalties for illegal use of credit cards or bank services cards, § 16-9-30 et seq.

Bond requirements for banks and trust companies acting as guardian of property, § 29-4-16 .

Authority of notaries public who are officers, employees, or other representatives of banks to take acknowledgment of any party to any written instrument executed to or by such bank, § 45-17-12 .

Appointment of banks and trust companies as state depositories, § 50-17-50 et seq.

RESEARCH REFERENCES

ALR. - Liability of bank which credits paper payable to a corporation to the personal credit of corporate officer who indorsed it, and pays out the proceeds on the latter's personal checks, 9 A.L.R. 346 .

Duty and liability of bank under agreement to remit money or establish credit, 27 A.L.R. 1488 ; 45 A.L.R. 1052 ; 69 A.L.R. 673 .

When bank deemed insolvent, or "hopelessly" insolvent, in civil cases, 85 A.L.R. 811 .

Statute regulating banks and trust companies as special or class legislation, or as denying the equal protection of the laws, 111 A.L.R. 140 .

Stipulation relieving bank from, or limiting its liability for disregard of, stop-payment order, 1 A.L.R.2d 1155.

Admissibility, in negligence action against bank by depositor, of evidence as to custom of banks in locality in handling and dealing with checks and other items involved, 8 A.L.R.2d 446.

Bank's liability for breach of implied contract of good faith and fair dealing, 55 A.L.R.4th 1026.

Bank's liability to customer for imposing allegedly excessive service charges, 73 A.L.R.4th 1028.

7-1-240. Powers and restrictions applicable when acting as bank and trust company.

Any financial institution authorized by law to act as both a bank and a trust company shall enjoy and be subject to the powers and restrictions of a bank of its type in regard to its banking activities and in like manner shall enjoy and be subject to the powers and restrictions of a trust company in regard to its trust activity. With respect to general corporate matters not identified with either banking or trust functions, it shall have the privileges and restrictions of a bank of its type.

(Code 1933, § 41A-1101, enacted by Ga. L. 1974, p. 705, § 1.)

Law reviews. - For article, "An Argument Evaluating Price Controls on Bank Credit Cards in Light of Certain Reemerging Common Law Doctrines," see 9 Ga. St. U.L. Rev. 797 (1993). For article, "An Economic Perspective on Interest Rate Limitations," see 9 Ga. St. U.L. Rev. 821 (1993).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 595 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 653, 662.

ALR. - Power of banking corporation to loan money for others, 33 A.L.R. 597 .

7-1-241. Restrictions on engaging in banking business.

  1. No person or corporation may lawfully engage in this state in the business of banking or receiving money for deposit or transmission or lawfully establish in this state a place of business for such purpose, except a bank, a national bank, a credit union to the extent provided in Article 3 of this chapter, a licensee engaged in selling payment instruments to the extent permitted by Article 4 of this chapter, an international banking agency to the extent provided in Article 5 of this chapter, or a savings and loan association to the extent provided by the laws of the United States.
  2. None of the following shall be deemed to be engaged in the business of receiving money for deposit or transmission within the meaning of subsection (a) of this Code section:
    1. A club or hotel to the extent it receives money from members or guests for temporary safekeeping;
    2. An express, steamship, or telegraph company to the extent it receives money for transmission;
    3. An attorney at law, real estate agent, fiscal agent, insurance company, utility company, or any other person or corporation to the extent he or she or it receives and transmits money solely as an incident to a business or profession not governed by this chapter;
    4. Persons or corporations engaged in the business of cashing checks, dispensing cash through credit or debit card activated electronic devices, or recording of financial transactions resulting from and initiated at the point of the sale of goods or services; provided, however, that no such person or corporation shall receive deposits except as provided in Code Section 7-1-603 or otherwise engage in the business of banking; or
    5. A securities broker or dealer registered pursuant to the provisions of 15 U.S.C. Section 78o or Chapter 5 of Title 10 to the extent that such securities broker or dealer:
      1. Sells certificates of deposit or interest in certificates of deposit or other deposit instruments issued by a bank or savings association, provided such securities broker or dealer fully and fairly discloses at the time of solicitation and confirmation whether or not federal deposit insurance is available for that deposit instrument;
      2. Purchases certificates of deposit or other deposit instruments issued by a bank or savings association for the account of the customer of such securities broker or dealer, provided that such instruments are registered in the name of the customer or the custodian of such customer on the books or other records of the issuing bank or savings association; or
      3. Holds customer funds incidental to the purchase and sale of securities on behalf of such customer.
  3. The department is authorized to promulgate regulations and establish policy, consistent with the objectives of this chapter, which objectives include for the purposes of this Code section providing for appropriate competition between financial institutions and other financial organizations and protection of the interests of depositors, and to further define, restrict, or require registration of entities which provide financial products and services to the citizens of this state via the Internet, other on-line access to financial products and services, or alternate methods of delivery which differ from geographically based banking.

    (Ga. L. 1919, p. 135, art. 1, § 4; Code 1933, § 13-204; Ga. L. 1960, p. 1170, § 1; Ga. L. 1966, p. 691, § 1; Code 1933, § 41A-1102, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1985, p. 258, § 3; Ga. L. 1986, p. 458, § 4; Ga. L. 1990, p. 301, § 1; Ga. L. 1997, p. 485, § 10; Ga. L. 2004, p. 631, § 7; Ga. L. 2008, p. 381, § 2/SB 358; Ga. L. 2016, p. 390, § 7-5/HB 811; Ga. L. 2017, p. 774, § 7/HB 323; Ga. L. 2018, p. 1112, § 7/SB 365.)

The 2016 amendment, effective July 1, 2016, in subsection (a), substituted "selling payment instruments" for "selling checks" in the middle and deleted "a building and loan association to the extent provided in Article 7 of this chapter," following "Article 5 of this chapter," near the end.

The 2017 amendment, effective May 9, 2017, part of an Act to revise, modernize, and correct the Code, substituted "provided, however, that no such person" for "provided, however, no such person" near the middle of paragraph (b)(4), and substituted "provided that such instruments" for "provided such instruments" near the middle of subparagraph (b)(5)(B).

The 2018 amendment, effective May 8, 2018, part of an Act to revise, modernize, and correct the Code, substituted "15 U.S.C. Section 78o" for "15 U.S.C. Section 780" in paragraph (b)(5).

OPINIONS OF THE ATTORNEY GENERAL

Foreign state savings and loan association may not offer and sell certificates of deposit in Georgia through one or more broker-dealers located in Georgia. 1983 Op. Att'y Gen. No. 83-23.

"Business of banking" construed. - As used in O.C.G.A § 7-1-241 "the business of banking" is not a separate concept perhaps extending into areas beyond the business of receiving money for deposit or transmission. Rather, it is the receipt of money for deposit or transmission which defines the business of banking for purposes of Georgia law. 1981 Op. Att'y Gen. No. 81-59.

Activities reserved exclusively to regulated financial institutions. - Some activities, such as the lending of funds, while properly engaged in by banks and other regulated financial institutions, are not reserved exclusively to them. Under Georgia law, the only functions which are prohibited to persons and corporations in general are the receipt of deposits and the transmission of funds. 1981 Op. Att'y Gen. No. 81-59.

Automated teller operations limited to financial institutions. - A nonfinancial institution may not establish and operate on its own behalf an unmanned automated teller facility which provides cash withdrawal services. 1985 Op. Att'y Gen. No. 85-2.

Restriction on renting of, or accepting deposits for, safe deposit boxes. - No person or entity, other than those specifically excepted by former Code 1933, § 41A-1102 (see O.C.G.A. § 7-1-241 ), may lawfully engage in the business of renting safe deposit boxes or receptacles for purpose of receiving money, or may accept deposits of money in such facilities. 1980 Op. Att'y Gen. No. 80-88.

Lockbox operations. - An out-of-state bank may not use a lockbox operator as a conduit for deposit-taking in Georgia; however, the operation of a lockbox in and of itself does not constitute engaging in the business of banking. 1985 Op. Att'y Gen. No. 85-3.

Operation of a lockbox in compliance with Department of Banking and Finance Proposed Rule 80-7-1-.06 is permissible under Georgia law. 1985 Op. Att'y Gen. No. 85-43, affirming the validity of 1985 Op. Att'y Gen. No. 85-3.

Investment motive removes deposits from category of deposit which may be accepted pursuant to former Code 1933, § 41A-1102 (see O.C.G.A. § 7-1-241 ). 1980 Op. Att'y Gen. No. 80-108.

Investment programs offered jointly by banks and brokerage firms. - Brokerage firm is not prohibited, by virtue of O.C.G.A. Art. 2, Ch. 1, T. 7 and O.C.G.A. § 7-1-241 , from offering, in conjunction with a bank, an investment program whereby the brokerage permits customers to maintain special accounts and receives and transmits money in connection with such accounts. 1981 Op. Att'y Gen. No. 81-59.

Actions of a bank, participating with a brokerage in offering a particular type of investment program, do not constitute the business of banking in violation of O.C.G.A. § 7-1-241 or O.C.G.A. § 7-1-604 . 1981 Op. Att'y Gen. No. 81-59.

Programs proposed to be offered by a brokerage firm, which would be directly involved in soliciting funds from the public primarily for the purpose of facilitating the making of deposits and the earning of interest, would be prohibited by O.C.G.A. § 7-1-241(a) . 1988 Op. Att'y Gen. No. 88-10.

Issuance by corporations of debt securities redeemable by check. - Arrangement by which business corporation would receive money from individuals and in return issue to the individuals its debt securities redeemable by negotiable checks would involve "receiving deposits" within the meaning of O.C.G.A. § 7-1-4(7) , and only persons or entities authorized to engage in the banking business by O.C.G.A. § 7-1-241 may lawfully engage in such arrangements. 1982 Op. Att'y Gen. No. 82-68.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 19.

C.J.S. - 9 C.J.S., Banks and Banking, § 5 et seq.

ALR. - Power of banking corporation to loan money for others, 33 A.L.R. 597 .

Duty and liability of bank under agreement to remit money or establish credit, 27 A.L.R. 1488 ; 45 A.L.R. 1052 ; 69 A.L.R. 673 .

Licensing and regulation of business of transmitting funds to foreign countries, 94 A.L.R.2d 496.

7-1-242. Restriction on corporate fiduciaries.

  1. No corporation, partnership, or other entity may lawfully act as a fiduciary in this state except:
    1. A financial institution authorized to act in such capacity pursuant to the provisions of Georgia law;
    2. A trust company;
    3. A national bank or a state bank lawfully doing a banking business in this state and authorized to act as a fiduciary under the laws of the United States or another state;
    4. A savings bank or savings and loan association lawfully doing a banking business in this state and authorized to act as a fiduciary under the laws of the United States or another state;
    5. Attorneys at law licensed to practice in this state, whether organized as a professional corporation or otherwise;
    6. An investment adviser registered pursuant to the provisions of 15 U.S.C. Section 80b-3 or Chapter 5 of Title 10, provided that this exception shall not authorize an investment adviser to act in any fiduciary capacity subject to the provisions of Title 53, relating to wills, trusts, and the administration of estates, or Title 29, relating to guardianships and conservatorships;
    7. A securities broker or dealer registered pursuant to the provisions of 15 U.S.C. Section 78o or Chapter 5 of Title 10 acting in such fiduciary capacity incidental to and as a consequence of its broker or dealer activities; or
    8. A nonprofit corporation.
  2. Acting as a fiduciary for purposes of this Code section includes but is not limited to:
    1. Accepting or executing trusts or otherwise acting as a trustee;
    2. Administering real or tangible personal property located in Georgia or elsewhere. For the purposes of this paragraph, "administer" means to possess, purchase, sell, lease, insure, safekeep, manage, or otherwise oversee; and
    3. Acting pursuant to a court order as personal representative, executor, or administrator of the estate of a deceased person or as guardian or conservator for a minor or incapacitated person.
  3. Nothing in this chapter shall be construed to repeal or to change Article 15 of Chapter 12 of Title 53 or any other statutes or rules of law on such subject.

    (Code 1933, § 109-302.1, enacted by Ga. L. 1973, p. 525, § 1; Code 1933, § 41A-1103, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1980, p. 972, §§ 5, 6; Ga. L. 1981, p. 1366, § 4; Ga. L. 1990, p. 301, § 2; Ga. L. 1991, p. 810, § 2; Ga. L. 1998, p. 795, § 13; Ga. L. 2004, p. 631, § 7; Ga. L. 2008, p. 381, § 3/SB 358; Ga. L. 2010, p. 579, § 2/SB 131.)

Cross references. - Substitution of parties to contracts generally, § 13-4-20 .

Impossibility as excuse for nonperformance, § 13-4-21 .

JUDICIAL DECISIONS

Legislative intent. - It was not the intent of the General Assembly in enacting former Code 1933, § 41A-1103 (see now O.C.G.A. § 7-1-242 ) to repeal former Code 1933, § 22-5503 (see now O.C.G.A. § 14-5-42 ). McGonagle v. Duncan, 244 Ga. 308 , 260 S.E.2d 44 (1979).

OPINIONS OF THE ATTORNEY GENERAL

Applicability to facilities conducting only trust business. - Branch banking and bank holding company restrictions apply to bank facilities conducting only trust business. 1980 Op. Att'y Gen. No. 80-156.

State-chartered credit unions not custodians of retirement funds. - State-chartered credit unions may not act as a custodian or trustee for retirement funds under the Employee Retirement Income Security Act of 1974. 1975 Op. Att'y Gen. No. 75-56.

Applicability to investment advisors. - Term "fiduciary" as used in O.C.G.A. § 7-1-242 includes the specific persons or entities identified in O.C.G.A. § 7-1-4(20) as well as other persons or entities who take possession of or title to assets of others or exercise control over such assets for the purpose of managing those assets. This definition of fiduciary and the restrictions of O.C.G.A. § 7-1-242 would also apply to corporate investment advisers who, in addition to offering advice for sale, also take custody of or exercise control over the customers' assets for the purpose of administering those assets, but this opinion does not address the issue of whether the restrictions of O.C.G.A. § 7-1-242 apply to a securities dealer who, incidental to the trading of securities, may hold uninvested client funds and securities subject to customer instruction and directives. 1989 Op. Att'y Gen. 89-25.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 19, 23.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 223, 224.

7-1-243. Restrictions on banking and trust nomenclature.

  1. Except as provided in subsection (c) of this Code section, no person or corporation except a bank, a national bank, or a corporation lawfully owning the majority of the voting stock of a bank or national bank or a subsidiary of such bank, national bank, or corporation shall use the words "bank," "banker," "banking company," "banking house," or any other similar name indicating that the business done is that of a bank upon any sign at its place of business or elsewhere, or upon any of its letterheads, billheads, blank checks, blank notes, receipts, certificates, circulars, advertisements, or any other written or printed matter.

    (a.1) Except as provided in subsection (c) of this Code section, no person or corporation except a credit union or a federal credit union or a subsidiary of such credit union or federal credit union shall use the words "credit union," or any other similar name indicating that the business done is that of a credit union upon any sign at its place of business or elsewhere, or upon any of its letterheads, billheads, blank checks, blank notes, receipts, certificates, circulars, advertisements, or any other written or printed matter.

  2. Except as provided in subsection (c) of this Code section, no person or corporation except:
    1. A corporation lawfully authorized to exercise trust powers or any subsidiary thereof;
    2. A corporation lawfully owning the majority of the voting stock of any corporation authorized to exercise trust powers, or any subsidiary of such owner corporation;
    3. An enterprise whose structure is in the nature of a trust where the trustees include a corporation lawfully authorized to exercise trust powers in this state; or
    4. An eleemosynary institution

      shall use the words "trust" or "trust company" or any similar name indicating that the business done is that of a trust company upon any sign at its place of business or elsewhere, or upon any of its letterheads, billheads, blank checks, blank notes, receipts, certificates, circulars, advertisements, or any other written or printed matter.

  3. Nothing in this Code section shall be construed to:
    1. Prevent the use of the words "banks," "banker," "banking," "banker's," "trust," or any similar word in a context clearly not purporting to refer to a banking or a trust business or to a business primarily engaged in the lending of money, underwriting or sale of securities, acting as a financial planner, financial service provider, investment or trust adviser, or acting as a loan broker;

      (1.1) Prevent the use of the words "credit union," or any similar word in a context clearly not purporting to refer to a credit union or to a business primarily engaged in the lending of money, or accepting shares or deposits or acting as a loan broker;

    2. Prohibit advertisement in media distributed in or transmitted into this state by persons or corporations lawfully engaged in the banking, credit union, or trust business outside of this state; or
    3. Prevent any person or corporation from continuing to use its name legally in use on April 1, 1989.
  4. The department shall advise the Secretary of State of any corporate name or proposed corporate name it deems to be inconsistent with this Code section.

    (Ga. L. 1927, p. 344, §§ 1, 2; Code 1933, § 109-502; Ga. L. 1974, p. 463, § 1; Code 1933, § 41A-1104, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1978, p. 1717, § 3; Ga. L. 1981, p. 1366, § 5; Ga. L. 1989, p. 1257, § 2; Ga. L. 1999, p. 674, § 3; Ga. L. 2009, p. 86, § 4/HB 141; Ga. L. 2010, p. 878, § 7/HB 1387; Ga. L. 2018, p. 214, § 4/HB 780.)

The 2018 amendment, effective May 3, 2018, inserted "or a subsidiary of such credit union or federal credit union" in the middle of subsection (a.1). See Editor's notes for applicability.

Cross references. - Further regulations pertaining to use of names by financial institutions, § 7-1-130 .

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

OPINIONS OF THE ATTORNEY GENERAL

Open-end investment fund not engaged in banking may use term "trust". - When open-end investment fund is not engaged in the banking business in this state, use of the term "trust" does not violate former Code 1933, § 41A-1104. 1975 Op. Att'y Gen. No. 75-92.

Name did not indicate that trust company business was conducted. - Use of the name Fidelity Daily Income Trust by a duly organized business trust does not indicate that the business being done by the fidelity is that of a "trust company"; therefore, fidelity is not in violation of former Code 1933, § 41A-1104 (see O.C.G.A. § 7-1-243 ). 1975 Op. Att'y Gen. No. 75-92.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 183.

C.J.S. - 9 C.J.S., Banks and Banking, § 43.

ALR. - Modern status of the Massachusetts or business trust, 88 A.L.R.3d 704.

7-1-244. Deposit insurance requirements; public notices when deposits not properly insured.

  1. Every bank shall obtain and maintain deposit insurance satisfactory to the department; provided, however, that banks which have had their deposit insurance withdrawn or canceled may, in the discretion of the department, continue to accept deposits; provided, further, such banks shall within six months after such withdrawal or cancellation of insurance obtain deposit insurance, satisfactory to the department, written by an insurance company authorized to transact business in this state or by the Federal Deposit Insurance Corporation. The department may, in its discretion, for cause shown, extend the time limitation in which deposit insurance must be obtained.
  2. Deposit insurance required to be obtained in subsection (a) of this Code section need not be in excess of amounts insured by the Federal Deposit Insurance Corporation at the time the insurance is obtained; but wherever the insurance coverage is, in the opinion of the department, less than amounts insured by the Federal Deposit Insurance Corporation, the bank shall be required to post at a conspicuous place near the entrance of such bank a sign in boldface print, in letters at least four inches high, which states "Deposits Not Insured" or "Deposits Insured Up To (insert amount of deposit insurance)." Such wording shall also follow the name of the bank wherever it is written or printed and shall be posted in writing which is easily legible in letters at least one inch high at each window or desk receiving deposits.

    (Ga. L. 1966, p. 692, § 17; Code 1933, § 41A-1105, enacted by Ga. L. 1974, p. 705, § 1.)

Cross references. - Restrictions on advertising for sale instruments purporting to be insured or guaranteed in manner comparable to insured deposit or shared account when such instrument does not in fact possess comparable insurance coverage, § 7-1-133 .

For similar provisions as to deposit insurance requirements for credit unions, § 7-1-666 .

For similar provisions pertaining to building and loan association deposit insurance requirements, § 7-1-797 .

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1086, 1087.

C.J.S. - 9 C.J.S., Banks and Banking, § 25.

ALR. - Insurance of bank or trust company against loss by burglary or robbery as covering contents of safety deposit boxes rented to customers, 30 A.L.R. 623 .

Liability on bond for security of public funds deposited in banks as affected by form of transaction, or nature or validity of deposit, 65 A.L.R. 798 .

Purchaser or holder of draft, cashier's check or certified check as a depositor within statutes relating to guaranty or insurance of deposits or deposit liability, 111 A.L.R. 228 .

Circumstances under which federal appellate court will allow Federal Deposit Insurance Corporation (FDIC) or Resolution Trust Corporation (RTC) to raise on appeal issues not raised at trial involving financial institution put in receivership or conservatorship after trial, 120 A.L.R. Fed. 469.

Determination, under 12 USCS § 1821(f), of disputes concerning insured nature of deposits as entitled to Federal Deposit Insurance Protection, 120 A.L.R. Fed. 485.

PART 2 G ENERAL POWERS OF BANKS AND TRUST COMPANIES

RESEARCH REFERENCES

ALR. - Duty of bank when several checks which, in the aggregate, exceed the depositor's balance, are presented at the same time, 26 A.L.R. 1486 ; 66 A.L.R. 404 ; 109 A.L.R. 858 ; 114 A.L.R. 518 .

Liability of bank for loss of liberty bonds and war savings stamps, 40 A.L.R. 899 .

Right of savings bank to liquidate voluntarily and close business, 69 A.L.R. 1255 .

Liability for interest or profits on funds of estate deposited in bank or trust company which is itself executor, administrator, trustee, or guardian, or in which executor, etc., is interested, 88 A.L.R. 205 .

Statute regulating banks and trust companies as special or class legislation, or as denying the equal protection of the laws, 111 A.L.R. 140 .

7-1-260. General corporate powers.

Subject to restrictions contained in this chapter or in its articles, a bank or trust company shall have the power:

  1. To have perpetual duration unless a limited period of duration is stated in its articles. Each bank or trust company existing on April 1, 1975, shall have perpetual duration unless its articles are amended under this chapter to provide for a limited period of duration;
  2. To sue and be sued, complain and defend in its corporate name;
  3. To have a corporate seal, which may be altered at pleasure, and to use the same by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced;
  4. To adopt, alter, and repeal bylaws pursuant to the procedures of Code Section 7-1-481 containing provisions for the regulation and management of affairs of the institution not inconsistent with law or its articles;
  5. To elect or appoint and remove officers and agents of the institution and to define their duties and fix their compensation;
  6. To make contracts;
  7. To make, irrespective of corporate benefit, loans, investments, contributions, and donations for community development and the promotion of the public welfare or for other religious, charitable, scientific, educational, hospital, civic, or similar purposes and in time of war or other national emergency in aid of the national effort with respect thereto;
  8. At the request or direction of the United States government or any public body thereof, to transact lawful business in time of war or national emergency in aid of the national effort in connection therewith;
  9. To procure, for its benefit, insurance on the life of any of its directors, officers, or employees or any other person whose death might cause financial loss to the bank or trust company; or, pursuant to any contract lawfully obligating the bank or trust company as guarantor or surety, on the life of the principal obligor; and
  10. To reimburse and indemnify litigation, liabilities, and expenses of directors, officers, and employees pursuant to agreements with them or otherwise and to purchase and maintain liability insurance for their benefit unless otherwise limited pursuant to this chapter.

    (Ga. L. 1898, p. 78, § 3; Civil Code 1910, § 2817; Ga. L. 1917, p. 56, § 1; Ga. L. 1919, p. 135, art. 17, § 1; Ga. L. 1920, p. 76, § 1; Code 1933, §§ 13-1801, 109-201; Code 1933, § 41A-1201, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 946, § 67; Ga. L. 1989, p. 1257, § 3; Ga. L. 1995, p. 673, § 11.)

Editor's notes. - The amendment to this Code section by Ga. L. 1989, p. 946, § 67, was superseded by the amendment by Ga. L. 1989, p. 1257, § 3, which was enacted later.

JUDICIAL DECISIONS

Operation of a general insurance agency does not qualify as an "incidental power" as it is not convenient or useful in connection with one of the bank's activities established pursuant to the exercise of the bank's express powers. The business of a general insurance agency encompasses selling various types of insurance to the general public. In operating such an agency, a bank would be engaged in an independent, profit-seeking venture unrelated to the bank's express powers. Independent Ins. Agents of Ga., Inc. v. Department of Banking & Fin., 248 Ga. 787 , 285 S.E.2d 535 (1982).

Cited in Department of Banking & Fin. v. Independent Ins. Agents of Ga., Inc., 158 Ga. App. 556 , 281 S.E.2d 265 (1981).

OPINIONS OF THE ATTORNEY GENERAL

Banking corporations of this state may not make political contributions. 1970 Op. Att'y Gen. No. 70-144.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 595 et seq. 18B Am. Jur. 2d, Corporations, §§ 1990 et seq., 2085.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 223, 224.

ALR. - Right of setoff by or against bank or trust company as affected by division of its business into departments, 81 A.L.R. 1508 .

Power of bank or trust company with respect to assistance of or cooperation with another bank financially embarrassed, 84 A.L.R. 1425 .

Trust company's agreement to repay in cash principal of trust fund investment as ultra vires, 96 A.L.R. 453 .

Dealings between bank or trust company and itself acting as executor, administrator, or trustee, 112 A.L.R. 780 .

Power of savings bank or similar institution to provide checking facilities or negotiable orders of withdrawal (NOW) to customers, 64 A.L.R.3d 1314.

7-1-261. Additional operational powers.

Banks and trust companies shall, in addition, have the power:

  1. To act as agent of the United States or any public body thereof for the sale or issue of bonds, notes, or other obligations of the United States, or those for which the full faith and credit of the United States is pledged, and to grant security interests in its assets for the faithful performance of its duties as agent;
  2. To receive for safekeeping or to rent out receptacles or safe-deposit boxes for the deposit of papers and other personal property;
  3. To grant security interests in their assets for borrowings authorized by this chapter and to dispose of their assets in the same manner as corporations generally;
  4. To give bond in any proceeding in any court in which they are a party or upon any appeal in any such proceeding and to secure such bond;
  5. To acquire and hold real property to the extent permitted by Code Sections 7-1-262, 7-1-282, and 7-1-286;
  6. To acquire and hold stocks and investment securities subject, in the case of banks, to the restrictions of Code Sections 7-1-287 and 7-1-288 and, in the case of trust institutions, to the restrictions of Code Section 7-1-312;
  7. To acquire and hold personal property necessary in the exercise of powers conferred by this chapter;
  8. To acquire and hold any property in order to avoid loss on an evidence of indebtedness, agreement for the payment of money, or an investment security previously acquired lawfully and in good faith subject to the restrictions of Code Section 7-1-263;
  9. To hold property lawfully held on April 1, 1975, irrespective of any restriction or limitation in this chapter, subject to the inclusion of any such property in any computation of limitation on the acquisition of property of like character under this chapter;
  10. To enter into an agency relationship as defined in Code Section 7-1-4 subject to restrictions and qualifications prescribed by regulations of the department; and
  11. To have and exercise all powers necessary, convenient, or incidental to effect any and all purposes for which the bank or trust company and its subsidiaries and affiliates is organized, provided that the commissioner may establish approval procedures by regulation for additional powers as needed to satisfy the objectives of this chapter. Powers shall include but not be limited to: sale of securities, annuities, and other investment products upon the order of and for the account of its customers, subject to applicable federal or state securities requirements; sale of insurance subject to state insurance laws, regulations, and licensing requirements, applicable federal laws, and departmental regulations and policies; sale or lease of excess computer capacity; expansion of customer services through the use of technology; other powers including those bank and trust powers authorized to subsidiaries of the bank or trust company pursuant to subparagraph (c)(2)(F) of Code Section 7-1-288; and other such powers to carry on banking, trust, or other activities determined by the commissioner to be financial in nature or incident or complementary to such financial activities and consistent with the objectives of this chapter and the regulations of the department.

    (Ga. L. 1898, p. 78, § 3; Civil Code 1910, § 2817; Ga. L. 1917, p. 56, § 1; Ga. L. 1919, p. 135, art. 17, § 1; Ga. L. 1920, p. 76, § 1; Code 1933, §§ 13-1801, 109-201; Code 1933, § 13-1802, enacted by Ga. L. 1968, p. 1044, § 1; Code 1933, § 41A-1202, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1983, p. 602, § 4; Ga. L. 1989, p. 1249, § 2; Ga. L. 1995, p. 673, § 12; Ga. L. 1996, p. 6, § 7; Ga. L. 1997, p. 485, § 11; Ga. L. 2000, p. 174, § 4.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1997, commas were deleted preceding and following "and its subsidiaries and affiliates" in the first sentence in paragraph (11).

Law reviews. - For survey article on insurance, see 34 Mercer L. Rev. 177 (1982).

JUDICIAL DECISIONS

Section 33-3-23 and paragraph (10), (now paragraph (11)), must be construed in pari materia. - O.C.G.A. § 33-3-23 and O.C.G.A. § 7-1-261(10) , (now paragraph (11)) were enacted at the same legislative session and relate to the same subject matter - permissible scope of bank's powers - and must, therefore, be construed in pari materia. Department of Banking & Fin. v. Independent Ins. Agents of Ga., Inc., 158 Ga. App. 556 , 281 S.E.2d 265 (1981), rev'd on other grounds, 248 Ga. 787 , 285 S.E.2d 535 (1982).

Approval of proposed exercises of incidental powers guided by § 7-1-3(a)(6). - O.C.G.A. § 7-1-261 establishes legislative intent that state banks be authorized to exercise "incidental powers" and delegates authority to approve such powers to the commissioner, who shall be guided in this determination by the statutory objective stated in O.C.G.A. § 7-1-3(a)(6) of making state banks competitive with national banks. Department of Banking & Fin. v. Independent Ins. Agents of Ga., Inc., 158 Ga. App. 556 , 281 S.E.2d 265 (1981), rev'd on other grounds, 248 Ga. 787 , 285 S.E.2d 535 (1982).

General words following list of particulars are construed to embrace only objects similar in nature to particulars. Independent Ins. Agents of Ga., Inc. v. Department of Banking & Fin., 248 Ga. 787 , 285 S.E.2d 535 (1982).

Operation of general insurance agency does not qualify as "incidental power" as it is not convenient or useful in connection with one of the bank's activities established pursuant to the exercise of the bank's express powers. The business of a general insurance agency encompasses selling various types of insurance to the general public. In operating such an agency, a bank would be engaged in an independent, profit-seeking venture unrelated to the bank's express powers. Independent Ins. Agents of Ga., Inc. v. Department of Banking & Fin., 248 Ga. 787 , 285 S.E.2d 535 (1982).

OPINIONS OF THE ATTORNEY GENERAL

Sale of data processing equipment and technology services by bank to other banks is authorized. 1974 Op. Att'y Gen. No. 74-121.

Banking corporations of this state may not make political contributions. 1970 Op. Att'y Gen. No. 70-144.

State trust company may establish foreign branch office for purpose of developing new international business. 1970 Op. Att'y Gen. No. 70-59.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 595 et seq. 18B Am. Jur. 2d, Corporations, §§ 1990 et seq., 2085.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 223, 224.

ALR. - Levy upon or garnishment of contents of safety deposit box, 19 A.L.R. 863 ; 39 A.L.R. 1215 .

Insurance of bank or trust company against loss by burglary or robbery as covering contents of safety deposit boxes rented to customers, 30 A.L.R. 623 .

Liability for loss of contents of safe-deposit box, 42 A.L.R. 1304 ; 133 A.L.R. 279 .

Power of bank or trust company with respect to assistance of or cooperation with another bank financially embarrassed, 84 A.L.R. 1425 .

Trust company's agreement to repay in cash principal of trust fund investment as ultra vires, 96 A.L.R. 453 .

Power of bank or trust company to create trust out of its securities and sell participation certificates therein, 97 A.L.R. 1182 .

Presumption as to ownership of property in safe deposit box, 101 A.L.R. 832 .

Dealings between bank or trust company and itself acting as executor, administrator, or trustee, 112 A.L.R. 780 .

Power of savings bank or similar institution to provide checking facilities or negotiable orders of withdrawal (NOW) to customers, 64 A.L.R.3d 1314.

7-1-262. Power to hold real estate; prior approval of acquisitions.

  1. A bank or trust company may solely or jointly with other persons or corporations acquire and hold such real property as it:
    1. Occupies or intends to occupy primarily for the transaction of its business, the business of any subsidiary or affiliate, or the recreational use of its employees or partly so occupies and partly leases;
    2. Acquires for the purpose of providing parking or other facilities primarily for the use of its tenants, customers, officers, and employees; or
    3. Acquires with others for the purpose of providing data processing facilities or other support services for the bank or trust company or any subsidiary solely or in cooperation with others,

      subject to the limitation that the investment of the bank or trust company in all such real property, in all furniture, fixtures, and equipment acquired in connection with any real property owned or leased by the bank or trust company, in all alterations of buildings on real property owned or leased by the bank or trust company, in all shares of corporations organized for the purpose of holding real estate in the categories described above where the bank or trust company or a subsidiary of the bank or trust company owns 25 percent or more of such shares outstanding, in obligations of or for the benefit of such corporations or loans upon the security of the shares of such corporations or, to the extent of the bank's or trust company's pro rata interest, the security of the real estate itself, and in all real estate, furniture, fixtures, or equipment held beyond the limits specified in Code Section 7-1-263 shall not exceed 60 percent of the statutory capital base of the bank or trust company, or such larger amount as may be approved by the department.

  2. All acquisitions of real property for purposes authorized above must be accorded prior written approval by the department in advance of the acquisition except to the extent authorized by regulation.

    (Ga. L. 1898, p. 78, § 3; Civil Code 1910, § 2817; Ga. L. 1917, p. 56, § 1; Ga. L. 1919, p. 135, art. 19, § 24; Ga. L. 1920, p. 76, § 1; Code 1933, §§ 13-2024, 109-201; Ga. L. 1963, p. 512, § 1; Ga. L. 1972, p. 1242, § 1; Code 1933, § 41A-1203, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 16; Ga. L. 1989, p. 1249, § 3.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 600 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, § 241.

7-1-263. Property held to avoid loss.

A bank or trust company may acquire and hold property for the purpose of avoiding loss as specified in paragraph (8) of Code Section 7-1-261, subject to:

  1. A determination by a majority vote of its directors at least once each year as to the advisability of retaining any such property, provided that no such property may be held for more than five years without the prior written approval of the department; and
  2. Disposition within a period of six months after the date of acquisition or such longer period as the department may approve in writing of shares of its own stock so acquired and of shares of stock of any bank, bank holding company, or trust company held after such acquisition.

    (Ga. L. 1898, p. 78, § 3; Civil Code 1910, § 2817; Ga. L. 1917, p. 56, § 1; Ga. L. 1919, p. 135, art. 19, §§ 22-24; Ga. L. 1920, p. 76, § 1; Ga. L. 1924, p. 76, § 1; Ga. L. 1927, p. 195, § 10; Code 1933, §§ 13-2022, 13-2023, 13-2024, 109-201; Ga. L. 1946, p. 65, § 1; Ga. L. 1947, p. 501, § 1; Ga. L. 1950, p. 18, § 1; Ga. L. 1951, p. 284, § 1; Ga. L. 1957, p. 275, § 1; Ga. L. 1958, p. 133, § 1; Ga. L. 1959, p. 238, § 1; Ga. L. 1962, p. 95, § 1; Ga. L. 1963, p. 512, § 1; Ga. L. 1965, p. 523, § 1; Ga. L. 1966, p. 590, § 8; Ga. L. 1968, p. 1162, § 1; Ga. L. 1969, p. 976, § 1; Ga. L. 1972, p. 1242, § 1; Code 1933, § 41A-1204, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1366, § 6.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 600 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, § 241.

ALR. - Liability of bank for loss of liberty bonds and war savings stamps, 40 A.L.R. 899 .

PART 3 P OWERS OF BANKS

RESEARCH REFERENCES

ALR. - Powers of bank president or vice president, 1 A.L.R. 693 ; 67 A.L.R. 970 .

Duty of bank when several checks which, in the aggregate, exceed the depositor's balance, are presented at the same time, 26 A.L.R. 1486.

Power of banking corporation to loan money for others, 33 A.L.R. 597 .

Rights of owners of securities deposited in bank, upon its insolvency, 51 A.L.R. 914 ; 84 A.L.R. 1534 ; 126 A.L.R. 625 .

Right of savings bank to liquidate voluntarily and close business, 69 A.L.R. 1255 .

Statute regulating banks and trust companies as special or class legislation, or as denying the equal protection of the laws, 111 A.L.R. 140 .

Power of bank officer respecting security or collateral held by bank, 11 A.L.R.2d 1305.

7-1-280. Major banking powers.

Subject to restrictions contained in this chapter or in its articles, a bank shall have the power:

  1. To receive money or commercial paper for deposit and to provide by its rules or by agreement for the terms of withdrawal and interest thereon;
  2. To act as an agent to collect checks, drafts, and other items of commercial paper and in exercising this power to become a member of a clearing-house and grant security interests in its assets for its qualification therein;
  3. To lend money and discount or purchase evidence of indebtedness and agreements for the payment of money and to take security title or security interests in real or personal property to secure obligations owing thereunder;
  4. To service loans made by it or by others whether or not held by the bank;
  5. To issue, advise, and confirm letters of credit authorizing the beneficiaries thereof to draw upon the bank or its correspondents;
  6. To receive money for transmission;
  7. To buy and sell exchange, coin, and bullion; and
  8. To provide third-party payments services.

    (Ga. L. 1919, p. 135, art. 17, § 1; Code 1933, § 13-1801; Code 1933, § 41A-1301, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1985, p. 258, § 4; Ga. L. 1986, p. 458, § 5.)

Cross references. - Definition of "clearing-house" for purposes of the "Uniform Commercial Code," § 11-4-104 .

Definition of "collecting bank" for purposes of the "Uniform Commercial Code," § 11-4-105 .

For provisions of T. 11, the "Uniform Commercial Code," pertaining to letters of credit generally, § 11-5-101 et seq.

Effect of laws relating to regulation of practice of law on power of banks to give advice to customers in matters incidental to banks or banking, § 15-19-52 .

JUDICIAL DECISIONS

Operation of general insurance agency does not qualify as "incidental power" as it is not convenient or useful in connection with one of the bank's activities established pursuant to the exercise of the bank's express powers. The business of a general insurance agency encompasses selling various types of insurance to the general public. In operating such an agency, a bank would be engaged in an independent, profit-seeking venture unrelated to the bank's express powers. Independent Ins. Agents of Ga., Inc. v. Department of Banking & Fin., 248 Ga. 787 , 285 S.E.2d 535 (1982).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 595 et seq.

Damages for Brach of Contract to Lend Money, 41 POF2d 337.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 223, 224.

ALR. - Liability of bank on letter of credit as affected by quality or condition of goods for purchase price of which it is issued, 39 A.L.R. 755 .

Liability of collecting bank which accepts something other than cash, 61 A.L.R. 739 ; 89 A.L.R. 1336 .

Misappropriation by agent or employee of bank of proceeds of loan made through him to third person as chargeable to bank or to borrower, 69 A.L.R. 804 .

What amounts to a deposit within statute in relation to civil or criminal liability for accepting deposit when bank is unsafe or insolvent, 76 A.L.R. 1320 .

Financial statement by borrower as basis of loan or extension of credit, 104 A.L.R. 921 .

Dealings between bank or trust company and itself acting as executor, administrator, or trustee, 112 A.L.R. 780 .

Power of bank to agree to repurchase real estate mortgage or other securities sold by it, 120 A.L.R. 485 .

Noncompliance by bank with statutory provisions relating to loans or discounts as defense to recovery of loan or enforcement of its security, 125 A.L.R. 1512 .

Power and capacity of bank to take devise or bequest, 8 A.L.R.2d 454.

Power of savings bank or similar institution to provide checking facilities or negotiable orders of withdrawal (NOW) to customers, 64 A.L.R.3d 1314.

Measure of damages for breach of contract to lend money, 4 A.L.R.4th 682.

Recovery by bank of money paid out to customer by mistake, 10 A.L.R.4th 524.

Bank's liability to real property purchaser for misrepresentation respecting purchaser's obtaining government guaranteed or subsidized loan, 37 A.L.R.4th 773.

7-1-281. Participation in federal programs.

Any bank may:

  1. Become a member of the Federal Reserve System and conform to the rules and regulations of that system and the federal reserve bank of which it is a member;
  2. Become an insured bank pursuant to the Federal Deposit Insurance Act and take all action necessary to the maintenance of insured status thereunder;
  3. Apply for and obtain insurance on loans pursuant to national housing legislation.

    (Ga. L. 1919, p. 135, art. 19, § 38; Code 1933, § 13-2038; Code 1933, § 41A-1302, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 17; Ga. L. 1984, p. 22, § 7.)

U.S. Code. - The Federal Deposit Insurance Act, referred to in paragraph (2) of this Code section, is codified as 12 U.S.C. §§ 1728, 1811 et seq.

7-1-282. Direct leasing of personal and real property.

Notwithstanding any other provision of law to the contrary and subject to such regulations as the department may prescribe, a bank may:

  1. Become the owner and lessor of personal property acquired upon the specific request and for the use of a customer and may incur such additional obligations as may be incident to becoming an owner and lessor of such property. At the end of any lease, the bank shall, within six months, enter into a new lease with respect to the property or dispose of it. The leasing shall constitute an indebtedness under Code Section 7-1-285 and shall be subject to the lending limitations of such Code section;
  2. Become the owner and lessor of certain public real property and facilities. A bank may purchase or construct a municipal building, school building, or other similar state, local, or other governmental authority facility if, as holder of legal title, such purchase is for the purpose of leasing the facility to a municipality or other public or governmental authority which has the authority to enter into such lease, is authorized to levy taxes or is backed by the taxing authority of another political subdivision, and has the resources sufficient to make lease payments as they come due. The lease agreement must provide that the lessee will become the owner of the building or facility upon the expiration of the lease; and
  3. Become the owner and lessor of real property acquired upon the specific request and for the use of a customer or an affiliate thereof and may incur such additional obligations as may be incidental to becoming an owner and lessor of such property. The lessee, or an affiliate thereof, shall be responsible for any and all construction of buildings or other improvements related to such real property. Any lease with respect to such real property shall provide that the lessee thereof shall be responsible for maintaining the property, insuring the property, and paying real estate taxes related to the property. At the end of any lease, the bank shall, within six months, enter into a new lease with respect to the property or dispose of it. The leasing shall be subject to credit approval by the bank in a manner substantially similar to a loan and shall constitute an indebtedness under Code Section 7-1-285 and shall be subject to the lending limitations of such Code section. The assignment of any purchase contract, or the right to purchase real property thereunder, by the lessee or an affiliate thereof to the bank shall not affect the entitlement of any real estate broker to any real estate brokerage commissions owing upon the sale of such real property.

    (Ga. L. 1919, p. 135, art. 19, § 22; Code 1933, § 13-2022; Ga. L. 1966, p. 590, § 8; Code 1933, § 41A-1303, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1999, p. 674, § 4; Ga. L. 2000, p. 174, § 5; Ga. L. 2001, p. 4, § 7; Ga. L. 2004, p. 458, § 3.)

7-1-283. Participations.

  1. A bank may purchase and may sell participations in:
    1. One or more evidences of indebtedness or agreements for the payment of money, subject to regulations by the department; or
    2. Pools of evidences of indebtedness or agreements for the payment of money, subject to regulations by the department.
  2. The department may prohibit the sale of any type of participation to the public or otherwise not in the usual course of banking business, except as permitted by other provisions of this chapter.

    (Code 1933, § 41A-1304, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

ALR. - Power of bank or trust company to create trust out of its securities and sell participation certificates therein, 97 A.L.R. 1182 .

7-1-284. Acceptances.

  1. A bank may accept drafts upon it having not more than nine months' sight to run arising out of transactions involving:
    1. The import or export of goods;
    2. The domestic shipment of goods, if secured by documents of title covering such goods; or
    3. The storage of readily marketable staples, if secured by documents of title covering such staples.
  2. The aggregate amount of acceptances under subsection (a) of this Code section shall not at any time exceed, for all such acceptances on behalf of one customer, 15 percent of the statutory capital base of the bank, exclusive of any acceptance secured by documents of title or other security growing out of the same transaction as the acceptance.
  3. In addition, a bank may, with the prior approval of the department, accept drafts having not more than three months' sight to run drawn upon it by banking institutions or bankers in foreign countries or in dependencies or insular possessions of the United States for the purpose of creating dollar exchange as required in an aggregate amount which shall not at any time exceed:
    1. For all such acceptances on behalf of a single banking institution or banker, 10 percent of the statutory capital base;
    2. For all such acceptances, 50 percent of the statutory capital base, provided that the department may, by regulation, impose additional restrictions on the acceptance of drafts under this subsection.

      (Ga. L. 1919, p. 135, art. 19, § 20; Code 1933, § 13-2020; Code 1933, § 41A-1305, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1976, p. 275, § 1; Ga. L. 1981, p. 1366, § 7; Ga. L. 1983, p. 602, § 5.)

Cross references. - Effect of proffered acceptance of draft by drawee which varies draft as presented, § 11-3-412 .

Warehouse receipts, bills of lading, and other documents of title, § 11-7-101 et seq.

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Bills and Notes, § 379 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 242, 243.

7-1-285. Limits on obligations of one person or corporation.

  1. As used in this Code section, the term:
    1. "Credit exposure as a counterparty in derivative transactions" means an amount that the bank reasonably determines, pursuant to a methodology acceptable to the department under the terms of the derivative or otherwise, would be its loss if a counterparty were to default on the date of determination, taking into account any netting and collateral arrangements and any guarantees or other credit enhancements; provided, however, that the bank may elect to determine credit exposure on the basis of such other method of determining credit exposure as may be permitted by the department and the bank's primary federal regulator.
    2. "Derivative transaction" includes any transaction that is an agreement, contract, note, option, swap, or warrant that is based, in whole or in part, on the value of, any interest in, or any quantitative measure or the occurrence of any event relating to, one or more commodities, securities, currencies, interest or other rates, indices, or other assets.
    3. "Person or corporation" includes, but is not limited to, an individual, corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, or unincorporated organization. The term "person or corporation" shall not include the affiliates of a bank or a clearing organization registered or exempt from registration with the Commodity Futures Trading Commission, the Securities and Exchange Commission, any other federal agency, or any successor agencies.

      (1) Make loans to any one person or corporation;

      (2) Have obligations owing to it from any one person or corporation as a result of purchasing or discounting evidences of indebtedness or agreements for the payment of money; or

      (3) Have credit exposure as a counterparty in derivative transactions with any one person or corporation,

      where the aggregate of such loans, obligations, and credit exposure together exceeds 15 percent of the statutory capital base of the bank at the time of issuance of a binding commitment unless each loan, discount, purchase, or derivative transaction in excess of such 15 percent limit is approved in advance by the board of directors or a committee authorized to act for it subject to the provisions set forth in subsections (b) and (c) of this Code section. Approval by the board of directors or authorized committee shall be recorded in the formal minutes of the actions of the board or its committee by name of borrower, amount of loan, maturity of loan, general type of collateral, and such other information as required pursuant to the rules and regulations of the department. Any action required by this subsection may be taken pursuant to Code Section 7-1-483, provided that the minutes of the proceedings of the board or of the committee reflect such action and each director taking such action signs the minutes reflecting such action by no later than the next regular meeting of the board or committee attended by such director.

    (a.1) A bank shall not at any time:

  2. Except as provided in subsection (c) of this Code section, a bank shall not directly or indirectly make loans, have obligations, or have credit exposure as a counterparty in derivative transactions to any one person or corporation which in aggregate exceed 15 percent of the statutory capital base of the bank at the time of issuance of a binding commitment unless the entire amount of such loans, obligations, and credit exposure in derivative transactions is secured by good collateral or other ample security and does not exceed 25 percent of the statutory capital base at the time of issuance of a binding commitment. Except as otherwise indicated in subsection (c) of this Code section, the purchase or discount of agreements for the payment of money or evidences of indebtedness shall be regarded as indirect loans to the person or corporation receiving the proceeds of such transactions. In estimating the legal lending limit for any one person or corporation, loans to related corporations, partnerships, and other entities shall be combined subject to regulations established by the department.
  3. The limitations of subsection (b) of this Code section shall not apply to:
    1. Obligations of and obligations guaranteed by:
      1. The United States;
      2. The State of Georgia or a public body thereof authorized to levy taxes;
      3. Any state of the United States or any public body thereof if the obligations or guarantees are general obligations; or
      4. Any agency of this state as defined in subparagraph (a)(1)(A) of Code Section 50-14-1;
    2. Obligations to the extent secured by:
      1. Obligations specified in paragraph (3) of this subsection;
      2. Obligations which the bank would be authorized to acquire without limit as investment securities pursuant to Code Section 7-1-287;
      3. Obligations fully guaranteed by the United States;
      4. Guaranties or commitments or agreements to take over or purchase made by any public body of the United States or any corporation owned directly or indirectly by the United States; or
      5. Loan agreements between a local public agency or a public housing agency and an instrumentality of the United States pursuant to national housing legislation under which funds will be provided for payment of the obligations secured by such loan agreements;
    3. Obligations in the form of investment securities acquired pursuant to Code Section 7-1-287 and related regulations;
    4. Obligations with respect to the sale of federal or correspondent funds to financial institutions having their deposits insured to the same extent as that required of similar institutions chartered in this state; and
    5. A renewal or restructuring of a loan as a new loan or extension of credit following the exercise by the bank of reasonable efforts, consistent with safe and sound banking practices, to bring the loan into conformance with the lending limits of this Code section, unless:
      1. New funds are advanced by the bank to the borrower, except as permitted under this Code section;
      2. A new borrower replaces the original borrower; or
      3. The department determines that a renewal or restructuring was undertaken as a means to evade the bank's lending limit.
  4. In lieu of following the limitations contained in subsections (a) through (c) of this Code section and the related regulations of the department, a bank may petition the department for approval to utilize all of the limitations applicable to national banks regarding obligations of a single person or corporation.
  5. The department may, by regulation not inconsistent with this Code section, prescribe definitions of and requirements for transactions included in or excluded from the indebtedness to which this Code section applies. The department may also by regulation prescribe less restrictive limitations than those listed in subsections (a) through (c) of this Code section for banks meeting certain financial and management criteria. In addition, the department may, by regulation or otherwise, specify that the liabilities of a group of one or more persons or corporations or both shall be considered as owed by one person or corporation for the purposes of this Code section because the borrowers within the group are related through common control or the group meets other criteria established by the department for the combination of indebtedness for legal lending limitation purposes.

    (Ga. L. 1919, p. 135, art. 19, § 13; Ga. L. 1922, p. 63, § 1; Ga. L. 1927, p. 195, § 9; Code 1933, § 13-2013; Ga. L. 1943, p. 254, § 1; Ga. L. 1951, p. 201, § 1; Ga. L. 1955, p. 414, § 1; Ga. L. 1966, p. 590, § 7; Ga. L. 1969, p. 603, § 1; Ga. L. 1973, p. 526, § 4; Code 1933, § 41A-1306, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1366, § 8; Ga. L. 1982, p. 3, § 7; Ga. L. 1983, p. 602, § 6; Ga. L. 1992, p. 6, § 7; Ga. L. 2000, p. 174, § 6; Ga. L. 2009, p. 86, § 5/HB 141; Ga. L. 2010, p. 1, § 1/HB 926; Ga. L. 2012, p. 349, § 1/HB 886; Ga. L. 2017, p. 193, § 6/HB 143; Ga. L. 2018, p. 214, § 5/HB 780.)

The 2017 amendment, effective June 1, 2017, inserted commas in paragraph (a)(1); inserted "at the time of issuance of a binding commitment" in the ending undesignated paragraph of subsection (a.1) and twice in the first sentence of subsection (b); in the ending undesignated paragraph of subsection (a.1), added "subject to the provisions set forth in subsections (b) and (c) of this Code section" at the end of the first sentence and added the second and third sentences; rewrote subsection (c); in subsection (d), in the middle, inserted "and the related regulations of the department", and substituted "utilize all of the limitations" for "utilize limits"; and substituted "borrowers within the group are related through common control or the group" for "group relies substantially on a common source for the payment of its obligations or makes common use of funds received by it, or" near the end of the last sentence of subsection (e).

The 2018 amendment, effective May 3, 2018, deleted "or" at the end of subparagraph (c)(1)(B), added "or" at the end of subparagraph (c)(1)(C), and added subparagraph (c)(1)(D). See Editor's notes for applicability.

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

Administrative Rules and Regulations. - Loans and discounts, Official Compilation of Rules and Regulations of State of Georgia, Department of Banking and Finance, Banks, Chapter 80-1-5.

Law reviews. - For annual survey on business corporations, see 64 Mercer L. Rev. 61 (2012).

JUDICIAL DECISIONS

Editor's notes. - In light of the similarity of the statutory provisions, decisions under former Civil Code 1910, § 2280(m) have been included in the annotations for this Code section.

Reasonable control and supervision as to loans of less than ten percent. - As to loans of less than ten percent, directors are not justified in absolutely relinquishing to any officer or agent unlimited discretion; but they must retain and exercise reasonable control and supervision over such officers, amounting to exercise on their part of ordinary care and diligence. Mobley v. Faulk, 42 Ga. App. 314 , 156 S.E. 40 (1930) (decided under former Civil Code 1910, § 2280(m)).

OPINIONS OF THE ATTORNEY GENERAL

Loans not rendered illegal by reduction of lending limit. - No loans in excess of a bank's lending limit can be made, but loans which were legal when made are not rendered illegal by reduction of bank's lending limit. 1977 Op. Att'y Gen. No. 77-58.

Purpose of ten percent (now fifteen percent) lending limit imposed is to protect depositors, other creditors, and shareholders from loss in the event that one or two large loans become uncollectible; relaxation of 10 percent (now 15 percent) ceiling is tied to factors such as collateral security and government guarantees, which reduce the risk of uncollectibility. 1977 Op. Att'y Gen. No. 77-58.

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, § 998.

7-1-286. Real estate loans; acquisition by bank or trust company of ownership interest.

  1. A bank shall make loans secured by improved or unimproved real estate (including a leasehold) subject to the provisions of Part 365 of the Federal Deposit Insurance Corporation's rules and regulations, including 12 C.F.R. 365.1 and 365.2 and the Interagency Guidelines for Real Estate Lending Policies in Appendix A and 12 C.F.R. 208.51 and the guidelines contained in 12 C.F.R. Part 208 in the case of Federal Reserve member banks. Such loans shall also be subject to the additional provisions and exceptions as set forth in the rules of the department.
  2. The limitations of subsection (a) of this Code section shall not apply to:
    1. An investment security acquired pursuant to Code Section 7-1-287;
    2. A loan in connection with which the bank takes a real estate lien as security in the exercise of banking prudence but as to which it is relying for repayment on:
      1. The general credit of the obligor or of an installment buyer or of a lessee of the real estate;
      2. Collateral other than the real estate lien;
      3. A guaranty or an agreement to take over or purchase the loan, in the event of default, by a financially responsible person other than a person engaged in the business of guaranteeing real estate loans; or
      4. An agreement by a financially responsible person to take over or purchase the loan, or to provide funds for payment thereof, within a period of two years from the date of the loan;

        and there is documentation in the file setting forth the applicable facts to support reliance on this paragraph.

  3. For the purpose of this Code section, a "leasehold" shall mean the interest, which is security for a loan, of a lessee of real estate under a lease which on the date of the loan has an unexpired term extending at least ten years beyond the maturity of the loan or contains a right of renewal, which may be exercised by the bank, extending at least ten years beyond the maturity of the loan.
  4. Notwithstanding any other provisions of this chapter and otherwise subject to regulations of the department, a bank or trust company may acquire, directly or indirectly, an ownership interest in real estate incidental to the financing of the purchase, development, or improvement of such real estate, provided:
    1. The amount of such ownership interest shall not exceed 25 percent of the appraised value of the real estate;
    2. The amount of such ownership interest when aggregated with the amount financed shall not exceed the limitations prescribed by this Code section and Code Section 7-1-285;
    3. The ownership interest shall be terminated upon substantial repayment of the financing in the manner prescribed in Code Section 7-1-263, relating to the divestiture of real estate interest; and
    4. Any time real estate owned by a bank or trust company pursuant to this subsection is held or disposed of pursuant to the provisions of Code Section 7-1-263, said action to hold or dispose shall be reported in writing annually to the stockholders. Said report shall include disclosure of any real estate acquired by foreclosure or the taking by a deed in lieu of foreclosure and the name or names of the corporation or individuals from whom title was taken.

      (Ga. L. 1919, p. 135, art. 19, § 15; Code 1933, § 13-2015; Ga. L. 1937, p. 423, § 1; Ga. L. 1945, p. 208, § 1; Ga. L. 1959, p. 250, § 1; Ga. L. 1965, p. 281, § 1; Ga. L. 1972, p. 556, § 1; Code 1933, § 41A-1307, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 18; Ga. L. 1989, p. 1249, § 4; Ga. L. 1992, p. 6, § 7; Ga. L. 1998, p. 795, § 14; Ga. L. 2000, p. 174, § 7; Ga. L. 2001, p. 970, § 2; Ga. L. 2007, p. 502, § 2/SB 70.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1989, "Any time" was substituted for "Anytime" at the beginning of paragraph (e)(4) (now (d)(4)).

Administrative Rules and Regulations. - Rules governing real estate loans, Official Compilation of Rules and Regulations of State of Georgia, Rules of Department of Banking and Finance, Chapter 80-1-5.

Law reviews. - For article, "Business Associations," see 53 Mercer L. Rev. 109 (2001). For note, "Opportunity Costs: Nonjudicial Foreclosure and the Subprime Mortgage Crisis in Georgia," see 25 Ga. St. U.L. Rev. 1205 (2009).

JUDICIAL DECISIONS

When bank letter confirming loan did not specify the financing terms the seller could not be sure that the buyer had obtained a commitment in accordance with the contract by terms which the buyer would be bound. Brown v. Morris Real Estate Consultants, Inc., 256 Ga. 269 , 347 S.E.2d 563 (1986).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 602.

C.J.S. - 9 C.J.S., Banks and Banking, § 501.

ALR. - Bank's liability to real property purchaser for misrepresentation respecting purchaser's obtaining government guaranteed or subsidized loan, 37 A.L.R.4th 773.

Financing agency's liability to purchaser of new home or structure for consequences of construction defects, 20 A.L.R.5th 499.

7-1-287. Dealings in securities; conflicts of interest; divestiture and fines.

Notwithstanding the limitations of Code Section 7-1-288, a bank may purchase, sell, underwrite, and hold securities which are obligations in the form of bonds, notes, or debentures or mutual funds, investment trusts, or pools primarily consisting of such bonds, notes, or debentures, and may purchase, sell, and hold corporate debt obligations, to the extent authorized by regulations of the department. The department may issue regulations which prescribe operating restrictions and standards of conduct dealing with potential conflicts of interest and shall prescribe rules for divestiture of securities held in violation of such regulations and fines for violations not to exceed $10,000.00 per day during which each violation remains uncorrected. A bank may hold without limit securities which are obligations of the United States or obligations which are guaranteed fully as to principal and interest by the United States or general obligations of any state.

(Ga. L. 1919, p. 135, art. 19, § 23; Ga. L. 1924, p. 76, § 1; Ga. L. 1927, p. 195, § 10; Code 1933, § 13-2023; Ga. L. 1946, p. 65, § 1; Ga. L. 1947, p. 501, § 1; Ga. L. 1950, p. 18, § 1; Ga. L. 1951, p. 284, § 1; Ga. L. 1957, p. 275, § 1; Ga. L. 1958, p. 133, § 1; Ga. L. 1959, p. 238, § 1; Ga. L. 1962, p. 95, § 1; Ga. L. 1965, p. 523, § 1; Ga. L. 1968, p. 1162, § 1; Ga. L. 1969, p. 976, § 1; Code 1933, § 41A-1308, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1249, § 5; Ga. L. 1999, p. 674, § 5.)

Administrative Rules and Regulations. - Rules governing investment securities, Official Compilation of Rules and Regulations of State of Georgia, Rules of Department of Banking and Finance, Chapter 80-1-4.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 501, 515, 613, 636.

C.J.S. - 9 C.J.S., Banks and Banking, § 240.

ALR. - Rights of owners of securities deposited in bank upon its insolvency, 51 A.L.R. 914 ; 84 A.L.R. 1534 ; 126 A.L.R. 625 .

7-1-288. Corporate stock and securities.

  1. A bank may engage in any transaction with respect to shares of stock or other capital securities of any corporation in accordance with this Code section and in other instances as provided in state or federal law.
  2. A bank may:
    1. Engage in transactions with respect to issuance and transfer of shares of its own stock and capital securities and in other transactions with respect to such stock and capital securities authorized by this chapter;
    2. Purchase and sell shares of stock, bonds, capital securities, and other investment products upon the order of and for the account of a customer without recourse against it;
    3. Receive a pledge or other security interest in stock or capital securities in order to secure loans made in good faith, except that it may not receive such interests in its own stock or capital securities nor lend in one or more transactions, involving one or more borrowers, more than 30 percent of its statutory capital base on the stock or capital securities of any corporation (including therein loans made directly to the corporation without ample security but excluding obligations representing the sale of federal or correspondent funds to another financial institution). The department may, by regulation or otherwise, specify that two or more corporations are so interrelated that their stock shall be regarded as the stock of one corporation for the purposes of this subsection.
  3. Notwithstanding any other provisions of law to the contrary, a bank may acquire and hold for its own account:
    1. Shares of stock of a federal reserve bank without limitation of amount;
    2. Shares of stock or interests in:
      1. Any state or federal government sponsored instrumentality for the guarantee, underwriting, or marketing of residential housing or financing of residential housing;
      2. A business development corporation or small minority business development corporation authorized under Article 6 of this chapter;
      3. An agricultural credit corporation duly organized under the laws of this state having authority to make loans to farmers of this state for agricultural purposes under programs administered by the federal farm credit system;
      4. A bank service corporation created to provide support services for one or more financial institutions;
        1. A bank principally engaged in foreign or international banking or banking in a dependency or insular possession of the United States, either directly or through the agency, ownership, or control of local institutions in foreign countries or in such dependencies or insular possessions, including the stock of one or more corporations existing pursuant to Section 25(a) of the Federal Reserve Act, provided that, before a bank may purchase a majority interest in any such banking institution, it shall enter into an agreement with the department to restrict its operations in such manner as the department may prescribe; and provided, further, that, if the department determines that said restrictions have not been complied with, it may order the disposition of said stock upon reasonable notice.
        2. A bank engaged in providing banking or other financial services to depository financial institutions, which bank's ownership consists primarily of such depository financial institutions;
      5. A corporation or limited liability company engaged in functions or activities that the bank or trust company is authorized to carry on, including, but not limited to: conducting a safe-deposit business; holding real estate; acting as a financial planner or investment adviser; offering of a full range of investment products; promoting and facilitating international trade and commerce; and exercising powers incidental to financial activities as provided in paragraph (11) of Code Section 7-1-261; in addition to functions or activities which include exercising powers granted by department regulations or exercising powers determined by the commissioner to be financial in nature or incidental to the provision of financial services, so long as these activities do not pose undue risk to the safety and soundness of the financial institution and are consistent with the objectives of this chapter as stated in Code Section 7-1-3; provided, however, unless the bank is exempt, nothing contained in this subparagraph shall relieve any such corporation or limited liability company from undertaking registration, licensing, or other qualification to engage in such functions or activities as may otherwise be required by law; and
      6. Other corporations created pursuant to act of Congress or pursuant to Chapter 3 of Title 14, known as the "Georgia Nonprofit Corporation Code," for the purpose of meeting the agricultural, housing, health, transit, educational, environmental, or similar needs where the department determines that investment therein by banks is in the public interest;
    3. Shares of stock of small business investment companies organized under acts of Congress and doing business in this state, provided that the aggregate investment by the bank in such shares shall not exceed 5 percent of its statutory capital base; and
    4. Shares of stock or partnership interests in a corporation or partnership the primary business of which, as determined by the department, is to promote the public welfare or community development by engaging in the development of low and moderate-income housing, job training and job placement programs, credit counseling, public education regarding financial matters, small business development, and other similar purposes. The ability to invest in such stock or partnership interests shall also be subject to such limitations and approval procedures as the department deems necessary in order to assure that such investments are not a safety and soundness concern.
  4. A bank acquiring stock or an interest in an entity listed in paragraph (2) of subsection (c) of this Code section shall be subject to the following limitations:
    1. Where the entity carries on only such activities as the bank could legally perform itself, there is no limitation on investment;
    2. Where the activities of the entity go beyond those that the bank could legally perform, the bank's investment may not exceed 10 percent of its statutory capital base; and
    3. Where the investment is in stock of the Federal Home Loan Bank, there is no limitation on the bank's investment, provided such investment is for the purpose of utilizing the services of the Federal Home Loan Bank.
  5. Prior approval by the department is required for acquisitions listed in subparagraphs (c)(2)(D) through (c)(2)(G) of this Code section. The department, by regulation, may permit expedited or notice only procedures and may provide for applicable administrative fees.
  6. The department may by rule or regulation prescribe less restrictive investment limitations than those contained in this Code section for banks meeting certain financial and management criteria.

    (Ga. L. 1919, p. 135, art. 19, §§ 20, 23; Ga. L. 1924, p. 76, § 1; Ga. L. 1927, p. 195, § 10; Code 1933, §§ 13-2017, 13-2023; Ga. L. 1946, p. 65, § 1; Ga. L. 1947, p. 501, § 1; Ga. L. 1950, p. 18, § 1; Ga. L. 1951, p. 284, § 1; Ga. L. 1953, Nov.-Dec. Sess., p. 328, § 1; Ga. L. 1957, p. 275, § 1; Ga. L. 1958, p. 133, § 1; Ga. L. 1959, p. 238, § 1; Ga. L. 1959, p. 328, § 1; Ga. L. 1962, p. 95, § 1; Ga. L. 1965, p. 523, § 1; Code 1933, § 13-2023.1, enacted by Ga. L. 1968, p. 1042, § 1; Ga. L. 1968, p. 1162, § 1; Ga. L. 1969, p. 976, § 1; Ga. L. 1972, p. 798, § 6; Code 1933, § 41A-1309, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 19; Ga. L. 1977, p. 730, § 3; Ga. L. 1979, p. 953, § 1; Ga. L. 1983, p. 602, § 7; Ga. L. 1984, p. 22, § 7; Ga. L. 1987, p. 1586, § 4; Ga. L. 1989, p. 1249, § 6; Ga. L. 1995, p. 673, § 13; Ga. L. 1996, p. 6, § 7; Ga. L. 1997, p. 143, § 7; Ga. L. 1997, p. 485, § 12; Ga. L. 1999, p. 674, § 6; Ga. L. 2000, p. 174, § 8; Ga. L. 2001, p. 970, § 3; Ga. L. 2002, p. 1220, § 5; Ga. L. 2005, p. 826, § 7/SB 82.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 2001, "subparagraphs (c)(2)(D) through (c)(2)(G)" was substituted for "subparagraphs (D) through (G)" in subsection (e).

U.S. Code. - Section 25(a) of the Federal Reserve Act, referred to in subsection (c)(2)(E)(i) of this Code section, is codified as 12 U.S.C. § 611 et seq.

Administrative Rules and Regulations. - Investment securities, Official Compilation of Rules and Regulations of State of Georgia, Department of Banking and Finance, Banks, Chapter 80-1-4.

Law reviews. - For article, "Business Associations," see 53 Mercer L. Rev. 109 (2001).

OPINIONS OF THE ATTORNEY GENERAL

Discussion of former Code 1933, § 13-2022 (see now O.C.G.A. §§ 7-1-288 and 7-1-370 ) and deposits by banks in mutual savings and loan association. - See 1978 Op. Att'y Gen. No. 78-66.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 613, 616.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 236 et seq., 501.

ALR. - Rights of owners of securities deposited in bank, upon its insolvency, 51 A.L.R. 914 ; 84 A.L.R. 1534 ; 126 A.L.R. 625 .

Power of bank or trust company to create trust out of its securities and sell participation certificates therein, 97 A.L.R. 1182 .

7-1-289. Security for deposits.

  1. A bank may pledge or otherwise grant security interests in its assets to secure deposits of:
    1. Public funds;
    2. Funds of a pension fund for employees of a public body of the state;
    3. Funds for which a public body of the state or an officer or employee thereof or any court of law is the custodian or trustee pursuant to statute;
    4. Funds held by the department as receiver;
    5. Funds which are required to be secured by law or by an order of a court;
    6. Its own fiduciary funds or the fiduciary funds of an affiliate. In either case, the funds shall be deposited with the pledging institution and held in its commercial department; and
    7. Public funds deposited in another bank.
  2. Except for the deposits listed in subsection (a) of this Code section, a bank may not pledge or otherwise grant security interests in its assets as security for deposits unless otherwise specifically approved in writing by the department.

    (Code 1933, § 13-2068, enacted by Ga. L. 1973, p. 526, § 8; Code 1933, § 41A-1310, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1993, p. 929, § 1; Ga. L. 1995, p. 673, § 14; Ga. L. 2016, p. 390, § 7-6/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted ", unless otherwise specifically approved in writing by the department," following "A bank may" in the introductory paragraph of subsection (a) and substituted the present provisions of subsection (b) for the former provisions, which read: "A bank may not pledge or otherwise grant security interests in its assets as security for deposits other than the deposits listed in subsection (a) of this Code section."

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 610, 611.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 223, 224.

ALR. - Power of bank to pledge assets to secure general depositors, 65 A.L.R. 1412 ; 87 A.L.R. 1456 ; 101 A.L.R. 515 ; 112 A.L.R. 483 .

7-1-290. Powers as surety or guarantor.

  1. Except as authorized in subsection (b) of this Code section, in paragraph (10) of Code Section 7-1-260, and in paragraph (4) of Code Section 7-1-261, a bank shall not lend its credit, bind itself as a surety to indemnify another, or otherwise become a guarantor.
  2. A bank may act as a surety or guarantor if it has a substantial interest in the performance of the transaction involved or has a segregated deposit sufficient in amount to cover the institution's potential liability.
  3. Nothing in this Code section shall be construed to prohibit banks from:
    1. Giving warranties or guaranties in connection with the handling of items for collection; the transfer, exchange, or collection of securities; or the sale or disposition of its assets;
    2. Issuing letters of credit; and
    3. Pledging or otherwise granting security interests in their assets to secure public funds deposited in the bank or another bank, including, but not limited to, deposits made pursuant to a pledging pool.
  4. Notwithstanding other provisions of law to the contrary, irrevocable letters of credit issued by banks domiciled in this state may, in the discretion of the party in whose favor such irrevocable letter of credit is issued, be accepted in lieu of any bond, surety, or pledge of assets required by the laws of this state or regulations promulgated pursuant to such laws.

    (Code 1933, § 41A-1311, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1983, p. 602, § 8; Ga. L. 1989, p. 1211, § 5; Ga. L. 1993, p. 929, § 2; Ga. L. 2016, p. 390, § 2-3/HB 811.)

The 2016 amendment, effective July 1, 2016, in paragraph (c)(3), inserted "the bank or" and added ", including, but not limited to, deposits made pursuant to a pledging pool" at the end.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 610.

C.J.S. - 9 C.J.S., Banks and Banking, § 230.

ALR. - Liability of bank on letter of credit as affected by quality or condition of goods for purchase price of which it is issued, 39 A.L.R. 755 .

Liability of guarantor of or surety for bank deposit as affected by reorganization, merger, or consolidation of bank, 78 A.L.R. 381 .

7-1-291. Borrowings; liabilities not subject to restrictions; restrictions; borrowing for emergencies.

  1. Subject to the restrictions of subsection (c) of this Code section, a bank may borrow money and issue notes, debentures, or other obligations to evidence such borrowings.
  2. The following outstanding liabilities are not subject to the restrictions in this Code section:
    1. Liabilities to a federal reserve bank on account of money borrowed or rediscounts;
    2. Liabilities on account of the acquisition of reserve balances at a federal reserve bank or other reserve agent from a member or a nonmember bank;
    3. Liabilities on account of agreements to repurchase securities sold by the bank (commonly known as "repurchase agreements");
    4. Liabilities in the form of subordinated securities under Code Section 7-1-419; and
    5. Liabilities which do not constitute or result from the borrowing of money under definitions prescribed by regulation of the department.
  3. A bank that wishes to borrow from sources other than those listed in subsection (b) of this Code section may borrow an aggregate amount which exceeds the sum of twice its unimpaired capital stock plus 100 percent of its unimpaired paid-in capital, appropriated retained earnings, and retained earnings, provided the bank's board of directors has approved a comprehensive written funding plan that addresses the following safety and soundness concerns:
    1. The plan must contain a detailed evaluation of the bank's management expertise and information systems to support the plan; and
    2. The plan must contain adequate asset and liability, liquidity, and funds management policies and procedures to specifically address the use of borrowings as an alternate funding source.
  4. The department may, notwithstanding the other provisions of this Code section, temporarily waive the requirements of this Code section to permit an individual bank to borrow for emergency purposes. The department shall review the funding plan of each bank as a part of its normal supervisory program. The department may prohibit or place additional restrictions upon borrowings of any bank which would, in the judgment of the department, constitute an unsafe or unsound practice in view of the condition and circumstances of the bank.

    (Ga. L. 1919, p. 135, art. 19, § 25; Code 1933, § 13-2025; Ga. L. 1966, p. 590, § 9; Ga. L. 1973, p. 526, § 5; Code 1933, § 41A-1312, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 20; Ga. L. 1996, p. 848, § 5.)

Administrative Rules and Regulations. - Rules governing borrowed money, Official Compilation of Rules and Regulations of State of Georgia, Rules of Department of Banking and Finance, Chapter 80-1-9.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 483, 484, 608 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 228, 229.

7-1-292. Interest and fees.

Any bank may take, receive, reserve, and charge interest and fees on any loan, advance of money, or forbearance to enforce the collection of money at rates not exceeding the limits set by the laws of this state. Whenever such laws authorize a special interest or fee rate with respect to a designated type of loan, then a bank may charge that special interest or fee on loans of that type made by it. Whenever such laws authorize a person or a corporation other than a bank to charge a special interest or fee rate with respect to a designated type of loan, then a bank may charge such rate or fee on loans made by it which would qualify as the designated type of loan if made by the person or corporation so authorized without any requirement for the bank to obtain any license, qualification, or permit.

(Ga. L. 1919, p. 135, art. 19, § 19; Code 1933, § 13-2019; Code 1933, § 41A-1313, enacted by Ga. L. 1974, p. 705, § 1.)

Cross references. - Regulation of rates of interest generally, T. 7, C. 4.

Law reviews. - For article surveying Georgia cases dealing with commercial law from June 1977 through May 1978, see 30 Mercer L. Rev. 15 (1978). For article discussing methods of computation of finance charges in Georgia consumer credit contracts, see 30 Mercer L. Rev. 281 (1978). For survey article on commercial law, see 34 Mercer L. Rev. 31 (1982).

JUDICIAL DECISIONS

Cited in Sumner v. Adel Banking Co., 244 Ga. 73 , 259 S.E.2d 32 (1979); FDIC v. Lattimore Land Corp., 656 F.2d 139 (5th Cir. 1981).

OPINIONS OF THE ATTORNEY GENERAL

Bank will not be authorized to charge rates permitted by former Code 1933, § 41A-3109 (see now O.C.G.A. § 7-1-658 ). 1975 Op. Att'y Gen. No. 75-2.

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, § 993.

C.J.S. - 9 C.J.S., Banks and Banking, § 504 et seq.

ALR. - Enforceability of provision in loan commitment agreement authorizing lender to charge standby fee, commitment fee, or similar deposit, 93 A.L.R.3d 1156.

7-1-293. Savings banks and state savings and loan associations.

  1. A bank desiring to be accorded treatment under this chapter as a savings bank or state savings and loan association shall so state in its articles.
  2. A savings bank or a state savings and loan association may apply to the department for permission to relinquish its status as a savings bank or state savings and loan association and become a commercial bank by filing an appropriate amendment to its articles. The department may exercise its discretion in determining whether to approve such a change and shall consider in connection therewith the same criteria considered in approving the original articles of incorporation.
  3. A savings bank shall provide its depositors with deposit insurance coverage pursuant to those deposit insurance provisions of this chapter applicable to commercial banks. A state savings and loan association shall provide its depositors, but not its shareholders, with deposit insurance coverage.
  4. Reserved.
  5. The conversion, merger, or consolidation of a federal savings and loan association or federal savings bank, including a federal mutual savings and loan association or federal mutual savings bank, shall be accomplished pursuant to the same procedures as are prescribed in this chapter for a conversion, merger, or consolidation involving a national bank, provided that the approval of such conversion by the members of such association or bank shall be by such vote as is required in the articles of association and bylaws of such association or bank. A federal mutual savings and loan association or federal mutual savings bank shall upon conversion be and be known as a mutual savings bank. In considering any plan for the conversion, merger, or consolidation of a federal savings and loan association or federal savings bank or conversion of a building and loan association, the department shall not approve the plan unless it is satisfied that such plan is fair and equitable to all borrowers, depositors, and shareholders.
    1. The conversion, merger, or consolidation of a federal mutual savings and loan association holding company or federal mutual savings bank holding company shall be accomplished pursuant to the same procedures as are prescribed in this chapter for a conversion, merger, or consolidation involving a national bank, provided that the approval of such conversion shall be by such vote of the members of such holding company as is required in the articles of association and bylaws of such holding company but shall be further conditioned upon the conversion of the federal savings and loan association or federal savings bank subsidiary of such holding company to a savings bank contemporaneously with the holding company's conversion.
    2. A state mutual savings bank holding company shall be subject to all of the rules and regulations of the department as if it were a commercial bank organized under this chapter, provided that it shall be authorized to own the stock of a savings bank subsidiary.
  6. With respect to the corporate governance of a mutual savings bank or mutual savings bank holding company, the members of the savings bank or holding company as defined in the articles of association, subject to the approval of the department, shall be the equivalent of the shareholders of a commercial bank or bank holding company having such rights, preferences, and powers and subject to such limitations as may be contained in the rules and regulations of the department and in the articles of association and bylaws of the savings bank or holding company approved by the department.
  7. Except as provided therein, Article 1 of this chapter and all other parts of this article shall apply to all mutual savings banks, savings banks, and state savings and loan associations and unless specifically exempt therein, all rules and regulations promulgated by the department applicable to banks shall be applicable to mutual savings banks, savings banks, and state savings and loan associations.
  8. Unless otherwise provided, the provisions of Part 18 of this article applicable to bank holding companies shall be applicable to mutual savings bank holding companies and unless specifically exempt therein, all rules and regulations promulgated by the department applicable to bank holding companies shall be applicable to mutual savings bank holding companies.
  9. In the event that a federal mutual savings and loan association or federal mutual savings bank upon conversion to a savings bank would own or hold assets or engage in any business that would not be allowable for a commercial bank, then the plan of conversion presented to the department shall include a plan for disposal of such assets or the termination of such nonconforming business within a reasonable time but in no event longer than four years from the date of the conversion.

    (Code 1933, § 41A-1314, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1566, § 2; Ga. L. 1982, p. 3, § 7; Ga. L. 1982, p. 1781, § 1; Ga. L. 1983, p. 602, § 9; Ga. L. 1987, p. 1586, § 5; Ga. L. 1988, p. 13, § 7; Ga. L. 1992, p. 6, § 7; Ga. L. 1997, p. 485, § 13; Ga. L. 2016, p. 390, § 7-7/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "pursuant to those deposit insurance provisions of this chapter applicable to building and loan associations" following "insurance coverage" at the end of subsection (c); substituted "Reserved" for the former provisions of subsection (d), which read: "(d)(1) Unless specifically exempt therein, all rules and regulations promulgated by the department and applicable to commercial banks shall be applicable to a savings bank.

"(2) The commissioner shall not approve an application of a financial institution requesting conversion to a commercial bank or a mutual savings bank unless such financial institution divests itself of all branches which were not lawfully established and in existence prior to July 1, 1996, or which do not conform with the branch banking laws of this state if established on or after July 1, 1996. Any federal mutual savings bank or federal mutual savings and loan association with a banking location in Georgia prior to July 1, 1996, which converts to a state charter, shall be entitled to retain the banking locations lawfully established in Georgia which conform to the limitations of this subsection"; in subsection (e), in the first sentence, deleted "any federal mutual savings bank or federal mutual savings and loan association converting to a Georgia mutual savings bank must have been in existence on January 1, 1997, and must have had its main office in the State of Georgia; and provided, further, that" following "provided that"; deleted the third sentence, which read: "Conversion of a building and loan association into a savings bank or state savings and loan association may be made with the approval of the department and an appropriate amendment of the articles of incorporation of the association."; and added the language beginning "and unless specifically" and ending with "loan associations" at the end of subsection (h).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 14, 598.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 634, 635.

ALR. - Construction of savings bank by-law expressly assented to by depositor, relieving bank from liability for payment to unauthorized person, 52 A.L.R. 760 .

Liability of savings bank to depositor for amounts withdrawn by depositor's agent without presentation of passbook, 139 A.L.R. 835 .

7-1-294. Transaction of business on holidays and outside of banking hours.

  1. Notwithstanding any existing provisions of law relative to the time of maturity or presentment of negotiable instruments, any financial institution doing business in this state may, at its option, outside of regular banking hours on any day, or at any time on a day which is in whole or in part a holiday, pay, certify, or accept negotiable or nonnegotiable instruments including a demand instrument dated on the holiday on which it is presented for payment, certification, or acceptance and transact any other business which would be valid if done on a business day during regular banking hours.
  2. Nothing in this Code section shall require any financial institution which remains open for business on all or a part of any holiday to do or perform any act on that day in its capacity as a collection agent which would not be required of it if it were closed on such holiday or part holiday.

    (Code 1933, § 14-1809.2, enacted by Ga. L. 1949, p. 352, § 1; Ga. L. 2017, p. 193, § 7/HB 143.)

The 2017 amendment, effective June 1, 2017, designated the existing provisions of this Code section as subsections (a) and (b); deleted the former proviso at the end of subsection (a), which read: "; provided, however, that nothing herein contained shall authorize the transaction of business on Sundays" following "bank hours"; and substituted "in this Code section" for "herein contained" near the beginning of subsection (b).

Cross references. - Public, legal and religious holidays, §§ 1-4-1 , 1-4-2 .

Definition of "banking day" for purposes of the Uniform Commercial Code, § 11-4-104 .

RESEARCH REFERENCES

ALR. - Power of municipal corporation to legislate as to Sunday observance, 37 A.L.R. 575 .

Power to extend Sunday observance laws beyond Sunday hours, 50 A.L.R. 628 .

Legal aspects and consequences of declaration of "bank holiday", 95 A.L.R. 934 .

Validity, construction, and effect of "Sunday closing" or "blue" laws - modern status, 10 A.L.R.4th 246.

7-1-295. Transaction fees charged by operators of automated teller machines.

An operator of an automated teller machine in this state may charge a transaction fee to the customer using the machine. An agreement to share automated teller machines may not prohibit, limit, or restrict the right to charge such transaction fees and no such agreement may prohibit, limit, or restrict the right of one or more financial institutions to enter into an agreement not to charge such transaction fees to their common customers.

(Code 1981, § 7-1-295 , enacted by Ga. L. 1993, p. 917, § 3; Ga. L. 1997, p. 575, § 1.)

7-1-296. "Federal power" defined; construction with federal law; notifications; objections; authority; construction.

  1. For purposes of this Code section, the term "federal power" means any banking or corporate power, right, benefit, privilege, or immunity of a national bank, the deposits of which are federally insured, that may be exercised by a national bank doing business in this state pursuant to the National Bank Act, 12 U.S.C. Section 1, et seq.; any other federal statute; or any regulation, ruling, circular, bulletin, order, or interpretation issued by the Office of the Comptroller of the Currency. Such term shall include only the provisions set forth above which were effective on January 1, 2018.
  2. Notwithstanding any other provisions of law, a bank may exercise any federal power while a national bank may also exercise such power subject to the same limitations and restrictions as are applicable to national banks, provided that the requirements of subsection (d) of this Code section have been satisfied. Nothing in this subsection shall be construed as authorizing a bank chartered by this state to exercise a federal power prior to compliance with subsection (d) of this Code section.
  3. Notwithstanding any other provisions of law, to the extent the National Bank Act, 12 U.S.C. Section 1, et seq., or any other federal law or regulation in effect on January 1, 2018, precludes or preempts or has been determined to preclude or preempt the application of any provision of law, rule, or regulation of this state, as to any national bank doing business in this state, a bank may also exercise such power authorized by the preclusion or preemption subject to the same limitations and restrictions as are applicable to a national bank, provided that the requirements of subsection (d) of this Code section have been satisfied. Nothing in this subsection shall be construed as authorizing a bank chartered by this state to exercise a federal power prior to compliance with subsection (d) of this Code section.
  4. In furtherance of the commissioner's statutory duties to regulate, supervise, and examine, a bank shall notify the commissioner in writing by certified or registered mail that, pursuant to subsection (b) or (c) of this Code section, it intends to exercise a federal power or to avail itself of any federal preclusion or preemption of any provision of law, rule, or regulation of this state. Such notice shall include the specific federal authorization of the activity to be utilized, the proposed action to be undertaken by the bank, documentation indicating that the bank satisfies the prescribed federal standards, if any, to engage in the activity, and such other information as may be required by the department. Upon receipt of such notice, the commissioner shall determine whether the exercise of any federal power or the availing of any federal preclusion or preemption, or any part thereof, by the bank is inconsistent with the purposes of this chapter or presents undue risk to the safety and soundness of the banking system. In making such a determination, the commissioner shall consider the financial condition of the bank, the regulatory safety and soundness ratings of the bank, the ability of bank management to administer and supervise the activity, and the overall impact on the safety and soundness to all other state chartered banks. Based on such a determination, the commissioner may object to the exercise of the federal power, in whole or in part, or to the federal preclusion or preemption of the law, rule, or regulation of this state, in whole or in part, including objecting to a level or quantity above which a bank may be seeking to exercise a federal power or availing itself of any federal preclusion or preemption of law, rule, or regulation of this state. If the commissioner so objects, the commissioner shall deliver such objection in writing by certified or registered mail to the bank within 45 days of receipt of the notice; provided, however, that the commissioner may extend such period of review for an additional 45 days by providing the bank with written notice of such extension prior to the expiration of the initial notice period. If the commissioner sends such an objection, the federal power, preclusion, or preemption, or the part thereof, objected to by the commissioner shall not be exercised by the bank pursuant to subsections (b) and (c) of this Code section. The objection by the commissioner of a bank's intent to exercise a federal power or avail itself of any federal preclusion or preemption shall not preclude such bank from providing notice to the department of its intent to exercise the same federal power or to avail itself of the same federal preclusion or preemption at a later date; provided, however, that the requirements of this subsection shall be applicable for any such additional notice. Further, in the event a bank determines, after satisfying the notice provisions of this subsection, that it no longer wishes to exercise a federal power or avail itself of any federal preclusion or preemption, then such bank shall provide written notice of such fact to the commissioner by certified or registered mail.
  5. Notwithstanding the provisions of Code Section 7-1-70, the department shall publish information stating the federal powers that are being exercised or federal preemptions or preclusions that are being utilized by each bank. All other information related to the notices or objections provided under subsection (d) of this Code section are governed by Code Section 7-1-70.
  6. Notwithstanding any other provisions of law, a bank may exercise any power that was granted through an order or ruling declared by the commissioner on or before January 1, 2018, pursuant to the current or former provisions of Code Section 7-1-61, 7-1-61.1, or 7-6A-12 and which has not been rescinded or withdrawn.
  7. Any federal power or activity authorized and exercised or conducted pursuant to this Code section shall be independent from, and in addition to, any other powers granted to banks under applicable laws of this state or rules or regulations promulgated thereunder. The express and incidental powers granted to banks under the Official Code of Georgia Annotated are not limited or otherwise restricted by this Code section.
  8. Nothing in this Code section shall be construed as limiting the commissioner's authority conferred by this chapter, including the powers granted under Code Sections 7-1-61 and 7-1-61.1.
  9. Nothing in this Code section shall be construed as authorizing the imposition of interest rates by a bank in excess of those authorized by Chapter 4 of this title nor shall any provision of this Code section be construed as permitting a bank to make loans in violation of Chapter 17 of Title 16. (Code 1981, § 7-1-296 , enacted by Ga. L. 2018, p. 214, § 6/HB 780.)

Effective date. - This Code section became effective May 3, 2018. See Editor's notes for applicability.

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

PART 4 P OWERS OF TRUST COMPANIES

RESEARCH REFERENCES

ALR. - Statute regulating banks and trust companies as special or class legislation, or as denying the equal protection of the laws, 111 A.L.R. 140 .

7-1-310. Powers to act as fiduciary and in other representative capacities.

  1. A trust company may act, alone or with others, as:
    1. Fiduciary;
    2. Investment advisor;
    3. Custodian of property;
    4. Agent or attorney in fact;
    5. Registrar or transfer agent of securities;
    6. Fiscal agent of the United States, a state or a public body thereof, a corporation, or a person; and
    7. Treasurer of a public body or of a nonprofit corporation.
  2. A trust company shall have, in respect to any capacity in which it may act pursuant to a power under subsection (a) of this Code section, all the rights and duties which a person has in such capacity under applicable laws and under the terms upon which the trust company is designated to act in such capacity.
  3. Every bank and credit union operating pursuant to this chapter shall possess all of the rights, privileges, powers, and responsibilities herein conferred upon trust companies; provided, however, that no such bank or credit union shall exercise such powers and privileges without the prior written approval of the department after a careful consideration of the factors enumerated in Code Section 7-1-394, relating to the chartering of trust companies. Any bank exercising or partially exercising trust powers prior to February 27, 1976, authorized by its articles may continue to exercise or partially to exercise those powers to the extent approved by the department without the necessity of obtaining a new approval.

    (Ga. L. 1898, p. 78, § 3; Civil Code 1910, § 2817; Ga. L. 1917, p. 56, § 1; Ga. L. 1919, p. 135, art. 2, § 2; Ga. L. 1920, p. 76, § 1; Code 1933, § 109-201; Code 1933, § 41A-1401, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1976, p. 274, § 1; Ga. L. 1981, p. 1366, § 9; Ga. L. 1982, p. 3, § 7; Ga. L. 1989, p. 1257, § 4; Ga. L. 2016, p. 390, § 7-4/HB 811.)

The 2016 amendment, effective July 1, 2016, in subsection (c), in the first sentence, deleted ", building and loan association," following "Every bank" at the beginning and following "no such bank," in the middle.

7-1-311. Operations as a fiduciary.

Except as otherwise permitted by Code Section 7-1-315, a trust company in its capacity as fiduciary shall:

  1. Segregate all property (other than items in the course of collection) held as a fiduciary from its nonfiduciary assets and keep separate records of all such fiduciary property for each account for which such property is held;
  2. Hold property held as fiduciary in a form complying with applicable law;
  3. Keep fiduciary funds awaiting investment or distribution in deposits in an authorized financial institution (including, in the case of a trust company which is also a bank, its own commercial department or the commercial department of an affiliate as provided in Code Section 7-1-289) which is insured or, to the extent of any deficiencies in insurance coverage, fully secured by a pledge or assignment of bonds or obligations of the United States, this state, or a public body of either or other obligations guaranteed as to principal and interest by the United States, this state, or a public body of either or real estate loans secured by a first lien or security title to improved realty and insured pursuant to any title of the National Housing Act. The beneficial owners of such uninvested funds shall have a first and prior lien on such security;
  4. Not be required to execute a bond or give any security required by the law of fiduciaries but may give its own bond and pledge or otherwise grant security interests in its assets as security for the faithful performance of its duties as fiduciary or as surety for such faithful performance by any cofiduciary where such is requested or otherwise required; and
  5. Provide any oath or affirmation or any affidavit required of the trust company through an officer thereof acting on behalf of the trust company.

    (Ga. L. 1935, p. 484, §§ 1, 2; Ga. L. 1953, Jan.-Feb. Sess., p. 108, §§ 1-3; Ga. L. 1965, p. 244, §§ 1, 2; Ga. L. 1966, p. 468, § 1; Code 1933, § 41A-1402, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1988, p. 1494, § 1; Ga. L. 1995, p. 673, § 15.)

Cross references. - Substitution of parties to contract generally, § 13-4-20 .

Impossibility as excuse for non-performance, § 13-4-21 .

U.S. Code. - The National Housing Act, referred to in paragraph (3) of this Code section, is codified generally as 12 U.S.C. § 1701 et seq.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 622.

C.J.S. - 9 C.J.S., Banks and Banking, § 660.

ALR. - Trust company's agreement to repay in cash principal of trust fund investment as ultra vires, 96 A.L.R. 453 .

Dealings between bank or trust company and itself acting as executor, administrator, or trustee, 112 A.L.R. 780 .

7-1-312. Nonfiduciary investments.

A trust company which is not a bank may, apart from its fiduciary activities, invest in stock and investment securities, except that it may not acquire or hold its own stock otherwise than pursuant to paragraphs (8) and (9) of Code Section 7-1-261.

(Code 1933, § 41A-1403, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-313. Collective investment funds.

  1. As used in this Code section, the term "collective investment fund" shall include a common trust fund and any other type of collective investment fund.
  2. A trust company may establish and maintain collective investment funds for the investment or reinvestment of property which:
    1. Is contributed by the trust company in a capacity in which it is authorized to act pursuant to Code Section 7-1-310; and
    2. Is eligible for contribution to a collective investment fund under this Code section.
  3. Property shall be eligible for contribution whenever the instrument, judgment, decree, or order under which the trust company holds the property does not prohibit investment in the type of collective investment fund involved, provided that, if the trust company holds the property under circumstances limiting it to investing the property in legal investments for fiduciaries, then it may invest the property only in a collective investment fund limited to assets authorized as legal investments for a fiduciary.
  4. The department shall regulate the establishment, operation, and maintenance of collective investment funds. Such regulations of the department shall comply with the general standards for exercise of the regulatory power of the department under this chapter and, in addition, shall be designed to assure:
    1. Ratably equal treatment of the participants in a fund by imposing minimum requirements for the method and frequency of valuation of participations in the fund, for the time and method of admission or withdrawals of participations in the fund, and for the determination of interests of participants in the assets and income of the fund; and
    2. The competitive equality between trust companies and national banks exercising fiduciary powers with respect to the authority to establish and maintain collective investment funds to the extent compatible with the general purposes of this chapter.
  5. No mistake made in good faith and in the exercise of due care in connection with the administration of a collective investment fund shall be deemed a violation of this Code section or of any other duty of the trust company if, promptly after discovery of the mistake, the trust company takes whatever action may be practicable in the circumstances to remedy the mistake.
  6. Any other trust company or national bank with trust powers which is a member of an affiliated group (as defined in Section 1504 of the Internal Revenue Code) with a trust company maintaining collective investment funds may participate in one or more such funds as though they were maintained by the participating trust company. Such participation may be made pursuant to agreement providing for reasonable compensation for the trust company maintaining the fund or funds.
  7. A trust company, in any capacity in which it may act under Code Section 7-1-310, may invest property collectively in accordance with the specific terms upon which it receives such property, without regard to the restrictions of this Code section.

    (Ga. L. 1943, p. 442, §§ 2, 3, 6, 8, 13, 14; Ga. L. 1972, p. 816, §§ 2, 3; Code 1933, § 41A-1404, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1987, p. 191, § 9.)

Editor's notes. - Ga. L. 1987, p. 191, § 10, not codified by the General Assembly, provided that this Act is applicable to taxable years ending on or after March 11, 1987, and that a taxpayer with a taxable year ending on or after January 1, 1987, and before March 11, 1987, may elect to have the provisions of that Act apply.

Ga. L. 1987, p. 191, § 10, not codified by the General Assembly, also provided that tax, penalty, and interest liabilities and refund eligibility for prior taxable years shall not be affected by that Act.

Ga. L. 1987, p. 191, § 10, not codified by the General Assembly, also provided that provisions of the federal Tax Reform Act of 1986 and of the Internal Revenue Code of 1986 which as of January 1, 1987, which were not yet effective become effective for purposes of Georgia taxation on the same dates as they become effective for federal purposes.

U.S. Code. - Section 1504 of the Internal Revenue Code, referred to in subsection (f) of this section, is codified as 26 U.S.C. § 1504.

7-1-314. Purchase in fiduciary capacity of securities underwritten by syndicate including institution.

A trust company or a financial institution with fiduciary powers may, in its fiduciary capacity, purchase securities underwritten by a syndicate which includes the financial institution or an affiliate of the financial institution, provided such purchase is otherwise prudent, not prohibited by the instrument governing the fiduciary relationship, and not otherwise inconsistent with regulations issued by the department.

(Code 1981, § 7-1-314 , enacted by Ga. L. 1983, p. 602, § 10; Ga. L. 1989, p. 1249, § 7.)

7-1-315. Satisfaction of fiduciary obligations respecting investment of funds awaiting investment or distribution and charging of fees.

  1. A trust company complying with this Code section will be deemed to have satisfied its fiduciary obligations and duties with respect to:
    1. The investment of fiduciary funds awaiting investment or distribution;
    2. The charging of fees in connection therewith; and
    3. The disclosure of policies, procedures, and fees in connection therewith.
  2. A trust company may invest fiduciary funds awaiting investment or distribution in short-term, trust-quality investment vehicles, through the medium of a collective investment fund or otherwise. A trust company may also place fiduciary funds awaiting investment or distribution in deposits of the commercial department of such trust company, in the case of a trust company which is also a bank, or in deposits of an affiliate bank; provided, however, that the rate of interest paid on such deposits shall be at least equal to the rate paid by such department or affiliate bank on deposits of similar terms and amounts. A fiduciary shall have complied with this Code section if cash awaiting investment or distribution in excess of $1,000.00 is invested or deposited within 30 days of receipt or accumulation thereof. The provisions of this subsection shall apply notwithstanding any other law or rule restricting or limiting the investments of fiduciaries.
  3. In addition to any other compensation to which it may be entitled, a trust company may, without necessity of obtaining the approval of any person or court, charge a reasonable fee for the temporary investment of fiduciary funds awaiting investment or distribution, which fee may be calculated upon the amount of such funds actually invested and upon the income produced thereby.
  4. A trust company shall have complied with its duty to disclose fees and practices in connection with the investment of fiduciary funds awaiting investment or distribution if the trust company's periodic statements set forth the trust company's practice and method of computing fees.
  5. This Code section shall be construed as a codification of existing law concerning the fiduciary duties of trust companies and not as a change in such law. (Code 1981, § 7-1-315 , enacted by Ga. L. 1988, p. 1494, § 2.)

7-1-316. Irrevocable letter of credit or pledge of securities for receivership contingency.

    1. A trust company shall provide an irrevocable letter of credit or pledge securities acceptable to the department to defray the costs of a liquidation of the trust company in the event it should be placed into receivership.
    2. The amount of the securities or the letter of credit required in this Code section shall be determined by the department as appropriate to defray the costs associated with receivership, provided that such amount shall be no less than $500,000.00.
    3. Any letter of credit shall be:
      1. Made payable to the department and issued by a Federal Home Loan Bank or a federally insured financial institution, approved by the department and authorized to do business in this state;
      2. In a form and with terms acceptable by the department; and
      3. Obtained from an entity in which the trust company has no financial interest.
    4. Any pledged securities shall be held at a bank authorized to do business in this state, and any fees associated with holding such securities shall be the responsibility of the trust company.
  1. If a trust company is placed in receivership, the department may, without regard to any priorities, preferences, or adverse claims, reduce the pledged securities or the letter of credit provided by a trust company to cash and, as soon as practicable, utilize the cash to defray the costs associated with receivership. (Code 1981, § 7-1-316 , enacted by Ga. L. 2017, p. 193, § 8/HB 143.)

Effective date. - This Code section became effective June 1, 2017.

7-1-317. Minimal amount of capital.

  1. The department may require, based on safety and soundness, that a trust company maintain a minimum amount of capital, provided that such amount shall in no event be less than $3 million. The department may alter the amount of capital required to be maintained by a trust company from time to time as may be necessary for the safe and sound operation of such trust company.
  2. The department may consider the following in establishing the minimum amount of capital:
    1. The nature and type of business to be conducted;
    2. The nature and liquidity of assets to be held;
    3. The amount of fiduciary assets to be under management of the trust company;
    4. The type of fiduciary assets to be held and the depository for such assets;
    5. The complexity of fiduciary duties and degree of discretion to be undertaken;
    6. The competence and experience of management;
    7. The extent and adequacy of internal controls;
    8. The presence or absence of annual unqualified audits by an independent certified public accountant;
    9. The reasonableness of business plans for retaining or acquiring additional equity capital;
    10. The existence and adequacy of insurance to protect the clients, beneficiaries, and grantors of the trust company;
    11. Any history of operating losses;
    12. Any history of loss in relation to fiduciary or custodial accounts; and
    13. The amount of support from the trust company's parent or affiliate. (Code 1981, § 7-1-317 , enacted by Ga. L. 2017, p. 193, § 8/HB 143.)

Effective date. - This Code section became effective June 1, 2017.

7-1-318. Prohibition on pledging or creating a lien by trust companies; void actions.

  1. No trust company shall pledge or create a lien on any of its assets except to secure:
    1. The repayment of money borrowed; or
    2. Trust accounts administered by the trust company.
  2. An act, deed, conveyance, pledge, or contract in violation of this Code section shall be considered void. (Code 1981, § 7-1-318 , enacted by Ga. L. 2017, p. 193, § 8/HB 143.)

Effective date. - This Code section became effective June 1, 2017.

PART 4A A FFILIATE TRANSFERS

7-1-320. Definitions.

As used in this part, the term:

  1. "Affiliate transfer" means a transfer by which a bank or trust company delegates, assigns, or transfers to an affiliated trust company or to an affiliated bank which has received the required approvals from the appropriate regulatory authorities to exercise trust powers all of its rights, powers, privileges, accounts, and designations with respect to one or more of its various capacities as fiduciary.
  2. "Affiliated trust company" means a trust company which is affiliated with a bank.  A trust company shall be considered an affiliate with a bank in accordance with the definition of such term set forth in paragraph (1) of Code Section 7-1-4. For the purposes of this part, the term affiliated trust company shall also include an affiliated bank which has received the required approvals from the appropriate regulatory authorities to exercise trust powers.
  3. "Bank" means a corporation as defined in either paragraph (7) or (23) of Code Section 7-1-4 and having its principal place of business in Georgia.
  4. "Fiduciary" means a bank or trust company acting in such capacity as set forth in paragraph (20) of Code Section 7-1-4 or as further defined by regulations of the department.
  5. "Trust company" means a corporation as defined in paragraph (40) of Code Section 7-1-4 or a national bank having:
    1. Authority to conduct business only to the extent of its trust powers as provided in 12 U.S.C. Section 92a; and
    2. A principal place of business in Georgia. (Code 1981, § 7-1-320 , enacted by Ga. L. 1986, p. 1244, § 1; Ga. L. 1993, p. 915, § 1.)

Law reviews. - For note on 1993 amendment of this Code section, see 10 Ga. St. U.L. Rev. 9 (1993).

7-1-321. Affiliate transfers authorized; powers and duties of affiliated trust company transferees.

  1. Any bank authorized by law to engage in the business of acting as a fiduciary is authorized and empowered to make an affiliate transfer whether or not each governing instrument expressly provides for or contemplates an affiliate transfer or whether or not the fiduciary capacity was created by will, indenture, trust, court order, agreement, or other means.  No affiliate transfer shall constitute:
    1. A resignation or disqualification of the bank as fiduciary; or
    2. A relinquishment of trust powers by the bank making the affiliate transfer.

      Upon execution of an instrument effecting an affiliate transfer by a bank, the affiliated trust company shall, as of the date specified in the instrument, have all of the rights, powers, privileges, appointments, accounts, and designations of the bank regarding each fiduciary capacity so transferred and shall have title to all property, real, personal, and mixed, and all debts due on whatever account, and all other choses in action, and each and every other interest of or belonging to or due to the bank as fiduciary shall be taken and deemed to be transferred to and vested in the affiliated trust company as fiduciary without further act or deed. The affiliated trust company shall file a certificate of transfer with the department setting forth its name, a copy of its governing instrument, a list of the banks with which it is affiliated, a statement of the facts which establish the affiliate relationship, and such other information as may be appropriate.

  2. Upon an affiliate transfer by a bank, the affiliated trust company, in each fiduciary capacity transferred, shall thenceforth be responsible for the performance of all of the duties, responsibilities, and obligations of the bank in such fiduciary capacity, and any claim existing or action or proceeding pending by or against the fiduciary may be prosecuted as if the affiliate transfer had not taken place and the affiliated trust company, as fiduciary, may be substituted in place of the bank, as fiduciary. Neither the rights of creditors to nor any liens upon the property held in any fiduciary capacity shall be impaired by any affiliate transfer. (Code 1981, § 7-1-321 , enacted by Ga. L. 1986, p. 1244, § 1; Ga. L. 1994, p. 1780, § 1.)

7-1-322. Effect of affiliate transfer on bank; abandonment of transfer; substituted fiduciary.

  1. Notwithstanding the provisions of Code Section 7-1-321, no affiliate transfer shall relieve the bank of any liability with respect to any of its acts and doings as fiduciary, and the bank shall remain liable and responsible to all affiliate transfer beneficiaries and other parties at interest with respect to all actions of the affiliated trust company as if performed by the bank itself.
  2. The bank shall be relieved of any claims, liabilities, or actions arising after the affiliate transfer where such affiliate transfer is expressly authorized by the terms of the instrument governing the fiduciary capacity.
  3. Upon application by an interested party, the bank shall within 30 days either abandon the affiliate transfer subject to such application or proceed to have a successor fiduciary appointed as provided by law.
  4. Nothing in this Code section shall be construed to impair any right of the grantor or beneficiaries of any fiduciary relationship under applicable instruments or otherwise to secure or provide for the appointment of a substituted fiduciary. (Code 1981, § 7-1-322 , enacted by Ga. L. 1986, p. 1244, § 1.)

7-1-323. Appointment of affiliated trust company as agent for bank; liability of bank for actions of agent.

In addition to and not in limitation of the other powers provided in this part, any bank shall be entitled and empowered to designate an affiliated trust company as its agent for the performance of all acts, obligations, and responsibilities of the bank with respect to any fiduciary capacity. In such event, the bank shall remain fully responsible and liable with respect to all actions of the affiliated trust company as if performed by the bank itself. No such agency relationship shall:

  1. Be deemed an impermissible delegation of responsibility or duty by the bank; or
  2. Constitute a resignation or disqualification of the bank as fiduciary or a relinquishment of trust powers by the bank. (Code 1981, § 7-1-323 , enacted by Ga. L. 1986, p. 1244, § 1; Ga. L. 1992, p. 6, § 7.)

7-1-324. Designation of affiliate trust company as successor fiduciary.

Upon any affiliate transfer, the affiliate trust company may be designated in any deed, trust, agreement, filing, instrument, notice, certificate, pleading, or other document as successor fiduciary pursuant to this part.

(Code 1981, § 7-1-324 , enacted by Ga. L. 1986, p. 1244, § 1.)

7-1-325. Other banking laws unaffected by part.

Except as expressly provided, nothing in this part shall be construed to amend or modify in any way the laws of the State of Georgia with respect to the establishment of banks, trust companies, branch banks, or bank holding companies or the conduct of the banking business or any part thereof.

(Code 1981, § 7-1-325 , enacted by Ga. L. 1986, p. 1244, § 1.)

PART 5 F IDUCIARY INVESTMENT COMPANIES

7-1-330. Definitions.

As used in this part, the term:

  1. "Fiduciary investment company" means a corporation which is an investment company as defined by the act of Congress entitled "Investment Company Act of 1940" and is incorporated in accordance with Chapter 2 of Title 14 so as to constitute a medium for the investment of funds held by trust institutions and foreign trust institutions in a fiduciary capacity, either alone or with one or more cofiduciaries.
  2. "Foreign trust institution" means any state banking institution or trust company organized under the laws of any state other than Georgia or any national banking association incorporated under the laws of the United States and having its principal office in some state other than Georgia which has trust powers and is authorized to act in a fiduciary capacity under the laws under which it was incorporated.
  3. "Investment adviser" of a fiduciary investment company means:
    1. Any trust institution which, pursuant to contract with a fiduciary investment company possessing the qualifications provided by this part, regularly furnishes advice to such investment company with respect to the desirability of investing in, purchasing, or selling securities or other property or is empowered to determine what securities or other property shall be purchased or sold by such investment company; and
    2. Any person or corporation other than a trust institution, who, pursuant to contract with such trust institution, regularly performs substantially all of such duties undertaken by such trust institution.
  4. "Trust institution" means any trust company or any national bank with its principal office located in this state, authorized to act as a fiduciary.

    (Ga. L. 1970, p. 515, § 1; Ga. L. 1971, p. 639, §§ 1, 2; Ga. L. 1973, p. 549, § 1; Code 1933, § 41A-1501, enacted by Ga. L. 1974, p. 705, § 1.)

U.S. Code. - The Investment Company Act of 1940, referred to in paragraph (1) of this Code section, is codified as 15 U.S.C. § 80a-1 et seq.

RESEARCH REFERENCES

Am. Jur. 2d. - 45 Am. Jur. 2d, Investment Companies and Advisers, §§ 2, 14, 20.

7-1-331. Organization; approval by department.

Any one or more trust institutions may cause a fiduciary investment company or companies to be organized and incorporated, but no trust institution or foreign trust institution may own an interest in more than seven fiduciary investment companies. A fiduciary investment company shall not begin business, except to select an investment adviser, until it is approved by the department.

(Ga. L. 1970, p. 515, § 2; Ga. L. 1971, p. 639, § 3; Code 1933, § 41A-1502, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 23.

C.J.S. - 9 C.J.S., Banks and Banking, § 656.

7-1-332. Incorporation.

Any such fiduciary investment company shall be incorporated under and subject to Chapter 2 of Title 14. The incorporators shall be persons who are officers or directors of the trust institution or institutions causing such fiduciary investment company to be incorporated; and the articles of incorporation shall set forth the name of each trust institution participating in such incorporation and the amount of stock originally subscribed for by each, together with such other facts as are required by Chapter 2 of Title 14.

(Ga. L. 1970, p. 515, § 3; Code 1933, § 41A-1503, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-333. Limitations on investments.

Trust institutions and foreign trust institutions, as defined by this part, acting in a fiduciary capacity and for fiduciary purposes, if exercising due care as a prudent investor, and with the consent of any cofiduciary, may invest and reinvest funds held in such fiduciary capacity in the shares of stock of one or more fiduciary investment companies, except where the will, trust indenture, or other instrument under which such trust institution or foreign trust institution acts prohibits such investment, provided that the fiduciary investment company, by its articles of incorporation issued and granted in conformity with Chapter 2 of Title 14, shall have and possess the corporate powers required by this part and be subject to the limitations set forth by this part; provided, further, that no such trust institution or foreign trust institution shall invest in the stock of a fiduciary investment company on behalf of any estate, trust, or fund administered by such trust institution or foreign trust institution a sum or amount which would result in such estate, trust, or fund having a total investment in such stock in excess of the maximum amount or percentage that might be invested by such estate, trust, or fund, under the regulations of the department in effect at the time of such investment, in any common trust fund having total assets equal to the total assets of the fiduciary investment company as increased by the proposed investment; and no trust institution or foreign trust institution shall invest in the stock of a fiduciary investment company if, immediately after such investment and as a consequence thereof, it would own more than 25 percent of the voting securities of such fiduciary investment company which would then be outstanding.

(Ga. L. 1970, p. 515, § 4; Ga. L. 1971, p. 639, § 4; Ga. L. 1973, p. 549, § 2; Code 1933, § 41A-1504, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 23.

C.J.S. - 9 C.J.S., Banks and Banking, § 656.

7-1-334. Corporate powers; limitations and restrictions.

Every fiduciary investment company in which a trust institution or foreign trust institution is authorized by this part to own and hold corporate stock or shares, in order to qualify for such investments, shall have such corporate powers as may be granted by Chapter 2 of Title 14 by virtue of its incorporation under those chapters and shall, in addition, have the following corporate powers under its articles of incorporation and, by its articles of incorporation or its bylaws, be subject to the limitations and restrictions set forth in this Code section:

  1. The stock of any such fiduciary investment company shall be owned and held only by trust institutions and foreign trust institutions acting as fiduciaries or cofiduciaries but may be registered in the name of the nominee or nominees of any such trust institution or foreign trust institution. Such stock shall not be subject to transfer or assignment except to the trust institution or foreign trust institution on whose behalf the stock is held by any such nominee or nominees or to a fiduciary or cofiduciary which becomes successor to the shareholder and which is also a trust institution or foreign trust institution qualified to hold such stock.
  2. A fiduciary investment company shall have no less than five directors, who need not be shareholders but shall be officers or directors of trust institutions or foreign trust institutions holding stock in such fiduciary investment company; provided, however, that no more than two directors shall be officers or directors of any one trust institution or foreign trust institution if the fiduciary investment company has been organized and incorporated by three or more trust institutions.
  3. In acquiring, investing, reinvesting, exchanging, selling, and managing its assets, every fiduciary investment company shall exercise the judgment and care under the circumstances then existing which men of prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income as well as the safety of their capital. Within the foregoing limitations, a fiduciary investment company may acquire and retain every kind of investment, specifically including (but not by way of limitation) bonds, debentures, and other corporate obligations and corporate stocks, preferred or common, which men of prudence, discretion, and intelligence acquire or retain for their own account, provided that a fiduciary investment company shall not at any time:
    1. Invest in real estate, commodities, or commodity contracts;
    2. Participate on a joint or joint and several basis in any securities trading account;
    3. Invest in companies for the purpose of exercising control or management;
    4. Make loans to any person or persons, except that the purchase of a portion of an issue of debt securities, convertible debt securities, debt securities with warrants, rights, or options attached, or other similar securities when originally issued or thereafter, of a character commonly distributed publicly, shall not be considered the making of a loan;
    5. Purchase or retain the securities of any issuer if immediately after such acquisition and as a result thereof the following requirements would not be met: at least 75 percent of the total assets in the fiduciary investment company taken at market value are represented by cash and cash items, securities issued or guaranteed by the United States or an instrumentality thereof, and other securities which, as to any one issuer, do not represent more than 10 percent of the value of the total assets of the fiduciary investment company;
    6. Purchase or otherwise acquire the securities of any other investment company as that term is defined in the act of Congress entitled "Investment Company Act of 1940";
    7. Act as underwriter of the securities of other issuers;
    8. Borrow money; or
  4. A fiduciary investment company may acquire, purchase, or redeem its own stock and may, by means of contract or by its bylaws, bind itself to acquire, purchase, or redeem its own stock; but it shall not vote shares of its own stock theretofore redeemed.
  5. A fiduciary investment company shall not be responsible for ascertaining the investment powers of any fiduciary who may purchase its stock, shall not be liable for accepting funds from a fiduciary in violation of restrictions of the will, trust indenture, or other instrument under which such fiduciary is acting in absence of actual knowledge of such violation, and shall be accountable only to the department and the fiduciaries who are the owners of its stock.
  6. Every fiduciary investment company subject to the supervision and regulation of the comptroller of the currency of the United States shall comply with all applicable rules and regulations of that agency to the extent that such rules and regulations are in addition to or in conflict with rules and regulations promulgated by the department.
  1. Engage in margin transactions or short sales or write put or call options for the purchase or sale of securities.

    (Ga. L. 1970, p. 515, § 5; Ga. L. 1971, p. 639, § 5; Ga. L. 1973, p. 549, §§ 3, 4; Ga. L. 1974, p. 598, §§ 1, 2; Code 1933, § 41A-1505, enacted by Ga. L. 1974, p. 705, § 1.)

U.S. Code. - The Investment Company Act of 1940, referred to in subparagraph (3)(F) of this Code section, is codified as 15 U.S.C. § 80a-1 et seq.

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 662 et seq.

ALR. - Statute regulating banks and trust companies as special or class legislation, as denying the equal protection of the laws, 111 A.L.R. 140 .

7-1-335. Rules and regulations; examinations.

Without limitation on the authority conferred by Article 1 of this chapter, the department shall have authority to adopt and issue reasonable and uniform rules and regulations to govern the conduct and management of all fiduciary investment companies. The department shall not examine fiduciary investment companies subject to regular examination by the comptroller of the currency of the United States or the Board of Governors of the Federal Reserve System but shall otherwise have full power to examine fiduciary investment companies and enforce laws concerning them as though they were financial institutions.

(Ga. L. 1970, p. 515, § 6; Ga. L. 1973, p. 549, § 5; Code 1933, § 41A-1506, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 23. 45 Am. Jur. 2d, Investment Companies and Advisers, § 4.

7-1-336. Advertisement of participation; financial reports.

Except as may be specifically authorized by rule or regulation of the department, no trust institution or foreign trust institution holding stock in a fiduciary investment company may advertise or publicize its participation in such fiduciary investment company, provided that any trust institution or foreign trust institution holding stock in a fiduciary investment company shall furnish the annual or periodic financial reports of such fiduciary investment company, on request, to any person having a beneficial interest therein and the fact of the availability of such material may be given publicity in connection with the promotion of the fiduciary services of such trust institution or foreign trust institution.

(Ga. L. 1970, p. 515, § 7; Ga. L. 1971, p. 639, § 6; Code 1933, § 41A-1507, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 45 Am. Jur. 2d, Investment Companies and Advisers, § 4.

7-1-337. Investment advisers.

No person shall serve or act as investment adviser of a fiduciary investment company except pursuant to a written contract which has been approved by the vote of a majority of the outstanding voting securities of such fiduciary investment company and which:

  1. Precisely describes all compensation to be paid thereunder;
  2. Shall continue in effect for a period more than two years from the date of its execution only so long as such continuance is specifically approved at least annually by the board of directors or by vote of a majority of the outstanding voting securities of such company;
  3. Provides, in substance, that it may be terminated at any time, without the payment of any penalty, by the board of directors of such company or by vote of a majority of the outstanding voting securities of such company on not more than 60 days' written notice to the investment adviser; and
  4. Provides, in substance, for its automatic termination in the event of its assignment by the investment adviser.

    (Ga. L. 1970, p. 515, § 8; Code 1933, § 41A-1508, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 45 Am. Jur. 2d, Investment Companies and Advisers, §§ 14, 20.

7-1-338. Prohibition on refusing participation.

No fiduciary investment company shall refuse participation to any trust institution or foreign trust institution, as defined in this part, which is otherwise qualified to engage in a fiduciary investment program.

(Ga. L. 1970, p. 515, § 9; Ga. L. 1971, p. 639, § 7; Code 1933, § 41A-1509, enacted by Ga. L. 1974, p. 705, § 1.)

PART 6 D EPOSITS, SAFE-DEPOSIT AGREEMENTS, AND MONEY RECEIVED FOR TRANSMISSION

RESEARCH REFERENCES

ALR. - Duty of bank to one primarily liable to apply his deposit to an indebtedness owing from him to the bank, 9 A.L.R. 181 .

Liability of bank for loss of Liberty bonds, 17 A.L.R. 1217 ; 31 A.L.R. 703 ; 40 A.L.R. 899 .

Levy upon or garnishment of contents of safety deposit box, 19 A.L.R. 863 ; 39 A.L.R. 1215 .

Right in absence of statute to preference in respect of deposit of public funds in insolvent bank, 51 A.L.R. 1336 ; 65 A.L.R. 690 ; 90 A.L.R. 184 ; 103 A.L.R. 621 ; 167 A.L.R. 640 .

Right of one indebted to insolvent bank to set off deposits which he has made as trustee, 55 A.L.R. 822 .

Funds accepted by bank "for safe-keeping" as a special deposit, 59 A.L.R. 448 .

Examination of account, passbook, or canceled checks by bank depositor, 67 A.L.R. 1121 ; 103 A.L.R. 1147 .

Trust in proceeds of collections made by charging debtor's account in collecting bank, 77 A.L.R. 473 .

Right to set off deposit in insolvent bank against indebtedness to bank, 82 A.L.R. 665 ; 97 A.L.R. 588 .

Constitutionality, construction, and effect of legislation for protection of bank depositors or relief of banks or building and loan associations in need of cash or cash resources, 82 A.L.R. 1025 .

Personal liability of directors, officers, or employees of bank interfering with payment of checks or otherwise preventing or discouraging withdrawal of deposit, 97 A.L.R. 315 .

Negligence in failing to discover insolvency of bank as equivalent of knowledge, or substitute therefor, as regards criminal responsibility of bank officer or employee for receiving deposit after insolvency, 98 A.L.R. 615 .

Presumption and burden of proof, in action or proceeding against bank or its liquidator, as to reasons or justification for failure to return subject of special deposit on demand, 119 A.L.R. 831 .

Liability for loss of contents of safe-deposit box, 133 A.L.R. 279 .

Credit by bank or loan association to borrower as an incident of loan transaction as a "deposit" within statute specifically taxing deposits, 135 A.L.R. 1480 .

Deposit of fund belonging to depositor in bank account in name of himself and another, 149 A.L.R. 879 .

Parol evidence rule as applied to deposit of funds in name of depositor and another, 33 A.L.R.2d 569.

Presumption of payment as applicable to bank deposit, 69 A.L.R.3d 1311.

Liability of bank to joint depositor of savings account for amounts withdrawn by other joint depositor without presentation of passbook, 35 A.L.R.4th 1094.

Liability of bank or safe-deposit company for its employee's theft or misappropriation of contents of safe-deposit box, 39 A.L.R.4th 543.

Bank's liability to customer for imposing allegedly excessive service charges, 73 A.L.R.4th 1028.

7-1-350. Notice of rules governing deposits.

A bank which has adopted rules governing deposits or withdrawal of deposits shall give notice of the rules and all changes therein to each customer whose deposits are affected by such rules, either by delivery of a copy to such customer or by posting them in a conspicuous area in the main office and in all branch offices of the bank. If such rules are stated on a signature card or other contract signed by the customer, the bank shall be deemed to have given notice of the rules for purposes of this provision even if such signature card or contract is returned to the bank.

(Ga. L. 1919, p. 135, art. 19, § 47; Code 1933, § 13-2047; Code 1933, § 41A-1601, enacted by Ga. L. 1974, p. 705, § 1.)

JUDICIAL DECISIONS

Failure to give notice not constructive fraud. - Even though a bank had a duty to notify the bank's customer of a change in the bank's signature verification procedures, since there was no evidence that the bank refrained from informing the bank's customers in order to induce the customers to take or refrain from taking any certain action, there was no showing of constructive fraud. Eason Publications, Inc. v. Nationsbank, 217 Ga. App. 726 , 458 S.E.2d 899 (1995).

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, §§ 225, 638.

ALR. - Status of "Christmas club" deposits, 21 A.L.R. 1128 .

Crediting amount to depositor's account as precluding recovery back of money paid to bank by mistake, 25 A.L.R. 129 .

Liability of correspondent bank to depositor in forwarding bank for breach of duty as to collection of paper, 58 A.L.R. 764 .

What amounts to a deposit within statute in relation to civil or criminal liability for accepting deposit when bank is unsafe or insolvent, 76 A.L.R. 1320 .

Trust in proceeds of collections made by charging debtor's account in collecting bank, 77 A.L.R. 473 .

Right of depositor to rescind or claim a trust in respect of a deposit because of insolvency of bank when it is made, 81 A.L.R. 1078 .

Validity, construction, application, and effect of agreement for, or condition of, indemnity to bank in event of payment to savings bank depositor who cannot produce passbook, 81 A.L.R. 1150 .

Agreement by depositors to prevent closing, or to assist in opening, of bank as affecting their rights or priorities in respect of their deposits, 88 A.L.R. 1009 .

Sufficiency of notice to bank of assignment of deposit, 115 A.L.R. 328 .

Effect on bank depositor's rights and those of bank, of printed rules in passbook not expressly accepted, 60 A.L.R.2d 708.

7-1-351. Minors' deposits and safe-deposit agreements.

  1. A bank may receive deposits from:
    1. A minor who is at least 16 years of age; or
    2. One or more minors jointly with one or more adults, as party to and with the same effect as a multiple-party account under Article 8 of this chapter.
  2. A bank may use electronic means, including, but not limited to, wire and mobile application software, to provide access to and facilitate the movement of money in such deposit account.
  3. A bank or trust company may rent a safe-deposit box or other receptacle for safe deposit of property to, and receive property for safe deposit from:
    1. A minor who is at least 16 years of age; or
    2. One or more minors jointly with one or more adults.
  4. A bank or trust company may deal with a minor who is at least 16 years of age with respect to a deposit account or safe-deposit agreement covered by paragraph (1) of subsection (a) or paragraph (1) of subsection (c) of this Code section without the consent of a parent or guardian and with the same effect as though the minor were an adult. A parent or guardian shall not have any right in that capacity to interfere with any such transaction. Any action of the minor with respect to such deposit account or safe-deposit agreement shall be binding on the minor with the same effect as though the minor were an adult.
  5. Nothing in this Code section shall be deemed to require a bank or trust company to provide deposit accounts or safe-deposit agreements authorized by this Code section.

    (Ga. L. 1919, p. 135, art. 19, § 41; Code 1933, § 13-2041; Code 1933, § 41A-1602, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1977, p. 730, § 4; Ga. L. 2017, p. 193, § 9/HB 143.)

The 2017 amendment, effective June 1, 2017, rewrote this Code section.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 650, 841.

ALR. - Insurance of bank or trust company against loss by burglary or robbery as covering contents of safety deposit boxes rented to customers, 30 A.L.R. 623 .

Liability for loss of contents of safe deposit box, 42 A.L.R. 1304 , 133 A.L.R. 279 .

Presumption as to ownership of property in safe deposit box, 101 A.L.R. 832 .

7-1-352. Deposit by agent, trustee, or other fiduciary.

  1. Whenever any agent, administrator, executor, guardian, trustee, either express or implied, or other fiduciary, whether bona fide or mala fide, shall deposit any money in any bank to his credit as an individual, or as such agent, trustee, or other fiduciary, whether the name of the person or corporation for whom he is acting or purporting to act be given or not, such bank shall be authorized to pay the amount of such deposit, or any part thereof, upon the order of such agent, administrator, executor, guardian, trustee, or other fiduciary, signed with the name in which such deposit was entered, without being accountable in any way to the principal, cestui que trust, or other person or corporation who may be entitled to or interested in the amount so deposited.
  2. Nothing contained in this Code section shall prevent the person or corporation claiming the beneficial interest in or to any deposit in any bank from resorting to the courts to claim such deposit, provided such action is brought and served before such deposit is paid out and in accordance with the requirements of Code Section 7-1-353.

    (Ga. L. 1919, p. 135, art. 19, § 42; Code 1933, § 13-2042; Code 1933, § 41A-1605, enacted by Ga. L. 1974, p. 705, § 1.)

JUDICIAL DECISIONS

Section protects bank against breaches by corporate agent. - Once account was properly set up by a corporation, former Code 1933, § 13-2042 (see O.C.G.A. § 7-1-352 ) protects bank from liability if the bank was without knowledge of the breach of duty of the agent withdrawing funds. Trust Co. v. Nationwide Moving & Storage Co., 235 Ga. 229 , 219 S.E.2d 162 (1975).

Purpose of O.C.G.A. § 7-1-352 is to protect a bank from liability in the event that an agent or fiduciary misappropriates funds of an owner in breach of the agency or trust without the bank's knowledge, and the statute protects a bank from liability for embezzlement by a signatory on a corporate bank account if the person setting up the account had the authority to do so and if the bank was without knowledge of the embezzlement. Atlanta Sand & Supply Co. v. Citizens Bank, 276 Ga. App. 149 , 622 S.E.2d 484 (2005).

Former Code 1933, § 13-2042 (see O.C.G.A. § 7-1-352 ) can be read to include an agent with authority or implied agency to make deposits. Trust Co. v. Nationwide Moving & Storage Co., 235 Ga. 229 , 219 S.E.2d 162 (1975).

Corporate officer's authority. - Because a company's corporate resolution authorized one of the corporation's officers to make deposits to and withdrawals from an account maintained at a bank, and the officer, in the process of making deposits to the account, illegally took cash back from the deposits for the officer's personal use, the bank was shielded from liability for conversion by O.C.G.A. § 7-1-352 because the corporate resolution, as well as a signature card bearing the officer's signature, gave the officer authority to deal with the account. Atlanta Sand & Supply Co. v. Citizens Bank, 276 Ga. App. 149 , 622 S.E.2d 484 (2005).

Account in a fictitious name is recognized in Georgia. National Factor & Inv. Corp. v. State Bank, 224 Ga. 535 , 163 S.E.2d 817 (1968).

Account can be opened in any name and bank may pay checks signed in accounts when the bank has no knowledge of a fraudulent purpose for the account. National Factor & Inv. Corp. v. State Bank, 224 Ga. 535 , 163 S.E.2d 817 (1968).

Banks not required to scrutinize every check written by a fiduciary or agent. - Former Code 1933, § 13-2042 is designed to protect the bank from liability when the agent or fiduciary misappropriates funds of the owner in breach of agency or trust without bank's knowledge. The bank is not required to scrutinize every check written by a fiduciary or agent to see if the check is written in compliance with the agent's authority. Trust Co. v. Nationwide Moving & Storage Co., 235 Ga. 229 , 219 S.E.2d 162 (1975).

Former Code 1933, § 13-2042 was designed to protect the bank from liability when an agent or fiduciary misappropriates funds of the owner in breach of agency or trust without bank's knowledge. The bank is not required to scrutinize every check written by a fiduciary or agent to see if the check is written in compliance with the agent's authority. Flo-Control, Inc. v. Northeast Bank, 150 Ga. App. 880 , 258 S.E.2d 695 (1979); National Bank v. Weiner, 180 Ga. App. 61 , 348 S.E.2d 492 (1986).

If agent has authority to open account and issue checks, bank is protected. - If agent was proven to have had either authority or inherent agency power to open an account, then the bank can rely on the protection of former Code 1933 § 13-2042 if the agent also had authority to issue checks. Trust Co. v. Nationwide Moving & Storage Co., 235 Ga. 229 , 219 S.E.2d 162 (1975).

Bank was protected from liability for conversion of checks deposited into a corporate account since the agent who made the deposits and later withdrew the deposits had presented documents to the bank, including a certificate bearing the corporate seal and naming the agent as an officer of the corporation, which appeared to give the agent very broad authorization. Service Lines v. Trust Co. Bank, 189 Ga. App. 891 , 377 S.E.2d 872 , cert. denied, 189 Ga. App. 913 , 377 S.E.2d 872 (1989).

General manager may have authority or inherent agency to arrange for handling of corporate funds. Trust Co. v. Nationwide Moving & Storage Co., 235 Ga. 229 , 219 S.E.2d 162 (1975).

Trust company cannot rely solely on general manager's position. - Trust company does not have the right to rely solely on the general manager's position as general manager for power to set up a corporate bank account and to withdraw corporate funds without a proper corporate resolution. Trust Co. v. Nationwide Moving & Storage Co., 235 Ga. 229 , 219 S.E.2d 162 (1975).

Corporate resolution is not exclusive method for conferring authority. - While a bank could easily protect the bank's interests by requiring a proper corporate resolution showing an agent's authority to act for the corporation, that method is not the exclusive one for establishing the existence either of authority or of inherent agency power to open a bank account for the corporation. Trust Co. v. Nationwide Moving & Storage Co., 235 Ga. 229 , 219 S.E.2d 162 (1975).

Chief executive officer's authority. - When evidence showed that a chief executive officer had the inherent agency power to open accounts and withdraw deposited funds, the bank was not liable for alleged conversions of funds by the officer on the basis that the bank did not require a corporate resolution or certificate of authority to open the accounts. Family Partners Worldwide, Inc. v. Suntrust Bank, 242 Ga. App. 618 , 530 S.E.2d 742 (2000).

This section does not violate U.S. Const., amend. 14, Sec. 1, or Ga. Const. 1983, Art. I, Sec. I, Para. II. - Former Code 1933, § 13-2042 (see now O.C.G.A. § 7-1-352(a) ) was not unconstitutional under U.S. Const., Art. XIV, Sec. I, and Ga. Const. 1976, Art. I, Sec. II, Para. III (see now Ga. Const. 1983, Art. I, Sec. I, Para. II) as violating equal protection and impartial protection of property, nor did the statute violate Ga. Const. 1976, Art. I, Sec. I, Para. VII (see now Ga. Const. 1983, Art. I, Sec. I, Para. X) prohibitions against grants of special privileges or immunities. National Factor & Inv. Corp. v. State Bank, 224 Ga. 535 , 163 S.E.2d 817 (1968).

Former Code 1933, § 13-2042 was not unconstitutional as a special law enacted in derogation of a general law. National Factor & Inv. Corp. v. State Bank, 224 Ga. 535 , 163 S.E.2d 817 (1968).

Circumstances required to charge bank with notice of misappropriation. - See National Factor & Inv. Corp. v. State Bank, 224 Ga. 535 , 163 S.E.2d 817 (1968).

Mere fact that a fiduciary deposits in bank to the fiduciary's individual account a check drawn by the fiduciary in a fiduciary capacity, or transfers funds by check from an account in the bank in the fiduciary's own name as a fiduciary to a personal account in the bank, will not of itself charge the bank with knowledge or notice that the fiduciary is misappropriating or will misappropriate such funds. Citizens Bank v. Middlebrooks, 209 Ga. 330 , 72 S.E.2d 298 (1952).

Trust funds. - Under O.C.G.A. § 7-1-352 , a bank incurs no liability for the uses to which trust funds are applied after the funds are withdrawn. On the other hand, the statute contains no language protecting the bank against liability for honoring forged or otherwise improper checks or endorsements. Trust Co. Bank v. Henderson, 258 Ga. 703 , 373 S.E.2d 738 (1988).

O.C.G.A. § 7-1-352 did not apply when the claim against the bank was based on the bank's acceptance for deposit into an employee's personal checking account of checks made payable to the employer, and the employee knowingly signed and presented the checks so as to give the appearance of authority from the employer. Trust Co. Bank v. Henderson, 185 Ga. App. 367 , 364 S.E.2d 289 (1987), aff'd, 258 Ga. 703 , 373 S.E.2d 738 (1988).

While O.C.G.A. § 7-1-352 protects banks from liability when allowing withdrawals and paying accounts ordered to be paid by the persons who have previously deposited such money, it is not applicable when the amount ordered to be transferred was not initially deposited by a temporary administratrix but instead was deposited by the deceased. Kelly v. Citizens & S. Nat'l Bank, 160 Ga. App. 405 , 287 S.E.2d 343 (1981).

Cited in First Nat'l Bank v. Rapides Bank & Trust Co., 145 Ga. App. 514 , 244 S.E.2d 51 (1978); Louis v. Citizens & S. Bank, 189 Ga. App. 164 , 375 S.E.2d 82 (1988); Grogan v. Lanier Bank & Trust Co., 219 Ga. App. 313 , 464 S.E.2d 892 (1995).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am Jur. 2d, Banks, § 504.

ALR. - Deposit to individual account of checks or notes drawn or endorsed by agent or fiduciary, as charging bank with notice of misappropriation, 64 A.L.R. 1404 ; 106 A.L.R. 836 ; 115 A.L.R. 648 .

Trust or preference in assets of insolvent bank in respect of money deposited or left on deposit pursuant to agreement of bank to purchase bonds or make other investments for depositor, 82 A.L.R. 1292 ; 105 A.L.R. 516 .

Liability of guardian for loss of funds deposited in bank in form which discloses trust or fiduciary character, 90 A.L.R. 641 .

Payee's and drawer's right of recovery, in conversion under pre-1990 UCC § 3-419, or post-1990 UCC § 3-420, for money paid on unauthorized endorsement, 91 A.L.R.5th 89.

7-1-353. Adverse claims to deposits and property held in safe deposit.

  1. Except as provided in subsections (b) and (c) of this Code section, a bank or trust company shall not be required to deny control over or access to a deposit account or property held in safe deposit (whether by the bank or trust company or in a safe-deposit box or other receptacle leased to a customer) to:
    1. The customer in whose name the account or property is held by the bank or trust company (including one of two depositors or lessees entitled to such control or access by virtue of their contract with the bank or trust company); or
    2. A person or group of persons who is authorized to draw on or control the account or property pursuant to a certified corporate resolution or other written arrangement with the customer currently on file with the bank or trust company.
  2. A bank shall be entitled to act and rely upon:
    1. A court order, distraint, levy, garnishment, or other effective legal process;
    2. An agreement of the parties concerning an adverse claim; or
    3. A claim of the type described in subsection (a) of this Code section accompanied by a bond or other indemnity adequate to protect the bank or trust company from loss as a consequence of recognizing an adverse claim.
  3. Nothing in this Code section shall impair the effect of a discharge which a bank or trust company would be entitled to under Code Section 11-3-602.

    (Code 1933, § 41A-1606, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1984, p. 22, § 7; Ga. L. 1997, p. 143, § 7; Ga. L. 2016, p. 390, § 7-8/HB 811.)

The 2016 amendment, effective July 1, 2016, inserted "garnishment," in paragraph (b)(1).

Cross references. - Disposition of property held in safe deposit box or held for safekeeping by financial institution for which department acts as receiver, § 7-1-172 .

JUDICIAL DECISIONS

IRS levy. - Bank did not violate O.C.G.A. § 7-1-353 by denying a depositor control over the depositor's bank account when the bank surrendered money in the depositor's account pursuant to an IRS levy. Dean v. NationsBank, 226 Ga. App. 370 , 486 S.E.2d 647 (1997).

Cited in Fedina v. Larichev, 322 Ga. App. 76 , 744 S.E.2d 72 (2013).

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1005 et seq., 1012.

C.J.S. - 93 C.J.S. (Rev), Warehousemen and Safe Depositaries, § 141.

ALR. - Levy upon or garnishment of contents of safety deposit box, 11 A.L.R. 225 ; 19 A.L.R. 863 ; 39 A.L.R. 1215 .

Crediting amount to depositor's account as precluding recovery back of money paid to bank by mistake, 25 A.L.R. 129 .

Insurance of bank or trust company against loss by burglary or robbery as covering contents of safety deposit boxes rented to customers, 30 A.L.R. 623 .

Liability for loss of contents of safe-deposit box, 42 A.L.R. 1304 ; 133 A.L.R. 279 .

Duty of bank to sureties or endorsers as to application of general deposit by principal, 70 A.L.R. 339 .

Right of bank to charge depositor's indebtedness against deposit account without first exhausting collateral, 96 A.L.R. 1240 .

Presumption as to ownership of property in safe deposit box, 101 A.L.R. 832 .

Garnishment of bank deposit as affected by bank's right, or waiver of right, to set off depositor's indebtedness to it against deposit or apply deposit to such indebtedness, 106 A.L.R. 62 ; 110 A.L.R. 1268 .

Conflict of laws as to disposition of and relative rights to bank deposits in the names of more than one person, 25 A.L.R.2d 1240.

7-1-354. Money received for transmission.

  1. A bank or trust company which receives money for transmission shall give the customer a receipt setting forth:
    1. The date of receipt of the money;
    2. The amount of the money in dollars and cents; and
    3. If the money is to be transmitted to a foreign country in the currency of such country, the amount of the money in such currency.
  2. In an action by a customer against a bank or trust company for recovery of money delivered for transmission, the burden of proof of delivery of the money in accordance with the instructions of the customer shall be on the bank or trust company; but an affidavit by an agent or correspondent of the bank or trust company that the money was delivered in accordance with the customer's instructions shall be prima-facie evidence of the delivery of the money in accordance with the customer's instructions.

    (Code 1933, § 41A-1607, enacted by Ga. L. 1974, p. 705, § 1.)

Cross references. - Persons, corporations, and others engaging in business of receiving cash from patrons as payment of obligations owed by such patrons to third parties, § 10-6-100 et seq.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 782, 792.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 476 et seq., 517.

ALR. - Liability of correspondent bank to depositor in forwarding bank for breach of duty as to collection of paper, 58 A.L.R. 764 .

Trust or preference in respect of money used to purchase exchange or to be transmitted, 84 A.L.R. 1470 ; 93 A.L.R. 938 ; 101 A.L.R. 631 .

Agreement by bank to transmit excess of deposit over specified amount as giving rise to a trust or preference in event of insolvency of bank, 89 A.L.R. 1287 .

Bank depositor's act in seeking restitution from third person to whom, or for benefit of whom, the bank has paid out the deposit, as election of remedy precluding action against bank, 144 A.L.R. 1440 .

7-1-355. Agreements concerning safe deposits.

A bank, trust company, or savings and loan association may receive property for safe deposit and rent out receptacles and safe-deposit boxes on the terms and conditions prescribed by it; but such terms and conditions shall not bind any customer to whom the bank, trust company, or savings and loan association does not give notice thereof either by delivery of a copy or by posting in its offices where such receptacles or safe-deposit boxes are located, or who does not otherwise agree to such terms and conditions.

(Code 1933, § 41A-1608, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1978, p. 1717, § 4; Ga. L. 2016, p. 390, § 7-4/HB 811; Ga. L. 2017, p. 774, § 7/HB 323.)

The 2016 amendment, effective July 1, 2016, deleted "building and loan association," following "trust company," twice in this Code section.

The 2017 amendment, effective May 9, 2017, part of an Act to revise, modernize, and correct the Code, revised punctuation in this Code section.

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1002, 1007, 1008.

C.J.S. - 93 C.J.S. (Rev), Warehousemen and Safe Depositaries, §§ 138, 139.

ALR. - Insurance of bank or trust company against loss by burglary or robbery as covering contents of safety deposit boxes rented to customers, 30 A.L.R. 623 .

Liability for loss of contents of safe-deposit box, 42 A.L.R. 1304 ; 133 A.L.R. 279 .

Presumption as to ownership of property in safe deposit box, 101 A.L.R. 832 .

7-1-356. Procedures on death or incompetence of safe depositor.

  1. Any financial institution contracting with a person for the use of a safe-deposit box or receiving property from a person for safekeeping, upon presentation of satisfactory proof of the death or legal incompetence of such person, shall permit any person named in an order granted by the probate court having jurisdiction of such person's estate to open and examine the contents of any safe-deposit box leased by the decedent or legally incompetent person or to examine the property left by such person for safekeeping, in the presence of an officer of the financial institution. The financial institution, if so requested by such person, shall deliver:
    1. Any writing purporting to be a will of the decedent to the probate court having jurisdiction of the decedent's estate;
    2. Any writing purporting to be a deed to a burial plot or to give burial instructions to the person named in such order;
    3. Any document purporting to be an insurance policy on the life of the decedent to the beneficiary named therein;

      but no other contents shall be removed pursuant to this Code section.

  2. Within five banking days after the order of the court is presented to the financial institution, the financial institution shall permit the person named in such order to inventory the contents of any safe-deposit box leased or rented to the decedent or legally incompetent person or the property left by such person for safekeeping. The inventory shall be conducted in the presence of an officer or employee of the financial institution by the person named in such order. The inventory shall be signed by such persons, and a copy thereof shall be retained by the financial institution and may be filed with the probate court.
  3. The financial institution shall be free from all liability with respect to any action, claim, or demand of whatever nature asserted by any heir, legatee, distributee, creditor, administrator, executor, guardian, trustee, or other fiduciary or by any person whomsoever when acting pursuant to such letters of authority.
  4. Upon presentation of a certified copy of his letters of authority, the financial institution shall grant the personal representative access to any safe-deposit box or property in safekeeping in the sole name of a decedent or legally incompetent person to permit him to remove from such box or place of safekeeping any part or all of the property therein without liability.

    (Ga. L. 1972, p. 437, §§ 1-4; Code 1933, § 41A-1609, enacted by Ga. L. 1974, p. 705, § 1.)

Cross references. - Opening of safe deposit box on authorization of fiduciary, § 53-7-5 .

RESEARCH REFERENCES

Am. Jur. 2d. - 11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1003, 1006, 1012.

C.J.S. - 93 C.J.S. (Rev), Warehousemen and Safe Depositaries, §§ 141, 142.

ALR. - Insurance of bank or trust company against loss by burglary or robbery as covering contents of safety deposit boxes rented to customers, 30 A.L.R. 623 .

Liability for loss of contents of safe deposit box, 42 A.L.R. 1304 ; 133 A.L.R. 279 .

Presumption as to ownership of property in safe deposit box, 101 A.L.R. 832 .

7-1-357. Payment of deposit of deceased depositor; deposit by nursing home of moneys left in its possession upon death of resident.

Reserved. Repealed by Ga. L. 1983, p. 661, § 2, effective July 1, 1983.

Editor's notes. - The former Code section was based on Ga. L. 1919, p. 135, art. 19, § 48; Ga. L. 1927, p. 195, § 11; Code 1933, § 13-2048; Ga. L. 1943, p. 253, § 1; Ga. L. 1952, p. 189, § 1; Ga. L. 1955, p. 202, § 1; Code 1933, § 41A-1610, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 21; Ga. L. 1976, p. 1388, § 3; Ga. L. 1981, p. 848, § 1.

Code Section 7-1-357 was repealed by Ga. L. 1983, p. 661, § 2, effective July 1, 1983. For present provisions as to payment of large deposits of deceased intestate depositors, see Code Section 7-1-239.

7-1-358. Dormant accounts.

In accordance with and subject to the limitation of such regulations as the department may prescribe, a bank may, from time to time, charge a dormant account a reasonable service charge.

(Code 1933, § 13-2067, enacted by Ga. L. 1966, p. 590, § 10; Code 1933, § 41A-1611, enacted by Ga. L. 1974, p. 705, § 1.)

JUDICIAL DECISIONS

Dormant checks, money orders, and drafts deemed "dormant accounts." - O.C.G.A. § 7-1-358 and a related regulation do not allow assessment of service charges only against dormant deposit accounts; thus, charges against dormant checks, money orders, and drafts qualified as "lawful charges" and were properly withheld from the Department of Revenue when funds were remitted under the Unclaimed Property Act, O.C.G.A. Art. 5, Ch. 12, T. 44. First Union Nat'l Bank v. Collins, 221 Ga. App. 442 , 471 S.E.2d 892 (1996).

OPINIONS OF THE ATTORNEY GENERAL

Repeals contrary provision in Disposition of Unclaimed Property Act. - Ga. L. 1974, p. 705, § 1 (see now O.C.G.A. § 7-1-358 ) repealed by implication the prohibition against the imposition of a service charge on dormant bank accounts contained in the Disposition of Unclaimed Property Act (see now O.C.G.A. Art. 5, Ch. 12, T. 44). 1975 Op. Att'y Gen. No. 75-128.

7-1-359. Fee prohibited for conducting search of dormant, abandoned, or unclaimed deposit accounts; commission or finder's fee allowed.

No person shall charge a fee or solicit any other form of compensation for the purpose of conducting a search for dormant, abandoned, or unclaimed deposit accounts or other abandoned properties whether held by a financial institution or escheated to any governmental agency. Notwithstanding the foregoing, a commission or finder's fee not to exceed 10 percent of actual sums recovered by the owner of such accounts may be agreed to by the parties. All moneys and properties located by a person to be compensated by the payment of such a commission or finder's fee shall be paid directly to the owner and may not be paid over to the person to receive the commission or finder's fee whether pursuant to a duly executed power of attorney or otherwise.

(Code 1981, § 7-1-359 , enacted by Ga. L. 1989, p. 1211, § 6.)

7-1-360. Third-party claims; notification of disclosure by third party to depositor; motion to quash disclosure.

  1. No financial institution shall be required to recognize the claim of any third party to any deposit, or withhold payment of any deposit to the depositor or to his order, unless and until the financial institution is served with citation, order, or other appropriate process issuing out of a court of competent jurisdiction in connection with a suit instituted by such third party for the purpose of recovering or establishing an interest in such deposit. Neither shall any financial institution be required to disclose or produce to third parties, or permit third parties to examine any records pertaining to a deposit account, loan account, or other banking relationship except:
    1. Where the financial institution itself is a proper or necessary party to a proceeding in a court of competent jurisdiction;
    2. Where the records of accounts or other customer records are requested through subpoena or other administrative process issued by a state, federal, or local administrative agency having competent jurisdiction over the depositor or other customer or where such records are requested pursuant to Georgia or federal law governing civil practice or procedure in conjunction with an ongoing civil action in a Georgia state or federal court of competent jurisdiction;
    3. Where the records of accounts or other customer records are requested in conjunction with an ongoing criminal or tax investigation of the depositor or other customer by a state or federal grand jury, taxing authority, or law enforcement agency; or
    4. Where the records of accounts or other customer records are requested by any state or federal regulatory agency having jurisdiction over the financial institution.
  2. Unless directed otherwise by a court of competent jurisdiction, before disclosure, production, or examination of records produced under paragraph (1) or (2) of subsection (a) of this Code section, the agency or other party seeking the disclosure or production of the records shall provide notification to the depositor or other customer of such request. Notification of the depositor or other customer under circumstances set forth in paragraphs (3) and (4) of subsection (a) of this Code section shall not be made without the consent of the requesting authority. For purposes of ascertaining whether or not proper notice has been given or whether or not the depositor or other customer may be notified, the financial institution may rely upon appropriate certification or written assurances from the requesting party and in doing so shall be relieved of any liability which might be asserted in connection with such disclosures.
  3. Each customer or depositor to whom notice of an order, subpoena, or request for disclosure, examination, or production of records was lawfully given may, prior to the date specified therein for disclosure, examination, or production, file in the court issuing an order or subpoena for the records or in the Georgia or federal court where the civil matter is being heard or, in the absence of such a court, in the superior court of the county in which the financial institution is located a motion to quash the order, subpoena, or request or for a protective order and shall serve such motion on the party requesting disclosure and the financial institution as may be otherwise provided by law for similar motions.  Failure to file and serve such motion to quash or for protection shall constitute consent for all purposes to disclosure, production, or examination made pursuant to this Code section. (Code 1981, § 7-1-360 , enacted by Ga. L. 1989, p. 1211, § 6; Ga. L. 2005, p. 826, § 8/SB 82.)

JUDICIAL DECISIONS

Section not intended to hinder discovery as to fair market value. - O.C.G.A. § 7-1-360 is intended to protect confidential banking records. It is not intended to hinder proper discovery in a lawsuit concerning the fair market value of taxable property, especially when the documents sought may contain evidence, including admissions by the taxpayer, as to the value of the property. Clayton County Bd. of Tax Assessors v. Lake Spivey Golf Club, Inc., 207 Ga. App. 693 , 428 S.E.2d 687 (1993).

Relevance of financial condition. - Trial court did not err in admitting banking records for accounts belonging to the defendant, as evidence of the defendant's financial condition was admissible regarding the defendant's reason for stabbing the victim, a fellow soldier, and grabbing for the victim's money; accordingly, the defendant's argument that the admission of defendant's bank records was improper pursuant to O.C.G.A. § 7-1-360 had to be rejected since that statute merely discussed the right of financial institutions to provide certain financial information to third parties when the records were requested by certain individuals or entities for certain purposes. Stogisavlijevic v. State, 259 Ga. App. 306 , 577 S.E.2d 18 (2003).

Discovery compelled by court of competent jurisdiction. - Compliance with Fed. R. Bankr. P. 2004(c) satisfies the requirement of O.C.G.A. § 7-1-360 that discovery of records of a financial institution be compelled by a court of competent jurisdiction. In re Bennett, Bankr. (Bankr. N.D. Ga. Apr. 15, 2008).

Chapter 7 trustee's motion for a Fed. R. Bankr. P. 2004 examination of a law firm as to documents relating to the real estate closing to which the debtors were parties was granted with the requirement that the trustee subpoena the firm because the trustee was not required to serve the motion, which could be granted ex parte, on the debtors under Fed. R. Bankr. P. 9013 and compliance with Fed. R. Bankr. P. 2004(c) satisfied the requirement of O.C.G.A. § 7-1-360 that discovery of records of a financial institution be compelled by a court of competent jurisdiction. In re Bennett, Bankr. (Bankr. N.D. Ga. Apr. 15, 2008).

Judgment creditor may review bank records of debtor's spouse. - Judgment creditor was authorized to seek bank records of the debtor's wife in post-judgment discovery because the creditor was entitled to seek information that would lead to any property or other sources of income of the debtor; further, the wife had begun paying the husband's country club dues from her bank accounts after the judgment was entered. Hickey v. RREF BB SBL Acquisitions, LLC, 336 Ga. App. 411 , 785 S.E.2d 72 (2016).

RESEARCH REFERENCES

ALR. - Bank's liability, under state law, for disclosing financial information concerning depositor or customer, 81 A.L.R.4th 377.

PART 7 B ANKING DEPOSITORIES, RESERVES, AND REMISSIONS

7-1-370. Deposits by financial institutions.

  1. Subject to the restrictions of subsection (b) of this Code section and of Code Section 7-1-371 in regard to reserve funds, a financial institution may deposit its funds in any depository which is:
    1. Selected by, or in any manner authorized by, its directors;
    2. Authorized by law to receive deposits; and
    3. In the case of a depository located in the United States, one which has deposit insurance issued by a federal public body to depositories of the type involved.
  2. If a director of the financial institution has a relationship to a depository as either:
    1. An officer or director; or
    2. An owner of 5 percent or more of the shares of the depository,

      the depository shall be approved by a majority of the directors other than the director who has such relationship.

      (Code 1933, § 41A-1701, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1366, § 10; Ga. L. 1997, p. 485, § 14; Ga. L. 2016, p. 390, § 2-4/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted "financial institution" for "bank" in the introductory paragraph of subsections (a) and (b); and deleted "or equivalent to deposit insurance provided by" following "issued by" in paragraph (a)(3).

OPINIONS OF THE ATTORNEY GENERAL

This section is broad enough to cover a savings and loan account as a deposit. - Former Code 1933, § 41A-1309 (see now O.C.G.A. § 7-1-288 ) was directed at a bank's long-term investment in capital stocks and securities in the bank's own name, while former Code 1933, § 41A-1701 (see now O.C.G.A. § 7-1-370 ) was directed at a bank's short-term deposits in other financial institutions. The language of former Code 1933, § 41A-1701 was broad enough to cover a savings and loan account as a deposit, therefore, former Code 1933, § 41A-1309 was inapplicable to deposits in mutual savings and loan associations and former Code 1933, § 41A-1701 permitted banks to deposit the bank's funds in these associations. Since the Georgia Supreme Court has not ruled on the question of whether such a deposit was equivalent to the purchase of shares in a corporation, federal law will not permit a state bank member of the federal reserve to make deposits in a Georgia building and loan association; however, there was no reason why a state bank which is not a member of the federal reserve cannot deposit the bank's funds in a state association. 1978 Op. Att'y Gen. No. 78-66.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 45, 53, 54.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1086, 1087.

7-1-371. Legal reserve requirements; notice of deficiency; penalty; effect of deficiency.

  1. For the purposes of the reserve requirement imposed by subsection (c) of this Code section and the composition of the required reserve fund under subsection (d) of this Code section, the term:
    1. "Demand deposits" means the aggregate of deposits which can be required to be paid on demand or within less than 30 days after demand;
    2. "Reserve agent" means a depository of a financial institution selected as provided in Code Section 7-1-370 for the deposit of funds included in the required reserve fund.
  2. A financial institution which is governed by 12 C.F.R. 204 shall maintain, at all times, a reserve fund in accordance with the applicable federal requirements.
  3. A financial institution which is not governed by 12 C.F.R. 204 shall maintain, at all times, a reserve fund in an amount fixed by regulation of the department, but in no case shall such reserve be required in excess of the aggregate of 15 percent of demand deposits and 5 percent of other deposits.

    The amount of the required reserve for each day shall be computed on the basis of average daily deposits covering such biweekly or shorter periods as shall be fixed by regulation of the department.

  4. In the case of a financial institution which is not governed by 12 C.F.R. 204, such portion of the reserve fund against deposits as shall be fixed by regulation of the department shall consist of United States coin and currency on hand or on deposit, subject to call without notice, in a reserve agent. The balance of such reserve fund shall be kept in obligations of:
    1. General obligations of the United States or of a subsidiary corporation of the United States government fully guaranteed by such government, or to obligations issued by the Federal Land Bank, Federal Home Loan Banks, Federal Intermediate Credit Bank, Bank for Cooperatives, Federal Farm Credit Banks regulated by the Farm Credit Administration, Federal Home Loan Mortgage Corporation, or Federal National Mortgage Association;
    2. Obligations of the State of Georgia or any instrumentality of this state; or
    3. Other issuers whose obligations are marketable and approved by regulation of the department for the purpose of this Code section.
  5. All assets which are part of the reserve fund required by this Code section shall be owned absolutely by the financial institution and shall not be pledged, assigned, or hypothecated in any manner or subject to setoff. The value of all securities which constitute a part of a financial institution's reserve fund shall be computed at the current market value thereof.
  6. A financial institution shall give written notice to the department, in the manner prescribed by the department for such notice, of any deficiency in the amount or form of the reserve fund required by this Code section within three business days after the close of any scheduled averaging period during which such deficiency occurs.
  7. Immediately following the closing of any scheduled averaging period during which a deficiency in the required reserve occurs, the financial institution will take immediate action to restore the deficiency; and, until such deficiency is restored, the financial institution shall not make any new loans or discounts other than by discounting or purchasing bills of exchange at sight; nor shall any dividend be declared out of the profits of such financial institution. Any financial institution failing to restore its reserve to the required amount within 30 days after the closing of the averaging period in which the deficiency occurs may have its business and assets taken over by the department as provided in Part 7 of Article 1 of this chapter.

    (Ga. L. 1919, p. 135, art. 19, §§ 27, 28; Ga. L. 1920, p. 102, § 1; Code 1933, §§ 13-2027, 13-2028; Ga. L. 1939, p. 360, §§ 1, 2; Ga. L. 1966, p. 692, § 50; Ga. L. 1967, p. 798, §§ 1, 2; Ga. L. 1969, p. 126, § 1; Ga. L. 1973, p. 526, §§ 6, 7; Code 1933, § 41A-1702, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 22; Ga. L. 2016, p. 390, § 2-5/HB 811.)

The 2016 amendment, effective July 1, 2016, rewrote this Code section.

Administrative Rules and Regulations. - Rules governing legal reserves, Official Compilation of Rules and Regulations of State of Georgia, Rules of Department of Banking and Finance, Chapter 80-1-7.

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 24.

ALR. - Rights and preference in respect of assets of insolvent bank or trust company as affected by its division into departments, 89 A.L.R. 1218 ; 114 A.L.R. 680 .

7-1-372. Collection charge; service charge.

A commercial bank may deduct a reasonable collection charge covering its actual expenses from the remittance for any check forwarded to it for collection and remittance as a special collection item and may impose a service charge as authorized by Code Section 44-12-196, relating to when an instrument on which a banking or financial organization is directly liable is presumed abandoned.

(Ga. L. 1919, p. 135, art. 19, §§ 27, 28; Ga. L. 1920, p. 102, § 1; Code 1933, §§ 13-2027, 13-2028; Ga. L. 1939, p. 360, §§ 1, 2; Ga. L. 1966, p. 692, § 50; Ga. L. 1967, p. 798, §§ 1, 2; Ga. L. 1969, p. 126, § 1; Ga. L. 1973, p. 526, §§ 6, 7; Code 1933, § 41A-1703, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1995, p. 1368, § 2; Ga. L. 2016, p. 390, § 2-6/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "shall pay all checks drawn on it at par and shall make no charge for the payment of such checks; provided, however, it" following "commercial bank" near the beginning of this Code section.

Cross references. - Bank deposits and collections generally, Art. 4, T. 11.

JUDICIAL DECISIONS

Preempted by federal law. - Since the court found that O.C.G.A. §§ 7-1-239.5 and 7-1-372 were in direct conflict with 12 U.S.C. § 24 and 12 C.F.R. § 7.4002(a) under the National Bank Act, 12 U.S.C. § 21 et seq., the state statutes were preempted, and the court granted the bank's Fed. R. Civ. P. 56 motion. Bank of Am., N.A. v. Sorrell, 248 F. Supp. 2d 1196 (N.D. Ga. 2002).

"Lawful charges" against dormant checks, money order, and drafts. - O.C.G.A. § 7-1-358 and a related regulation do not allow assessment of service charges only against dormant deposit accounts; thus, charges against dormant checks, money orders, and drafts qualified as "lawful charges" and were properly withheld from the Department of Revenue when funds were remitted under the Unclaimed Property Act, O.C.G.A. Art. 5, Ch. 12, T. 44. First Union Nat'l Bank v. Collins, 221 Ga. App. 442 , 471 S.E.2d 892 (1996).

Cited in Bank of Am., N.A. v. Sorrell, 248 F. Supp. 2d 1196 (N.D. Ga. 2002).

OPINIONS OF THE ATTORNEY GENERAL

This title does not restrict how banks treat items for collection. - Neither former Code 1933, Title 41A nor Title 109A (see now O.C.G.A. Title 7 nor Title 11) restricted in any way a bank's freedom to decide how the bank will treat any particular collection item, whether it be a check or a credit union share draft. 1977 Op. Att'y Gen. No. 77-2.

Banks not required to process credit union share drafts as cash items, rather than as drafts for collection. 1977 Op. Att'y Gen. No. 77-2.

RESEARCH REFERENCES

ALR. - Priority as between checks simultaneously presented to drawee bank for payment, 61 A.L.R. 960 .

Liability of bank which diverts checks or drafts drawn to its order to a use other than that of the drawer, 82 A.L.R. 1372 .

Discharge of drawer or endorser of check by holder's acceptance therefor of something other than money, 87 A.L.R. 442 .

Duty and liability of bank in respect of a depositor's check drawn upon and payable to the bank, 138 A.L.R. 853 .

Constitutionality, construction, and application of statutes requiring clearance of checks at par, 174 A.L.R. 869 .

PART 8 I NCORPORATION OF BANKS AND TRUST COMPANIES

Cross references. - Incorporation of Secretary of State corporations generally, § 14-4-21 et seq.

JUDICIAL DECISIONS

Editor's notes. - In light of the similarity of the statutory provisions, decisions under former Ga. L. 1919, p. 135 are included in the annotations for this part.

Trust company not a chartered bank within penal laws. - Trust company incorporated under provisions of Ga. L. 1919, p. 135 is not a chartered bank, within the meaning of the penal laws of this state relating only to such banks. Dunn v. State, 13 Ga. App. 314 , 79 S.E. 170 (1913).

7-1-390. Incorporators.

One or more natural persons 18 years of age or over may act as incorporators of a bank or trust company.

(Ga. L. 1898, p. 78, § 1; Civil Code 1910, § 2815; Ga. L. 1919, p. 135, art. 8, § 1; Ga. L. 1920, p. 102, § 1; Ga. L. 1927, p. 195, § 7; Ga. L. 1931, p. 156, § 1; Code 1933, §§ 13-901, 109-101; Ga. L. 1935, p. 101, § 1; Ga. L. 1941, p. 312, § 1; Ga. L. 1943, p. 249, § 1; Ga. L. 1965, p. 501, § 1; Ga. L. 1966, p. 463, § 1; Ga. L. 1966, p. 692, § 7; Ga. L. 1972, p. 384, § 1; Ga. L. 1972, p. 727, § 1; Code 1933, § 41A-1801, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 18A Am. Jur. 2d, Corporations, §§ 189, 190.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 19, 748.

7-1-390.1. Organization of bank or trust company as limited liability company; promulgation of rules and regulations governing.

  1. Subject to the requirements and restrictions of this chapter including, but not limited to, deposit insurance requirements where applicable, a bank or trust company may organize as a limited liability company pursuant to Chapter 11 of Title 14.
  2. The department shall have the authority to promulgate rules and regulations in accordance with Code Section 7-1-3 specifying the conditions under which a bank or trust company may organize as a limited liability company.
  3. To the extent the provisions of Chapter 11 of Title 14 are consistent with and not in conflict with the provisions of this chapter and the rules and regulations of the department, such provisions shall apply to a bank or trust company that has organized as a limited liability company. (Code 1981, § 7-1-390.1 , enacted by Ga. L. 2003, p. 843, § 4.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 109 et seq.

7-1-391. Prohibition of promoters' fees.

  1. A bank or trust company shall not pay any fee, compensation, or commission for promotion in connection with its organization or apply any money received on account of shares or subscriptions, selling shares, or other services in connection with its organization, except legal fees, commissions or fees to disinterested third parties for sale of bank stock to others, and other usual and ordinary expenses necessary for its organization.
  2. A majority of incorporators shall file with the department at the time of filing of the articles an affidavit:
    1. Setting forth all expenses incurred or to be incurred in connection with the organization of the bank or trust company, subscription for its shares, and sale of its shares; and
    2. Stating that no fee, compensation, or commission prohibited by subsection (a) of this Code section has been paid or incurred.
  3. In the event of a violation of this Code section the department may disapprove the articles on account of such violation.

    (Code 1933, § 41A-1802, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1999, p. 674, § 7.)

JUDICIAL DECISIONS

Cited in O'Neal v. Home Town Bank, 237 Ga. App. 325 , 514 S.E.2d 669 (1999).

RESEARCH REFERENCES

Am. Jur. 2d. - 18 Am. Jur. 2d, Corporations, §§ 102, 103, 146.

C.J.S. - 18 C.J.S., Corporations, § 145.

7-1-392. Articles of incorporation; advertisement of articles or notice of application; naming registered agent.

  1. The articles of incorporation shall be signed by each of the incorporators and shall set forth in the English language:
    1. The name of the bank or trust company;
    2. The street address and county where the main office will be located;
    3. For institutions chartered after July 1, 1998, the name of the initial registered agent;
    4. The street address where its initial registered office will be located;
    5. A brief statement of the purpose or purposes for which it is incorporated, that it is incorporated under this chapter, and whether it shall be solely a bank, solely a trust company, or both a bank and trust company;
    6. The term for which it is to exist, which shall be perpetual unless otherwise limited;
    7. The aggregate number of shares which the bank or trust company shall have authority to issue, and:
      1. If the shares are to consist of one class only, the par value of each of the shares; or
      2. If the shares are to be divided into classes, the number of shares of each class, the par value of each share of each class, a description of each class, and a statement of the preferences, redemption provisions, qualifications, limitations, restrictions, and the special or relative rights granted to or imposed upon the shares of each class;
    8. The name, place of residence, and post office address of each incorporator;
    9. The name, occupation, citizenship, place of residence, and post office address of each of the first directors, which number shall not be less than five; and
    10. Any provision not inconsistent with law which the incorporators may choose to insert for the regulation of the internal affairs and business of the bank or trust company.
  2. It shall not be necessary to set forth in the articles any of the corporate or operational powers set forth in this chapter.
  3. The incorporators shall file with the department the articles, together with the fee required by Code Section 7-1-862. Such filing shall constitute an application for a certificate of incorporation. Immediately upon the filing of the articles, the department shall certify a copy thereof and return it to the applicants, who shall, in conformity with Code Section 7-1-7 and on the next business day following the filing of the articles, transmit for publication a copy of the articles or, in lieu thereof, a statement in substantially the following form:

    "An application for a certificate of incorporation of a (bank, trust company, or bank and trust company) to be known as the __________ and to be located at __________ in __________ County, Georgia, will be made to the Secretary of State of Georgia by (names and addresses of incorporators) in accordance with Chapter 1 of Title 7 of the Official Code of Georgia Annotated, the 'Financial Institutions Code of Georgia.' A copy of the articles of incorporation of such proposed (bank, trust company, or bank and trust company) and the application have been filed with the Department of Banking and Finance. The following persons have been proposed as the initial directors: (names and addresses of proposed directors)."

    to the newspaper which is the official organ of the county where the main office will be located. The articles or statement must be published once a week for two consecutive weeks with the first publication occurring within ten days of receipt by the newspaper of the articles or statement.

  4. A registered agent shall be named for each financial institution that is a corporation, and each financial institution shall inform the department and the Secretary of State of its current registered agent.

    (Ga. L. 1898, p. 78, §§ 1, 2; Civil Code 1910, §§ 2815, 2816; Ga. L. 1919, p. 135, art. 8, §§ 1-3; Ga. L. 1920, p. 102, § 1; Ga. L. 1927, p. 195, § 7; Ga. L. 1931, p. 156, § 1; Code 1933, §§ 13-901, 13-902, 13-903, 109-101, 109-102; Ga. L. 1935, p. 101, § 1; Ga. L. 1941, p. 312, § 1; Ga. L. 1943, p. 249, § 1; Ga. L. 1952, p. 193, § 1; Ga. L. 1965, p. 501, § 1; Ga. L. 1966, p. 463, § 1; Ga. L. 1966, p. 692, §§ 7-9; Ga. L. 1972, p. 384, § 1; Ga. L. 1972, p. 727, § 1; Code 1933, § 41A-1803, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1257, § 5; Ga. L. 1998, p. 795, § 15; Ga. L. 2015, p. 344, § 9/HB 184.)

The 2015 amendment, effective July 1, 2015, in subsection (c), deleted ", in triplicate," following "department" in the first sentence, substituted "a copy" for "one copy" in the third sentence, in the form, deleted "known as" following "Annotated," and substituted "such proposed" for "said proposed", and deleted "the" preceding "statement" in the last sentence.

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1989, "have been filed" was substituted for "has been filed" in the next to last sentence of the form in subsection (c).

Pursuant to Code Section 28-9-5, in 1998, a colon was added at the end of paragraph (a)(7).

JUDICIAL DECISIONS

Writ of mandamus may lie to compel issuance of certificate of incorporation upon compliance with statutory requirements. Manley v. McLendon, 158 Ga. 659 , 124 S.E. 138 (1924).

Corporation did not have power to act as trustee. - Probate court did not err by appointing a successor trustee pursuant to O.C.G.A. §§ 15-9-127 and 53-12-170 as even if a corporation had not rejected the trust property, the corporation did not have the power to act as a trustee in Georgia as the corporation had not received approval from the Georgia Department of Banking and Finance to act as a trust company; a county board of commissioners was properly appointed as the successor trustee in spite of the corporation's speculation over a possible future event that might result in a conflict of interest. Chattowah Open Land Trust, Inc. v. Jones, 281 Ga. 97 , 636 S.E.2d 523 (2006).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 176 et seq.

C.J.S. - 18 C.J.S., Corporations, §§ 84 et seq., 240 et seq., 312.

7-1-393. Additional filings with department; fees.

The incorporators shall also file with the department:

  1. Information desired by the department in order to evaluate the proposed institution which shall be made available in the form specified by the department;
  2. The affidavit required by Code Section 7-1-391;
  3. A certificate of the Secretary of State showing that the proposed name of the bank or trust company has been reserved pursuant to Code Section 7-1-131; and
  4. Applicable fees established by regulation of the department to defray the expense of the investigation required by Code Section 7-1-394.

    (Ga. L. 1919, p. 135, art. 8, § 4; Code 1933, § 13-904; Ga. L. 1955, p. 201, § 1; Ga. L. 1964, p. 689, § 1; Ga. L. 1966, p. 692, § 10; Ga. L. 1972, p. 727, § 2; Code 1933, § 41A-1804, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-394. Investigation; approval or disapproval by department; abbreviated procedures.

  1. Upon receipt of the articles and the filings and fees from the incorporators as required by Code Section 7-1-393, the department shall conduct such investigation as it may deem necessary to ascertain whether it should approve the proposed bank or trust company. The department shall approve the bank or trust company if and only if it determines in its discretion that:
    1. The articles and supporting items satisfy the requirements of this chapter;
    2. The convenience and needs of the public will be served by the proposed bank or trust company;
    3. There is a reasonable promise of adequate support for the bank or trust company in the light of:
      1. The competition offered by existing banks and trust companies and other financial institutions;
      2. The previous financial history of the community as to banks, trust companies, and other financial institutions;
      3. As to banks, the opportunities for profitable employment of bank funds as indicated by the average demand for credit, the number of potential depositors, the volume of bank transactions, and the businesses and industries of the community with particular regard to their stability, diversification, and size; and
      4. As to trust companies, the opportunities for profitable employment of fiduciary or other representative services;
    4. The character and fitness of the incorporators, of the directors, and of the proposed officers are such as to command the confidence of the community and to warrant the belief that the business of the proposed bank or trust company will be honestly and efficiently conducted;
    5. There has not been any material violation of Code Section 7-1-391, so that approving the articles would, in the opinion of the department, impair the policy manifested by that provision;
    6. The capital structure of the proposed bank or trust company is adequate in relation to the amount and character of the anticipated business of the bank or trust company and the safety of prospective depositors; and
    7. In the case of trust companies, the proposed company will have sufficient personnel with adequate knowledge and experience to administer fiduciary accounts.
  2. Within 90 days after receipt of the articles and the filings and fees from the incorporators as required by Code Section 7-1-393, the department shall approve or disapprove the proposed bank or trust company. In giving approval, the department may impose conditions to be satisfied prior to the issuance of a permit to do business under Code Section 7-1-396. If the department, in its discretion, shall approve the proposed bank or trust company with or without conditions, it shall deliver its written approval of the articles to the Secretary of State and notify the incorporators of its action, provided that if the approval of a federal public body is also required with respect to the bank or trust company, then the department may, at its option, withhold its written approval from the Secretary of State until such approval is given and may, at its option, withdraw its approval if the federal public body refuses to grant its approval to the bank or trust company. If the department, in its discretion, shall disapprove the proposed bank or trust company, it shall notify the incorporators of its disapproval and state generally the unfavorable factors influencing its decision. The decision of the department shall be conclusive, except that it may be subject to judicial review as provided in Code Section 7-1-90.

    (b.1) The procedure and criteria used in the review of a request to establish an additional banking location pursuant to Code Sections 7-1-601 and 7-1-602 may be streamlined and abbreviated as provided by departmental rule, regulation, or written policy.

  3. Nothing contained in this Code section, Code Section 7-1-608, or Code Section 7-1-622 shall limit the authority of the department to approve the organization of a special purpose bank or trust company which does not do a general banking business with the public but is organized for the purpose of conducting a limited banking business which facilitates the economic, commercial, or export-import trade growth of this state. The department may establish, by rule or by condition to its approval of articles of incorporation of any special bank or of any credit card bank incorporated under the provisions of Chapter 5 of this title, such special provisions concerning distribution of ownership, composition of the board of directors, bylaws, or the conduct of corporate affairs for any such special purpose bank or credit card bank incorporated under the provisions of Chapter 5 of this title as it determines to be consistent with the special nature of such charters and their efficient operation and safe and sound banking practice; provided, however, in no event shall fewer than a majority of the directors of such special purpose bank or credit card bank be residents of this state.
  4. The department may utilize in its investigation process such reports from other bank supervisory agencies as are pertinent to the requirements of state law.

    (Ga. L. 1925, p. 119, § 1; Code 1933, § 13-905; Ga. L. 1949, p. 308, § 1; Ga. L. 1951, p. 287, § 1; Ga. L. 1966, p. 692, § 11; Code 1933, § 41A-1805, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1983, p. 602, § 11; Ga. L. 1989, p. 1211, § 7; Ga. L. 1989, p. 1257, § 6; Ga. L. 1990, p. 8, § 7; Ga. L. 1993, p. 511, § 1; Ga. L. 1996, p. 848, § 6; Ga. L. 1998, p. 795, § 16; Ga. L. 2017, p. 193, § 10/HB 143.)

The 2017 amendment, effective June 1, 2017, deleted former subsection (d), which read: "The department shall not approve articles for any trust company that is not also a bank or an affiliated trust company as defined in Code Section 7-1-320."; redesignated former subsection (e) as present subsection (d); and, in subsection (d), substituted "state" for "Georgia" near the end.

Cross references. - Unlawful acquisitions by bank holding companies, § 7-1-608 .

Provisions applicable to interstate acquisitions or mergers by bank holding companies, § 7-1-622 .

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 179.

7-1-395. Issuance of certificate of incorporation.

If the Secretary of State shall receive, with respect to the proposed bank or trust company:

  1. The written approval of the department with a copy of the articles of incorporation attached;
  2. An affidavit executed by the duly authorized agent or publisher of the newspaper in which publication of the articles or a summary statement relating thereto is required by Code Sections 7-1-7 and 7-1-392 stating that the articles or the summary statement have been published as required by those Code sections;
  3. All fees and charges required by law and if, in addition, the name of the proposed bank or trust company continues to be reserved or is available,

    the Secretary of State shall immediately issue to the incorporators a certificate of incorporation. The Secretary of State shall retain on file in his office a copy of the certificate, the articles, the department's approval, and the publisher's certificate.

    (Ga. L. 1898, p. 78, § 2; Civil Code 1910, § 2816; Ga. L. 1919, p. 135, art. 8, §§ 6, 7; Code 1933, §§ 13-906, 13-907, 109-102; Ga. L. 1952, p. 193, § 1; Ga. L. 1966, p. 692, §§ 12, 13; Code 1933, § 41A-1806, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1257, § 7.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 179.

7-1-396. Effect of certificate of incorporation; permit to begin business.

  1. As of the issuance of the certificate of incorporation by the Secretary of State, the corporate existence of the bank or trust company shall begin and those persons who subscribed for shares prior to filing of the articles, or their assignees, shall be shareholders in the bank or trust company; provided, nevertheless, that the department shall have full authority to regulate and supervise the activities of promoters, incorporators, initially named directors, subscribers for shares, and all persons soliciting offers to subscribe for shares in any bank in formation under this chapter even though the corporate existence of the bank may not have officially begun and the bank in formation shall be considered a "bank" for those purposes. Persons named in the articles of incorporation and approved by the department as initial directors of the bank in formation shall not be considered "agents" or "broker-dealers" within the meaning of paragraphs (1) and (3) of Code Section 10-5-2.
  2. The certificate of incorporation shall be conclusive evidence of the fact that the bank or trust company has been incorporated; but proceedings may be instituted by the state to dissolve, wind up, and terminate a bank or trust company in accordance with Code Section 7-1-92 and other applicable provisions of this chapter.
  3. Until receipt of a permit to begin business issued by the department, a bank or trust company shall not transact any business except such business as is incident to its organization or to the obtaining of subscriptions and payment for its shares and other securities.
  4. The department shall issue to a bank or trust company a permit to begin business when:
    1. Capital stock of the bank or trust company shall have been fully paid in, in cash, and in no event in an amount less than the minimum capital stock for banks or trust companies under Code Section 7-1-410, and, in addition, there shall have been paid in:
      1. Paid-in capital in an amount not less than 20 percent of the capital stock;
      2. An expense fund in an amount fixed by the department which shall not be less than 5 percent of the capital stock; and
      3. The proceeds of subordinated securities, if any, which were considered part of the capital structure of the bank or trust company by the department under Code Section 7-1-419 in giving its approval of the proposed institution;
    2. All of the directors have taken the oath or affirmation required by Code Section 7-1-484;
    3. The bylaws of the bank or trust company have been filed with the department;
    4. The bank or trust company has designated its registered agent and registered office pursuant to Code Section 7-1-132;
    5. The bank or trust company has been organized and is ready to begin the business for which it was incorporated;
    6. All conditions imposed by the department in giving its approval of the proposed bank or trust company under Code Section 7-1-394 have been satisfied; and
    7. The department has received an affidavit signed by the president or secretary and by at least a majority of the directors of the bank or trust company to the effect that all of the foregoing requirements of this subsection have been satisfied.

      (Ga. L. 1919, p. 135, art. 8, §§ 7, 8; Code 1933, §§ 13-908, 13-909; Ga. L. 1963, p. 511, §§ 1, 2; Ga. L. 1966, p. 692, §§ 14, 16; Code 1933, § 41A-1807, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 23; Ga. L. 1977, p. 730, § 5; Ga. L. 1987, p. 1586, § 6; Ga. L. 1991, p. 94, § 7; Ga. L. 1998, p. 795, § 17; Ga. L. 2008, p. 381, § 4/SB 358.)

7-1-397. Organizational meetings.

  1. After the issuance of the certificate of incorporation by the Secretary of State, a first meeting of the shareholders may be held within this state at the call of the shareholders who were the incorporators, or a majority of them, for the purpose of adopting bylaws or for such other purposes as shall be stated in the notice of the meeting.
  2. After the issuance of the certificate of incorporation by the Secretary of State, an organizational meeting of the board of directors named in the articles shall be held within this state at the call of a majority of the directors for the purpose of adopting bylaws and of electing officers and for transaction of such other business as may come before the meeting. The directors who call the meeting shall give to each director named in the articles at least three days' written notice of the meeting.

    (Code 1933, § 41A-1808, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 18A Am. Jur. 2d, Corporations, § 219 et seq.

7-1-398. Liability for premature business.

Incorporators and other persons who organize a bank or trust company which transacts business before its capital stock, paid-in capital, and expense fund as required by Code Section 7-1-396 have been paid in shall be jointly and severally liable to depositors and other creditors to make good the amounts not paid in by subscribers or otherwise deficient. Such liability shall be deemed as an asset of the bank or trust company and may be enforced by it, its successors or assignees, or by a shareholder suing derivatively, or by a receiver appointed under this chapter.

(Ga. L. 1919, p. 135, art. 18, § 6; Code 1933, § 13-1906; Code 1933, § 41A-1809, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 18 Am. Jur. 2d, Corporations, §§ 131, 132, 135.

C.J.S. - 18 C.J.S., Corporations, §§ 89 et seq.

19 C.J.S., Corporations, §§ 653 et seq., 719.

ALR. - False representation by officers or directors of bank or building and loan association that impairment of capital has been made good, as basis of action against them, 144 A.L.R. 1498 .

Validity, construction, and effect of statutory provisions concerning capital requisites of state incorporation of bank, 79 A.L.R.3d 1190.

PART 9 F INANCIAL STRUCTURE

Cross references. - Applicability of security-registration requirements to securities issued by or guaranteed by banks or trust companies, § 10-5-8.

OPINIONS OF THE ATTORNEY GENERAL

Charter may not be amended to provide authorized but unissued shares. - Regulated certificated bank is not authorized by law to amend the bank's charter to provide for authorized but unissued shares of common stock. 1974 Op. Att'y Gen. No. 74-149.

7-1-410. Minimum capital stock.

  1. Except as provided in subsections (b) and (c) of this Code section, the minimum capital stock of a de novo bank or trust company shall be $3 million. An established bank or trust company no longer in de novo status shall maintain a minimum capital stock of $3 million or such greater amount as the department may require based on a proportion of capital to total assets.
  2. A de novo bank or trust company whose main office is located in a county with a population of less than 200,000, according to the last official United States census, shall have a minimum capital stock of $2 million. An established bank or trust company located in such county shall maintain a minimum capital stock of $2 million or such greater amount as the department may require based on a proportion of capital to total assets.
  3. A bank or trust company existing on July 1, 1989, with a capital stock of less than that required by subsections (a) and (b) of this Code section shall not be required to increase its capital stock above the amount outstanding on July 1, 1989, except as otherwise provided by law.

    (Ga. L. 1898, p. 78, § 1; Civil Code 1910, § 2815; Ga. L. 1919, p. 135, art. 8, § 1; Ga. L. 1920, p. 102, § 1; Ga. L. 1927, p. 195, § 7; Ga. L. 1931, p. 156, § 1; Code 1933, §§ 13-901, 109-101; Ga. L. 1935, p. 101, § 1; Ga. L. 1941, p. 312, § 1; Ga. L. 1943, p. 249, § 1; Ga. L. 1965, p. 501, § 1; Ga. L. 1966, p. 463, § 1; Ga. L. 1966, p. 692, § 7; Ga. L. 1972, p. 384, § 1; Ga. L. 1972, p. 727, § 1; Code 1933, § 41A-1901, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1211, § 8; Ga. L. 1998, p. 795, § 18; Ga. L. 2003, p. 843, § 5.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 285, 287.

C.J.S. - 9 C.J.S., Banks and Banking, § 49.

ALR. - Validity, construction, and effect of statutory provisions concerning capital requisites of state incorporation of bank, 79 A.L.R.3d 1190.

7-1-411. Paid-in capital and appropriated retained earnings.

Losses sustained by a bank or trust company in excess of retained earnings may be charged to paid-in capital or to appropriated retained earnings, provided that a bank or trust company shall not pay any dividends so long as its paid-in capital and appropriated retained earnings do not, in combination, equal at least 20 percent of its capital stock. Earnings shall, not later than the end of each fiscal year, be transferred to appropriated retained earnings until such required 20 percent margin is obtained.

(Code 1933, § 41A-1902, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 294.

ALR. - Validity, construction, and effect of statutory provisions concerning capital requisites of state incorporation of bank, 79 A.L.R.3d 1190.

7-1-412. Beginning business expense fund.

The expense fund required under Code Section 7-1-396 shall be created out of amounts paid for shares of common stock which are in excess of 120 percent of the par value of such shares. Such expense fund may be charged for expenses incurred by the bank or trust company in connection with its incorporation and operation, and any balance in such fund at any time after the expiration of one year from the issuance of a permit to begin business may be credited to paid-in capital.

(Code 1933, § 41A-1903, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-413. Classes of shares.

A bank or trust company may have one or more classes of common or preferred shares, all of which shall be shares with par value of not less than $1.00 and any or all of which may, subject to the restrictions of this chapter, consist of shares with full, limited, multiple, fractional, or no voting rights and such designations, preferences, qualifications, privileges, limitations, redemption provisions (in the case of preferred shares), options, conversion rights, and other special rights as shall be stated in the articles. Except as otherwise stated in the articles, this chapter, or other applicable laws, each share shall be equal in all respects to every other share.

(Ga. L. 1919, p. 135, art. 8, § 1; Ga. L. 1920, p. 102, § 1; Ga. L. 1927, p. 195, § 7; Ga. L. 1931, p. 156, § 1; Code 1933, § 13-901; Ga. L. 1935, p. 101, § 1; Ga. L. 1941, p. 312, § 1; Ga. L. 1943, p. 249, § 1; Ga. L. 1965, p. 501, § 1; Code 1933, § 13-912, enacted by Ga. L. 1966, p. 590, § 3; Ga. L. 1966, p. 692, § 7; Ga. L. 1968, p. 1045, § 1; Ga. L. 1969, p. 958, § 1; Ga. L. 1972, p. 727, § 1; Code 1933, § 41A-1904, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 285, 287.

C.J.S. - 18 C.J.S., Corporations, § 205 et seq.

7-1-414. Purchase, redemption, and convertibility of shares and debt securities.

  1. Any preferred shares subject to redemption shall be redeemable only pro rata or by lot or by such other equitable method as is selected by the board of directors, except as otherwise provided in the articles.
  2. With the written approval of the department and the votes of directors and shareholders required to authorize an increase in the capital stock of the institution under Code Section 7-1-511:
    1. Preferred stock may be convertible to common stock; and
    2. Subordinated securities may be convertible to common stock.
  3. With the written approval of the department and a resolution of the board of directors, a bank or trust company may acquire issued shares of its own common stock, which will then be considered treasury shares. The department shall consider whether the acquisition has a legitimate corporate purpose, whether any capital impairment would result, and whether the price of the shares reflects fair market value.

    (Code 1933, § 13-912, enacted by Ga. L. 1966, p. 590, § 3; Ga. L. 1968, p. 1045, § 1; Ga. L. 1969, p. 958, § 1; Code 1933, § 41A-1905, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1999, p. 674, § 8; Ga. L. 2018, p. 214, § 7/HB 780.)

The 2018 amendment, effective May 3, 2018, substituted "department and a resolution of the board of directors," for "department, a resolution of the board of directors, and a two-thirds' affirmative vote of the shares entitled to vote," in the first sentence of subsection (c). See Editor's notes for applicability.

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

RESEARCH REFERENCES

Am. Jur. 2d. - 18 Am. Jur. 2d, Corporations, §§ 217, 282.

C.J.S. - 18 C.J.S., Corporations, § 245 et seq.

7-1-415. Consideration for shares.

  1. Except as provided in subsection (b) of this Code section and in the case of a distribution of shares under subsection (e) of Code Section 7-1-488 or incident to a merger, consolidation, or other corporate reorganization or rehabilitation authorized by this chapter, shares of a bank or trust company may be issued only for cash in an amount which shall be at least the aggregate par value of the share, unless otherwise approved by the department with the demonstration of good cause, plus such amounts, if any, necessary to assure that after issuance of the shares the bank or trust company will have the paid-in capital required by Code Section 7-1-411 and, in the case of a new bank or trust company, the expense fund required by Code Section 7-1-396.
  2. Where a bank or trust company issues shares in exchange for or in order to convert other shares or obligations which have been issued by it, the consideration for such shares shall be:
    1. The cash originally received for the shares or obligations surrendered or converted;
    2. The additional cash received incident to the exchange or conversion;
    3. The other amounts, if any, transferred to capital stock incident to the exchange or conversion.

      In any such case the consideration shall be not less than the minimum amount specified in subsection (a) of this Code section. Any amount by which capital stock may be reduced upon an exchange or conversion shall be transferred to paid-in capital.

      (Ga. L. 1898, p. 78, § 1; Civil Code 1910, § 2815; Ga. L. 1919, p. 135, art. 8, § 7; Code 1933, §§ 13-908, 109-101; Ga. L. 1963, p. 511, § 1; Code 1933, § 13-912, enacted by Ga. L. 1966, p. 590, § 3; Ga. L. 1966, p. 692, § 14; Ga. L. 1968, p. 1045, § 1; Ga. L. 1969, p. 958, § 1; Ga. L. 1972, p. 384, § 1; Code 1933, § 41A-1906, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2012, p. 795, § 1/HB 945.)

Law reviews. - For annual survey on business corporations, see 64 Mercer L. Rev. 61 (2012).

RESEARCH REFERENCES

Am. Jur. 2d. - 18A Am. Jur. 2d, Corporations, §§ 494, 495.

C.J.S. - 9 C.J.S., Banks and Banking, § 56.

7-1-416. Method of issuance.

  1. Unless more restrictive procedures are stated in the articles, the board of directors may, by resolution duly adopted, issue from time to time, in whole or in part, common or preferred shares authorized by the articles.
  2. With the consent of the department, a bank or trust company may withdraw any offer to sell its common or preferred shares, whether issued pursuant to its articles or pursuant to subsection (a) of this Code section; and such shares may be held as authorized shares subject to future issuance in accordance with subsection (a) of this Code section.
  3. A bank or trust company may not, directly or indirectly, extend credit for the purpose of financing the original purchase of capital stock or capital debt issued by it or by a bank holding company to which it is affiliated.

    (Code 1933, § 13-912, enacted by Ga. L. 1966, p. 590, § 3; Ga. L. 1968, p. 1045, § 1; Ga. L. 1969, p. 958, § 1; Code 1933, § 41A-1907, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1366, § 11; Ga. L. 1995, p. 673, § 16.)

RESEARCH REFERENCES

Am. Jur. 2d. - 18 Am. Jur. 2d, Corporations, § 19. 18A Am. Jur. 2d, Corporations, §§ 484, 485.

C.J.S. - 18 C.J.S., Corporations, § 185 et seq.

7-1-417. Share certificates and debt security instruments.

  1. A bank or trust company shall not deliver any share certificate until the share or shares represented thereby are fully paid. Each subscriber, upon payment in full for his shares, shall be entitled to a certificate or certificates certifying the number of shares owned by him in the bank or trust company.
  2. Unless otherwise provided in the articles or the bylaws, the shares of a bank or trust company shall be represented by certificates signed by the president or a vice-president and the secretary or an assistant secretary of the bank or trust company and may be sealed with the seal of the bank or trust company or a facsimile thereof. The signatures of such officers upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent, or registered by a registrar, other than the bank or trust company itself or any employee of the bank or trust company.
  3. Each certificate representing shares shall set forth upon the face thereof:
    1. The name of the bank or trust company;
    2. That the bank or trust company is organized under the laws of this state;
    3. The name or names of the person or persons to whom issued;
    4. The number and class of shares such certificate represents;
    5. The par value of each share represented by such certificate;
    6. If the shares represented thereby are nonvoting shares, a statement or notation to that effect; and
    7. If the shares represented thereby are subordinate to shares of any other class with respect to dividends or amounts payable on liquidation, a brief statement to that effect.
  4. Each certificate representing shares issued by a bank or trust company which is authorized to issue shares of more than one class shall set forth or fairly summarize upon the face or back of the certificate, or shall state that the bank or trust company will furnish to any shareholder upon request and without charge, a full statement of the designations, preferences, limitations, and relative rights of the shares of each class authorized to be issued.
  5. In the event of a change in the capital structure of a corporation, it shall not be necessary to recall any previously issued share certificate for either the addition or deletion of the statement required by paragraph (7) of subsection (c) of this Code section to be set forth upon the face of such certificate or for revision of the information placed upon the face or back of the certificate pursuant to subsection (d) of this Code section.
  6. The signatures of the officers of a bank or trust company and the seal of the bank or trust company upon any bond, debenture, or other debt security issued by the bank or trust company may be facsimiles if the instrument is authenticated or countersigned by a trustee or transfer agent, or registered by a registrar, other than the bank or trust company itself or any employee of the bank or trust company.
  7. In case any officer who has signed or whose facsimile signature has been placed upon a share certificate or upon a bond, debenture, or other debt security as provided in this Code section shall have ceased for any reason to be such officer before such certificate or instrument is issued, it may be issued by the bank or trust company with the same effect as if he were such officer at the date of its issue.
  8. Nothing in this Code section shall be construed to invalidate any share certificate validly issued and outstanding on April 1, 1975.

    (Code 1933, § 41A-1908, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1982, p. 3, § 7.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 301.

C.J.S. - 9 C.J.S., Banks and Banking, § 57.

7-1-418. Issuance and transfer of fractional shares or scrip.

  1. A bank or trust company may, but shall not be obliged to, issue certificates for fractional shares in order to effect share transfers, share distributions or reclassifications, mergers, consolidations, or reorganizations which shall entitle the holder, in proportion to his fractional holdings, to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the bank or trust company in the event of liquidation.
  2. As an alternative, a bank or trust company may pay in cash the fair value of fractional shares as determined by the board of directors as of a time fixed by the board. In the absence of bad faith, all acts of the board pursuant to this subsection shall be conclusive.
  3. As an alternative, the board of directors may issue scrip in registered or bearer form over the manual or facsimile signature of an officer of the bank or trust company or of its agent, exchangeable as therein provided for full shares; but such scrip shall not entitle the holder to any rights of a shareholder except as therein provided. The board of directors may cause such scrip to be issued subject to the condition that it shall become void if not exchanged for certificates representing full shares before a specified date, or subject to the condition that the shares for which such scrip is exchangeable may be sold by the bank or trust company and the proceeds thereof distributed to the holders of such scrip, or subject to any other conditions which the board of directors may deem advisable. If a bank or trust company issues scrip, it shall provide reasonable opportunity for persons entitled thereto to sell such scrip or to purchase such additional scrip as may be needed to acquire a full share.
  4. A corporation may provide reasonable opportunity for persons entitled to fractional shares to sell such fractional shares or to purchase such additional fractional shares as may be needed to acquire a full share, or may sell fractional shares or scrip for the account of such persons.

    (Code 1933, § 41A-1909, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-419. Subordinated securities.

  1. A bank or trust company may issue notes, debentures, or other obligations in the form of "subordinated securities," provided that they:
    1. Are subordinated in right of payment, in the event of insolvency or liquidation of the bank or trust company, to the prior payment of all deposits of the bank or trust company and of all claims of other creditors of the bank or trust company except the holders of securities on a parity therewith and the holders of securities expressly subordinated thereto;
    2. Are authorized by the same votes of directors as those required for authorization of an increase in capital stock or any instrument convertible into capital stock of the bank or trust company;
    3. Contain provisions for amortization, serial maturities, transfers to a sinking fund, allocation of reserves, or other provisions sufficient to pay or to have paid at maturity all amounts due thereon;
    4. Furnish disclosures to investors of the risks associated with the subordinated securities prior to investment; and
    5. Include notice that, if the bank or trust company becomes subject to a regulatory action, then the bank or trust company may be prohibited from paying or retiring the subordinated securities.
  2. The aggregate amount of the obligations of a bank or trust company in the form of subordinated securities shall at no time exceed 50 percent of the sum of the unimpaired capital stock, unimpaired paid-in capital, and appropriated retained earnings of the bank or the trust company.
  3. If at or after the payment or retirement of the subordinated securities of a bank or trust company there is or would be a deficiency in the capital stock of the bank or trust company, such fact shall be reported to the department in advance of the payment or retirement. The department may, upon receipt of such report, order a restoration of capital stock or take other appropriate remedial measures under this chapter.
  4. Subordinated securities shall not be considered in determining the amount of ad valorem taxes payable by the bank or trust company.

    (Code 1933, § 13-2025.1, enacted by Ga. L. 1965, p. 494, § 1; Ga. L. 1968, p. 1045, §§ 6, 7; Code 1933, § 41A-1910, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2017, p. 193, § 11/HB 143.)

The 2017 amendment, effective June 1, 2017, in paragraph (a)(2), deleted "and shareholders" following "votes of directors" near the beginning, inserted "capital stock or any instrument convertible into" in the middle, and deleted "under Code Section 7-1-511" following "trust company" at the end; deleted "and" at the end of paragraph (a)(3); substituted the present provisions of paragraph (a)(4) for the former provisions, which read: "Are approved by the department prior to the issue thereof."; and added paragraph (a)(5).

Cross references. - Order of payment of liabilities of financial institution which is liquidated or dissolved and whose assets are insufficient to pay in full all liabilities, § 7-1-202 .

Administrative Rules and Regulations. - Borrowed money, Official Compilation of Rules and Regulations of State of Georgia, Department of Banking and Finance, Banks, Chapter 80-1-9.

JUDICIAL DECISIONS

Cited in Georgia R.R. Bank & Trust Co. v. FDIC, 758 F.2d 1548 (11th Cir. 1985).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 498.

ALR. - Trust or preference in assets of insolvent bank in respect of funds intended to aid bank in financial difficulty, 88 A.L.R. 996 .

Trust or preference in respect of funds deposited by executors, administrators, testamentary trustees, or guardians, 101 A.L.R. 602 .

Rights and preferences in respect of assets of insolvent bank as affected by its division into departments, 114 A.L.R. 680 .

PART 10 S HAREHOLDERS

RESEARCH REFERENCES

ALR. - Duty and liability of bank under agreement to remit money, 69 A.L.R. 673 .

7-1-430. Liability of subscribers and shareholders.

  1. Except as otherwise provided in this Code section, a holder of or subscriber to shares of a bank or trust company shall be under no obligation to the bank or trust company or its creditors with respect to such shares or subscription other than the obligation to pay the full consideration remaining due to the company upon such shares or subscription. Such obligation may be enforced by the bank or trust company and its successors or assigns, or by a shareholder suing derivatively, or by a receiver appointed under this chapter.
  2. Every subscriber for shares not fully paid and every original holder of shares not fully paid which were issued contrary to Code Section 7-1-417 and every transferee or assignee of a subscription for shares or of shares with knowledge or notice that the shares are not fully paid and were issued contrary to Code Section 7-1-417 shall continue personally liable thereon as provided in subsection (a) of this Code section, notwithstanding any transfer or assignment of such shares or subscription for such shares.
  3. Any person becoming a transferee or assignee of shares or of a subscription for shares in good faith and without knowledge or notice that the full consideration therefor has not been paid shall not be personally liable thereon for any unpaid portion of such consideration.
  4. An executor, administrator, conservator, guardian, trustee, assignee for the benefit of creditors, receiver, or other fiduciary shall not be personally liable to the bank or trust company or its creditors as a holder of or subscriber for its shares; but the estate and funds in his hands or under his control shall be so liable. Nothing in the foregoing shall relieve any fiduciary from liability for a breach of trust.
  5. No bailee or nominee and no pledgee or other holder of shares as collateral security shall be personally liable as a shareholder, but the bailor or real party in interest or pledgor or other person transferring such shares as collateral shall be considered the holder thereof for purposes of liability under this Code section.
  6. No liability under this Code section shall be asserted against a subscriber or shareholder more than six years after the date on which the shares for which payment is sought were to have been fully paid pursuant to the contract of sale or subscription agreement or, if no such date is provided for in the contract of sale or subscription agreement, more than six years from the date of the contract of sale or subscription agreement, whether or not such contract or agreement is under seal.
  7. The subscription agreement or contract of sale may prescribe other penalties for failure to make payments when due; but no penalty working a forfeiture of a subscription, or of the amounts paid thereon, shall be declared as against any subscriber unless the amount due thereon shall remain unpaid for a period of 20 days after written demand has been made therefor. The delinquent subscriber or his legal representative shall be entitled to be paid the excess of the sale proceeds realized from the sale by the bank or trust company of such subscribed shares over the sum of:
    1. The amount due and unpaid on the subscription; and
    2. The reasonable expenses incurred in selling the shares;

      but in no event shall the delinquent subscriber or his legal representative be entitled to be paid an amount greater than the amount paid by said subscriber on his subscription.

  8. The board of directors shall have power to compromise, on such terms and conditions as the board may prescribe, any claim, dispute, or action arising out of a subscription for shares when in the judgment of the board it is in the best interests of the bank or trust company to do so.

    (Ga. L. 1919, p. 135, art. 18, §§ 1, 4; Ga. L. 1925, p. 119, § 1; Code 1933, §§ 13-1901, 13-1904; Ga. L. 1935, p. 103, § 1; Ga. L. 1937, p. 429, § 1; Code 1933, § 41A-2001, enacted by Ga. L. 1974, p. 705, § 1.)

JUDICIAL DECISIONS

Editor's notes. - In light of the similarity of the statutory provisions, decisions under Ga. L. 1919, p. 135, art. 18, § 2, and former Code 1933, § 13-1902 have been included in the annotations for this Code section.

Trustees are exempt personally from liabilities as stockholders; but the estates and funds in the trustees' hands are made liable in like manner and to the same extent as persons interested in such trust funds would be if the stock stood in their own name. State Banking Co. v. Hinton, 178 Ga. 68 , 172 S.E. 42 (1933) (decided under Ga. L. 1919, p. 135, art. 18, § 2); Griffin v. Securities Inv. Co., 53 Ga. App. 396 , 186 S.E. 232 (1936) (decided under former Code 1933, § 13-1902).

RESEARCH REFERENCES

Am. Jur. 2d. - 18A Am. Jur. 2d., Corporations, § 850 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 70, 75, 79, 86 et seq.

ALR. - Payments by stockholders applicable upon double liability, 56 A.L.R. 527 ; 83 A.L.R. 147 ; 120 A.L.R. 511 .

Statutory added liability of holders of bank stock or other corporate stock the issue of which was ultra vires, invalid, or irregular, 86 A.L.R. 816 .

Conclusiveness of assessment of statutory liability of stockholders of national banks, 90 A.L.R. 1063 .

Statutory liability of stockholder of bank or other corporation as affected by change in or renewal of corporation's obligation, 97 A.L.R. 630 .

Liability on stock held by one as trustee or in other fiduciary capacity, 97 A.L.R. 1250 ; 117 A.L.R. 655 .

Liability on stock held by one as trustee or in other fiduciary capacity, 117 A.L.R. 655 .

State laws regarding superadded liability of stockholders in state banks as affected by federal legislation, 169 A.L.R. 942 .

7-1-431. Preemptive rights.

  1. Except as provided in subsection (b) of this Code section or in the articles, a bank or trust company shall issue shares, option rights, or securities having conversion or option rights by first offering them to shareholders of the same class in proportion to their holdings of shares of such class.
  2. Except as provided in the articles, there shall be no preemptive right to:
    1. Shares issued as a share dividend;
    2. Fractional shares;
    3. Shares issued pursuant to share plans authorized by subsection (e) of Code Section 7-1-488;
    4. Shares issued pursuant to acquisition of substantially all of the assets of another bank or trust company;
    5. Shares released by waiver from their preemptive right by the affirmative vote or written consent of the holders of two-thirds of the shares of the class to be issued. Any such vote or consent shall be binding on all shareholders and their transferees for the time specified in such vote or consent up to but not exceeding one year from the date thereof and shall protect the bank or trust company, its management, and all persons who may within such time acquire the shares so released;
    6. Shares which have been offered to shareholders to satisfy their preemptive right but not purchased by them within the prescribed time and which are thereafter issued or sold to any other person or persons at a price not less than the price at which they were offered to such shareholders.
  3. Unless otherwise provided in the articles, no holder of shares of any class shall have any preemptive right with respect to shares of any other class which may be issued or sold by the bank or trust company.
  4. Nothing in this Code section shall impair any cause of action or remedy which any shareholder may have for a breach of duty by the board of directors relating to the sale or other disposition by the bank or trust company of shares or securities not subject to the preemptive rights under this Code section or under the articles.
  5. The holders of shares entitled to the preemptive rights shall be given prompt notice setting forth the time within which and the terms and conditions upon which such shareholders may exercise their preemptive rights. Such notice shall be given at least 30 days prior to the expiration of the period during which the rights may be exercised.

    (Ga. L. 1919, p. 135, art. 9, § 9; Ga. L. 1920, p. 102, § 1; Code 1933, § 13-1009; Ga. L. 1965, p. 496, § 1; Ga. L. 1966, p. 590, § 5; Ga. L. 1968, p. 1045, § 5; Code 1933, § 41A-2002, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 18A Am. Jur. 2d, Corporations, § 525 et seq.

C.J.S. - 18 C.J.S., Corporations, § 192 et seq.

ALR. - Character of banks or banking companies within constitutional or statutory provision imposing additional liability on stockholders, 82 A.L.R. 1356 .

7-1-432. Meetings of shareholders.

  1. Meetings of the shareholders of a bank or trust company shall be held at such place within or without the state as shall be fixed by the bylaws or by the board of directors pursuant to the bylaws or, if not so fixed, at the main office of the bank or trust company.
  2. There shall be at least one meeting of the shareholders in each calendar year for the election of directors. In addition, any matter relating to the bank or trust company, whether or not stated in the notice of meeting, may be brought up for action, except matters which this chapter requires to be stated in the notice of meeting. The time of such annual meeting shall be fixed by the bylaws or by the board of directors pursuant to the bylaws. If the annual meeting shall not be called and held during any calendar year, the principal court may, after notice to the bank or trust company, order a substitute annual meeting to be held upon the application of any shareholder. The principal court may issue such orders as may be appropriate, including, without limitation, orders designating the time and place of such meeting, the record date for determination of shareholders entitled to vote, and the form of notice of such meeting.
  3. Special meetings of the shareholders or a special meeting in lieu of the annual meeting of the shareholders may be called by the president, the chairman of the board of directors, the board of directors, or such other officers or persons as may be provided in the articles or bylaws or, in the event there are no officers or directors, then by any shareholder. Special meetings of the shareholders or a special meeting in lieu of the annual meeting of the shareholders shall be called by the bank or trust company upon the written request of the holders of not less than 25 percent of the outstanding shares of the bank or trust company entitled to vote in an election of directors.
  4. Notice of annual and special meetings shall be given to shareholders of record pursuant to Code Section 7-1-6. But when a meeting is adjourned to another time or place, it shall not be necessary, unless the bylaws require otherwise, to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken; and at the adjourned meeting any business may be transacted that might have been transacted on the original date of the meeting. If, however, after the adjournment the board fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given each shareholder of record on the new record date entitled to vote at such meeting.
  5. Any action required by this chapter to be taken at a meeting of the shareholders of a bank or trust company, or any action which may be taken at a meeting of the shareholders, may be taken without a meeting if written consent setting forth the action so taken shall be signed by all the shareholders entitled to vote with respect to the subject matter thereof. Such consent shall have the same force and effect as a unanimous vote of shareholders and may be stated as such in any articles or document filed with the Secretary of State or the department under this chapter.

    (Ga. L. 1898, p. 78, § 6; Civil Code 1910, § 2818; Ga. L. 1917, p. 62, § 1; Ga. L. 1919, p. 191, art. 19, § 1; Code 1933, §§ 13-2001, 109-103; Ga. L. 1947, p. 476, § 1; Ga. L. 1947, p. 480, § 1; Ga. L. 1966, p. 590, § 6; Code 1933, § 41A-2003, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1998, p. 795, § 19.)

RESEARCH REFERENCES

Am. Jur. 2d. - 18A Am. Jur. 2d, Corporations, § 948 et seq. 18B Am. Jur. 2d, Corporations, § 1366 et seq., 1436.

C.J.S. - 18 C.J.S., Corporations, § 442 et seq.

7-1-433. Closing of transfer books or fixing record date.

  1. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors of a bank or trust company may provide that the stock transfer books shall be closed for a stated period not to exceed, in any case, 70 days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days immediately preceding such meeting.
  2. In lieu of closing the stock transfer books, the bylaws or, in the absence of an applicable bylaw, the board of directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than 70 days and, in case of a meeting of shareholders, not less than ten days prior to the date on which the particular action requiring such determination of shareholders is to be taken.
  3. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed, or the date on which the resolution of the board of directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of stockholders.
  4. When a determination of shareholders entitled to vote at any meeting of shareholders has been made, as provided in this Code section, such determination shall apply to any adjournment thereof, unless the board of directors fixes a new record date under this Code section for the adjourned meeting.

    (Code 1933, § 41A-2004, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2005, p. 826, § 9/SB 82.)

RESEARCH REFERENCES

Am. Jur. 2d. - 18A Am. Jur. 2d, Corporations, §§ 965, 966.

C.J.S. - 18 C.J.S., Corporations, § 456 et seq.

7-1-434. Voting list.

  1. The officer or agent having charge of the stock transfer books for shares of a bank or trust company shall make a complete list of the shareholders entitled to vote at a meeting of shareholders or any adjournment thereof, arranged in alphabetical order, showing the address of each shareholder and the number and class, if any, of shares held by each shareholder. Such list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting for the purposes thereof. Such list shall be prima-facie evidence of who is a shareholder of record; but, in the event of challenge, the record of shareholders required by Code Section 7-1-439 shall control.
  2. If the requirements of this Code section have not been substantially complied with, the meeting shall, on the demand of any shareholder in person or by proxy, be adjourned until the requirements are complied with.
  3. If no such demand is made, failure to comply with the requirements of this Code section shall not affect the validity of any action taken at such meeting.
  4. Notwithstanding subsections (a) through (c) of this Code section, it shall not be necessary to prepare or produce a list of shareholders in any case where the record of shareholders is presented and readily shows, in alphabetical order or by alphabetical index and by classes, if any, the names of the shareholders entitled to vote, with the address of and the number of shares held by each.

    (Code 1933, § 41A-2005, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1977, p. 730, § 6.)

7-1-435. Quorum of shareholders.

  1. Except as provided in subsection (d) of this Code section or the articles or in bylaws adopted by the shareholders, a majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders.
  2. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the vote of a greater number, or voting by classes, is required by this chapter, or the articles, or bylaws.
  3. When a quorum is once present to organize a meeting, the shareholders present may continue to do business at the meeting or at any adjournment thereof, notwithstanding the withdrawal of enough shareholders to leave less than a quorum.
  4. If a meeting cannot be organized for lack of a quorum, those present may adjourn the meeting to such time and place as they may determine. In the case of a meeting for the election of directors which is twice adjourned for lack of a quorum, those present at the second of such adjourned meetings, of which notice has been given in writing to shareholders pursuant to Code Section 7-1-6, shall constitute a quorum for the election of directors without regard to the other quorum requirements of this Code section, the articles, or bylaws.

    (Code 1933, § 41A-2006, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 18A Am. Jur. 2d, Corporations, § 993 et seq. 18B Am. Jur. 2d, Corporations, § 1372.

C.J.S. - 18 C.J.S., Corporations, § 453 et seq.

7-1-436. Voting of shares.

  1. Unless otherwise provided in the articles, each outstanding share entitled to vote, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. A subscriber shall not be entitled to vote the share subscribed for until such shares have been fully paid.
  2. Treasury shares shall not be voted at any meeting nor counted in determining the total number of outstanding shares at any given time.
  3. The chairman of the board, chief executive officer, president, any vice-president, the secretary, or the treasurer of a corporation which is the holder of record of shares of a bank or trust company shall be deemed by the bank or trust company to have authority to vote such shares and to execute proxies and written waivers and consents in relation thereto, whether such shares are held in a fiduciary capacity or otherwise, unless, before a vote is taken or a waiver of consent is acted upon, it is made to appear by a certified copy of the bylaws or resolution of the board of directors or executive committee of the corporation holding such shares that such authority does not exist or is vested in some other officer or person. In the absence of such certification, a person executing any such proxies, waivers, or consents or presenting himself or herself at a meeting as one of such officers of a corporate shareholder shall, for the purposes of this Code section, be prima facie deemed to be duly elected, qualified, and acting as such officer and to be fully authorized; and, in the case of conflicting representation, the corporate shareholder shall be deemed to be represented by its senior officer in the order first stated in this subsection.
  4. Shares held by an administrator, executor, guardian, or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy; but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name or the name of his nominee. Shares standing in the name of a person as life tenant may be voted by him, either in person or by proxy, unless the record of shareholders shows that he is not entitled to vote such shares.
  5. Shares standing in the name of a receiver may be voted by such receiver; and shares held by or under the control of a receiver may be voted by such receiver without a transfer thereof into his name if authority to do so is contained in an order of the court by which such receiver was appointed.
  6. If a share or shares stand of record in the names of two or more persons, whether fiduciaries, joint tenants, tenants in common, tenants in partnership, or otherwise, or if two or more persons have the same fiduciary relationship respecting the same share or shares, then unless the instrument or order appointing them or creating the tenancy otherwise directs and such instrument or order or a copy thereof is filed with the secretary of the bank or trust company, their acts with respect to voting shall have the following effect:
    1. If only one votes, in person or by proxy, his act binds all;
    2. If more than one votes, in person or by proxy, the act of the majority so voting binds all;
    3. If more than one votes in person or by proxy but the votes are evenly split on any particular matter, each faction is entitled to vote the share or shares in question proportionally;
    4. If the instrument or order so filed shows that any such tenancy is held in unequal interest, a majority or even-split for purposes of this subsection shall be a majority or even-split in interest;
    5. The principles of this subsection shall apply, insofar as possible, to execution of proxies, waivers, consents, or objections and for the purpose of ascertaining the presence of a quorum.
  7. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, or a nominee of the pledgee; and thereafter the pledgee or his nominee shall be entitled to vote the shares so transferred.
  8. Notwithstanding subsections (a) through (g) of this Code section, a corporation shall be protected from liability in relying on and treating the persons in whose names shares stand on the record of shareholders as the owners thereof for all purposes.
  9. When notice of redemption of redeemable shares has been mailed to the holders thereof and a sum sufficient to redeem such shares has been set aside to pay the redemption price to shareholders, such shares shall not be entitled to vote in any manner and shall not be deemed to be outstanding shares.

    (Code 1933, § 41A-2007, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 7-9/HB 811.)

The 2016 amendment, effective July 1, 2016, in subsection (c), inserted "chief executive officer," near the beginning of the first sentence and inserted "or herself" near the middle of the second sentence; and, in subsection (h), substituted "protected from liability in relying on and treating" for "protected in treating".

RESEARCH REFERENCES

Am. Jur. 2d. - 18A Am. Jur. 2d, Corporations, §§ 1019, 1020, 1039 et seq., 1046, 1047, 1050, 1063 et seq.

C.J.S. - 18 C.J.S., Corporations, § 456 et seq.

ALR. - Voting power of corporation stock as confined to issued and outstanding stock to exclusion of authorized unissued stock or stock which has been reacquired by the corporation, 90 A.L.R. 315 .

7-1-437. Proxies.

  1. Unless otherwise unlawful, a person or corporation who is entitled to attend a shareholders' meeting, to vote thereat, or to execute consents, waivers, or releases may be represented at such meeting or vote thereat, and execute consents, waivers, and releases, and exercise any of his or her other rights, by one or more agents, who may be either an individual or individuals or any domestic or foreign corporation, authorized by a written proxy or electronic transmission of proxy executed by such person or by his or her attorney in fact.
  2. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the person executing it, except as otherwise provided in this Code section.
  3. Subject to the limitation of subsection (b) of this Code section, any proxy duly executed is not revoked and continues in full force and effect until an instrument revoking it, or a duly executed proxy bearing a later date, is received by the secretary of the bank or trust company. A proxy is not revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of such death or incapacity is received by the secretary of the bank or trust company. Notwithstanding that a valid proxy is outstanding, the powers of the proxyholder are suspended, except in the case of a valid proxy which is by law irrevocable and which states on its face that it is irrevocable, if the maker is present at the meeting and elects to vote in person.
  4. If a proxy for the same shares confers authority upon two or more persons and does not otherwise provide, a majority of them present at the meeting or, if only one is present, then that one may exercise all the powers conferred by the proxy; but, if the proxyholders present at the meeting are divided as to the right and manner of voting in any particular case and there is no majority, the voting of said shares shall be prorated.
  5. If a proxy expressly provides, any proxyholder may, unless otherwise unlawful, appoint in writing a substitute to act in his or her place.
  6. A shareholder shall not sell his or her vote or issue a proxy to vote to any person for any sum of money or anything of value, except as permitted in this Code section and in Code Section 7-1-438, relating to shareholders' agreements.
  7. To be irrevocable, a proxy must be entitled "IRREVOCABLE PROXY," must state that it is irrevocable, must not otherwise be unlawful, and must be held by any of the following or by a nominee of any of the following:
    1. A pledge or other person holding a security interest in the shares;
    2. A person who has purchased or agreed to purchase the shares;
    3. A creditor or creditors of the bank or trust company who extend or continue credit to the bank or trust company in consideration of the proxy, if the proxy states that it was given in consideration of such extension or continuation of credit, the amounts thereof, and the name of the person extending or continuing credit;
    4. A person who has contracted to perform services as an officer of the bank or trust company, if a proxy is required by the contract of employment and if the proxy states that it was given in consideration of such contract of employment, the name of the employee, and the period of employment contracted for;
    5. A person designated by or under an agreement under Code Section 7-1-438, relating to shareholders' agreements.
  8. Notwithstanding a provision in a proxy stating that it is irrevocable, the proxy becomes revocable after the pledge or security interest is redeemed, or the debt of the bank or trust company is paid, or the period of employment provided for in the contract of employment has terminated, or the agreement under Code Section 7-1-438, relating to shareholders' agreements, has terminated; and, in a case provided for in paragraph (3) or (4) of subsection (g) of this Code section, a proxy becomes revocable three years after the date of the proxy or at the end of the period, if any, specified therein, whichever period is less, unless the period of irrevocability is renewed from time to time by the execution of a new irrevocable proxy as provided in this Code section. This subsection does not affect the duration of a proxy under subsection (b) of this Code section.
  9. A proxy may be revoked, notwithstanding a provision making it irrevocable, by a purchaser of shares without knowledge of the existence of the provision unless the existence of the proxy and its irrevocability are noted conspicuously on the face or back of the certificate representing such shares.

    (Code 1933, § 41A-2008, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 24; Ga. L. 2007, p. 502, § 3/SB 70; Ga. L. 2010, p. 878, § 7/HB 1387.)

RESEARCH REFERENCES

Am. Jur. 2d. - 18A Am. Jur. 2d, Corporations, § 1069 et seq.

C.J.S. - 18 C.J.S., Corporations, § 472 et seq.

7-1-438. Shareholders' agreements.

  1. Unless otherwise unlawful, an agreement between two or more shareholders, if in writing and signed by the parties thereto and if a copy thereof is delivered to the department and approved by the department when, in its discretion, such agreement is in the best interest of the bank and the public, may provide that in exercising any voting rights the shares held by them shall be voted as therein provided, or as they may agree, or as determined in accordance with a procedure agreed upon by them. Nothing herein shall impair the right of the bank or trust company to treat the shareholders of record as entitled to vote the shares standing in their names.
  2. The duration of any agreement permitted by subsection (a) of this Code section shall not exceed 20 years. Failure to state a period of duration or stating a period of duration in excess of 20 years shall not invalidate the agreement, but in either such case the period of duration of the agreement shall be 20 years. Any such agreement shall be renewable at any time before the expiration of such 20 year period by agreement of all the shareholders bound thereby at the date of renewal.
  3. A transferee of shares in a bank or trust company whose shareholders have entered into an agreement authorized by subsection (a) of this Code section shall be bound by such agreement or any renewal of such agreement authorized by subsection (b) of this Code section if he takes the shares with notice thereof. A transferee shall be deemed to have notice of any such agreement or any renewal if the existence thereof is noted on the face or back of the certificate or certificates representing such shares.

    (Code 1933, § 41A-2009, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 25.)

RESEARCH REFERENCES

Am. Jur. 2d. - 18 Am. Jur. 2d, Corporations, § 24. 18A Am. Jur. 2d, Corporations, § 1112 et seq.

C.J.S. - 18 C.J.S., Corporations, § 460.

7-1-439. Books and records.

  1. Each bank and trust company shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its shareholders, board of directors, and committees of directors; and each bank and trust company shall keep at its registered office or main office or at the office of its transfer agent or registrar a record of its shareholders, giving the names and addresses of all shareholders and the number, class, and series, if any, of the shares held by each.
  2. The department may, by regulation, prescribe the minimum disclosure of corporate records and reports which must be made by the bank or trust company to its shareholders at each annual meeting. In issuing such regulations, the department shall consider the legitimate rights of a shareholder to sufficient information to evaluate the management and use of his investment and to elect qualified directors for the bank or trust company as well as the rights of customers of the bank or trust company to maintain the confidentiality of their business affairs.
  3. Nothing in this Code section shall impair the power of any court of competent jurisdiction, upon proof by a shareholder of proper purpose, irrespective of the period of time during which such shareholder shall have been a shareholder of record and irrespective of the number of shares held by him, to compel the production or examination by such shareholder of the books and records of account, minutes, and record of shareholders of a bank or trust company.

    (Ga. L. 1919, p. 135, art. 19, § 4; Code 1933, § 13-2004; Code 1933, § 41A-2010, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 26; Ga. L. 1998, p. 795, § 20; Ga. L. 2004, p. 631, § 7.)

JUDICIAL DECISIONS

"Proper purpose" to compel production of records not shown. - Minority shareholders did not show the requisite "proper purpose" to compel production of corporate books and records since the shareholders, who sought to place one of their number on the board of directors, failed to show that the shareholders could not achieve the shareholders' purported purposes through resort to the records that had been previously furnished to the shareholders. Stewart v. Bank of Lumber City, 193 Ga. App. 188 , 387 S.E.2d 366 (1989).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 314 et seq., 321.

C.J.S. - 18 C.J.S., Corporations, §§ 150 et seq. 19 C.J.S., Corporations, § 683.

ALR. - Admissibility of computerized private business records, 7 A.L.R.4th 8.

7-1-440. Derivative actions by shareholders - When proper.

A derivative action may be brought by a shareholder in the right of the bank or trust company to procure a judgment in its favor against directors, officers, or other representatives of the bank or trust company, or shareholders, or third parties, or any combination thereof, whenever the bank or trust company has a claim or cause of action which the representatives of the bank or trust company, in violation of their duties, have failed to enforce, including a claim or cause of action against such representatives for their failure in this respect.

(Code 1933, § 41A-2011, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 313. 19 Am. Jur. 2d, Corporations, §§ 2243-2272, 2326.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 480, 481. 18 C.J.S., Corporations, § 482 et seq.

7-1-441. Derivative actions by shareholders - Restrictions on.

  1. In a derivative action involving a right which a bank or trust company may have properly asserted, but which its representatives wrongfully failed to enforce that has been brought by one or more shareholders of a bank or trust company to procure a judgment in its favor, the complaint shall be verified and shall allege that the plaintiff is a shareholder of record at the time of bringing the action. It shall further allege:
    1. That the plaintiff had purchased his or her shares or was a shareholder of record at the time of the transaction of which he or she complains or that his or her shares thereafter devolved on him or her through one or more transfers by operation of law from one who was a holder of record or member at such time; or
    2. That the plaintiff is the holder of record of shares which at the time of the transaction of which he or she complains were held of record by a trustee of a trust in which the plaintiff held a beneficial interest or in which a beneficial interest was held by one from whom the shares have devolved upon the plaintiff through one or more transfers by operation of law.
  2. In any such action the complaint shall also allege with particularity the efforts of the plaintiff to secure the initiation of such action by the board of directors or comparable authority, or the reasons for not making such effort.
  3. Such action shall not be discontinued, compromised, or settled without the approval of the court having jurisdiction of the action. If the court shall determine that the interests of the members or of the shareholders of any class or classes will be substantially affected by such discontinuance, compromise, or settlement, the court shall direct that notice, by publication or otherwise, of the action and the proposed discontinuance, compromise, or settlement thereof be given to the members or to the shareholders of the class or classes whose interests it determines will be so affected; if notice is so directed to be given, the court may determine which one or more of the parties to the action shall bear the expense of giving the same in such amount as the court shall determine and find to be reasonable in the circumstances.
  4. If such action is successful, in whole or in part, or if anything is received by the plaintiff or plaintiffs as the result of the judgment or compromise or settlement of the action, the court may award the plaintiff or plaintiffs reasonable expenses, including reasonable fees of attorneys, and shall direct him or them to account to the bank or trust company for the remainder of the proceeds so received by him or them.
  5. In any such action, the court having jurisdiction, upon final judgment and a finding that the action was brought without reasonable cause, may require the plaintiff or plaintiffs to pay to the parties named as defendants the reasonable expenses, including fees of attorneys, incurred by them in the defense of such action; and such damages as the court may assess shall be paid to the bank or trust company for damages such bank or trust company may have sustained due to adverse publicity brought about as a result of action brought without reasonable cause.

    (Code 1933, § 41A-2012, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 27; Ga. L. 2016, p. 390, § 7-10/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted the present provisions of the introductory paragraph of subsection (a) for the former provisions, which read: "In a derivative action brought by one or more shareholders of a bank or trust company to procure a judgment in its favor, the representatives of the bank or trust company wrongfully having failed to enforce a right which may properly be asserted by it, the complaint shall be verified and shall allege that the plaintiff is a shareholder of record at the time of bringing the action. It shall further allege:"; inserted "or her" three times in paragraph (a)(1); and inserted "or she" in paragraphs (a)(1) and (a)(2).

RESEARCH REFERENCES

Am. Jur. 2d. - 19 Am. Jur. 2d, Corporations, §§ 2250 et seq., 2273, 2275, 2279, 2280, 2286, 2290, 2301, 2326, 2440 et seq., 2487 et seq., 2496.

C.J.S. - 18 C.J.S., Corporations, § 482 et seq.

PART 11 D IVIDENDS, DISTRIBUTIONS, AND PREFERRED SHARE ACQUISITION

7-1-460. Restrictions on payment of dividends; limitation of actions for dividends or distributions.

  1. The board of directors of a bank or trust company may, from time to time, declare and the bank or trust company thereupon shall pay dividends on its outstanding shares in cash, property, or its own shares, except when the bank or trust company is insolvent or when the payment thereof would render the bank or trust company insolvent or when the declaration or payment thereof would be contrary to any restrictions contained in the articles, and subject to the following provisions:
    1. Dividends may be declared and paid in cash or property only out of the retained earnings of the bank or trust company unless otherwise approved in advance by the department on terms consistent with standards of safety and soundness;
    2. Dividends may not be declared or paid at any time that the bank or trust company does not have the paid-in capital and appropriated retained earnings required by Code Section 7-1-411, except the department may approve the payment of dividends by a Subchapter S bank, prior to cumulative profitability, for the sole purpose of providing its shareholders with a source of funds to pay federal and state income taxes on the Subchapter S bank's income that is taxable to those shareholders;
    3. Dividends may not be paid without the prior approval of the department in excess of specified amounts as may be fixed by regulations of the department to assure that banks and trust companies maintain an adequate capital structure;
    4. Dividends may be declared and paid in lawfully held treasury shares or in authorized but unissued shares, provided that, in the case of a dividend of authorized but previously unissued shares, there shall be transferred to capital stock an amount equal to the aggregate par value of the shares distributed and, after payment of the dividend, the bank or trust company continues to maintain the paid-in capital and appropriated retained earnings required by Code Section 7-1-411; and
    5. No dividends payable in shares of any class shall be paid in respect to shares of any other class unless the articles so provide or unless such payment is authorized by the affirmative vote or the written consent of the holders of a majority of the outstanding shares of the class in which the payment is to be made.
  2. A split or division of the issued shares of any class into a greater number of shares of the same class without increasing the capital stock of the bank or trust company shall not be construed to be a share dividend within the meaning of this Code section.
  3. If a bank or trust company has declared a cash dividend on any shares or any other distribution payable in cash or has sold fractional shares or scrip for the account of a shareholder and has mailed to a shareholder, at his address appearing on the records of the bank or trust company, a valid check in the amount of the dividend or other distribution or the proceeds of such sale to which such shareholder is entitled and, if such check would have been honored if duly presented to the bank on which it is drawn, no action for the recovery of such dividend or other distribution or for the amount thereof shall be brought by the shareholder or other person entitled thereto more than seven years after the date of mailing the check.
  4. If a bank or trust company has declared a dividend payable in its own shares or any other distribution payable in its own shares or in other than cash and has mailed to a shareholder, at his address appearing on the records of the bank or trust company, a certificate representing such shares or a notice setting forth the time and manner in which a distribution in other than its own shares or cash shall be paid, no action for the recovery of such dividends or other distribution or for the amount thereof shall be brought by the shareholder or other person entitled thereto more than seven years after the mailing of the share certificate or certificates or, in the case of a distribution in other than the shares of the bank or trust company or in cash, the time specified in the notice for the payment thereof.
  5. When the statute of limitations provided for in this Code section has run with respect to any unclaimed dividend, other unclaimed distribution, or unclaimed proceeds of the sale of fractional shares or scrip, the cash or property represented thereby shall thenceforth be treated as an asset of the bank or trust company.

    (Ga. L. 1919, p. 135, art. 19, §§ 29, 30; Code 1933, §§ 13-2029, 13-2030, 13-2031, 13-2032; Code 1933, § 41A-2101, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2009, p. 86, § 6/HB 141; Ga. L. 2012, p. 795, § 2/HB 945.)

JUDICIAL DECISIONS

Former Code 1933, § 41A-2011 (see now O.C.G.A. § 7-1-460 ) was not unconstitutional as an unlawful delegation of legislative authority. Commercial Bank v. Department of Banking & Fin., 244 Ga. 172 , 259 S.E.2d 435 (1979).

Violation of regulations enforced by suspension or cancellation of license. - General Assembly did not provide that violation of regulations policing the industry and requiring certain acts to be performed in a specified manner would be a misdemeanor. In every instance, reasonable rules and regulations promulgated for administrative purposes or for policing the industry may be enforced as to licensees either by suspension or cancellation of a license. Commercial Bank v. Department of Banking & Fin., 244 Ga. 172 , 259 S.E.2d 435 (1979).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 249.

C.J.S. - 9 C.J.S., Banks and Banking, § 62.

ALR. - Duty and remedy as regards deferring payment of dividends from assets of insolvent bank or other insolvent corporation while there are undetermined claims or preferences, 88 A.L.R. 1301 .

7-1-461. Distribution upon reduction of capital stock or paid-in capital.

  1. Upon the decrease of capital stock of a bank or trust company pursuant to amendment of its articles as provided in this chapter, the board of directors, subject to restrictions of the articles, may distribute to the shareholders of the bank or trust company an amount in cash equal to all or part of the amount of the decrease in capital stock, if immediately after such distribution the bank or trust company would have the capital stock required by this chapter and would have the paid-in capital and appropriated retained earnings required by Code Section 7-1-411.
  2. Any portion of the amount of a decrease in capital stock which is not distributed to shareholders in accordance with this Code section shall be transferred to paid-in capital.
  3. A bank or trust company, by resolution of its board of directors, may distribute to its shareholders amounts representing a reduction in its paid-in capital, provided that after such distribution the institution shall continue to have the paid-in capital and appropriated retained earnings required by Code Section 7-1-411 and provided that such distribution shall first be approved in writing by the department.

    (Code 1933, § 41A-2102, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-462. Dividends and distributions must be authorized by chapter.

The directors of a bank or trust company shall not declare dividends or authorize or ratify the distribution of any part of its assets to shareholders by purchase of its shares or otherwise, except as authorized by this chapter.

(Code 1933, § 41A-2103, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 248, 293.

7-1-463. Preferred share acquisition.

  1. Unless otherwise provided in its articles, a bank or trust company, by resolution of its board of directors and with the prior approval of the department, may redeem or otherwise acquire preferred shares, if immediately after the redemption or other acquisition the bank or trust company would have the paid-in capital and appropriated retained earnings required by Code Section 7-1-411. In determining whether or not to give its approval under this subsection, the department shall give primary consideration to the question of whether or not, after the cancellation of the preferred shares, the capital accounts of the bank or trust company would be adequate to support its anticipated deposit or trust business.
  2. Preferred shares which are redeemed or otherwise acquired shall be canceled and shall not be reissued without prior approval of the department.

    (Code 1933, § 41A-2104, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 248, 293.

C.J.S. - 9 C.J.S., Banks and Banking, § 245.

PART 12 M ANAGEMENT

7-1-480. Board of directors.

  1. Administration of the business and affairs of a bank or trust company shall be the responsibility of a board of directors.
  2. Seventy-five percent of the directors shall be citizens of the United States and at least a majority shall:
    1. Reside in Georgia; or
    2. Reside within 40 miles of any banking location authorized to offer a complete banking or trust service.
  3. The residency requirements of paragraphs (1) and (2) of subsection (b) of this Code section shall not apply to banks having branches in states other than Georgia, provided the residency of directors is consistent with the bank's articles of incorporation and bylaws.
  4. The department may waive or modify the requirements of subsection (b) of this Code section with respect to special purpose banks organized pursuant to subsection (c) of Code Section 7-1-394.
  5. Notwithstanding other provisions of this Code section, directors who were legally qualified to serve on April 1, 1975, may continue to serve for such time as they are continuously members of the board of directors of their bank or trust company.

    (Ga. L. 1898, p. 78, § 4; Civil Code 1910, § 2818; Ga. L. 1917, p. 62, § 1; Ga. L. 1919, p. 135, art. 19, §§ 1, 2; Ga. L. 1927, p. 195, § 8; Code 1933, §§ 13-2001, 13-2002, 109-103; Ga. L. 1943, p. 249, § 3; Ga. L. 1947, p. 476, § 1; Ga. L. 1947, p. 480, § 1; Ga. L. 1949, p. 378, § 1; Ga. L. 1959, p. 323, § 1; Ga. L. 1961, p. 196, § 1; Ga. L. 1966, p. 590, § 6; Ga. L. 1973, p. 811, § 1; Code 1933, § 41A-2201, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1986, p. 458, § 6; Ga. L. 1987, p. 1586, § 7; Ga. L. 1997, p. 485, § 15; Ga. L. 2000, p. 174, § 9; Ga. L. 2001, p. 970, § 4.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 2000, "bank's" was substituted for "banks" in subsection (c).

Law reviews. - For article discussing limitations on the establishment and transaction of international banking in Georgia, see 27 Mercer L. Rev. 629 (1976). For article, "Business Associations," see 53 Mercer L. Rev. 109 (2001).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 329 et seq., 476.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 99, 104 et seq., 111.

7-1-481. Adopting, amending, and repealing bylaws.

The board of directors shall have the power to adopt, amend, or repeal bylaws as specified in paragraph (4) of Code Section 7-1-260 unless such power is reserved exclusively to the shareholders by the articles or in bylaws previously adopted by the shareholders; but any bylaws adopted by the board of directors may be altered, amended, or repealed and new bylaws adopted by the shareholders. The shareholders may prescribe that any bylaw or bylaws adopted by them shall not be altered, amended, or repealed by the board of directors. Copies of the bylaws and any change, addition, or amendment thereto shall be filed with the department immediately upon adoption by the directors or the shareholders.

(Ga. L. 1898, p. 78, § 5; Civil Code 1910, § 2819; Code 1933, § 109-104; Code 1933, § 41A-2202, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 632, 633.

C.J.S. - 9 C.J.S., Banks and Banking, § 48.

7-1-482. Number, term, and compensation of directors; effect of failure to maintain at least five directors.

  1. The articles or bylaws of any bank or trust company may fix the number of directors of its policy-making board at not less than five nor more than 25 and may provide that the board may, within such limitation, increase or decrease the number of directors by not more than two in any one year, provided that nothing in this subsection shall require a bank with a board of directors of less than five on July 1, 1972, to increase its board to five members. The failure of a bank or trust company to maintain at least five directors at any time does not exculpate the remaining directors from their obligations and liabilities associated with the actions and decisions made as directors of the financial institution, nor does it in any way void any actions taken or decisions made by the board of directors during any such time that there were less than five directors.
  2. Except as otherwise provided in this chapter, each director shall be elected by the shareholders for a term of one year or for staggered terms as provided in Code Section 14-2-806 and shall serve until he or she resigns, is removed, or becomes disqualified or until his or her successor shall have been duly elected and qualified.
  3. Except as otherwise provided in the articles or bylaws, the board of directors may fix the compensation for directors; and a director may be a salaried officer of the bank or trust company.
  4. Notwithstanding the requirements of this Code section, the board of directors of a bank may appoint one or more nonpolicy-making regional boards of directors to consist of a number of persons to be determined by the board. The members of such regional boards may not set bank policy but may exercise certain powers, duties, and responsibilities as delegated by the board. Such regional board members shall have the same status as nonpolicy-making officers of the bank. All such delegations shall be documented in detail in the minutes of the board.

    (Ga. L. 1898, p. 78, § 4; Civil Code 1910, § 2818; Ga. L. 1917, p. 62, § 1; Ga. L. 1919, p. 135, art. 19, § 1; Code 1933, §§ 13-2001, 109-103; Ga. L. 1947, p. 476, § 1; Ga. L. 1947, p. 480, § 1; Ga. L. 1966, p. 590, § 6; Code 1933, § 41A-2203, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2000, p. 174, § 10; Ga. L. 2011, p. 518, § 3/HB 239.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 2001, a comma was deleted following "Code Section 14-2-806" in subsection (b).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 330, 334.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 99, 104 et seq., 119.

7-1-483. Meetings of board; quorum; committees; acting without meeting.

  1. The board of directors shall hold regular meetings at such times as may be fixed by the bylaws and shall at all times be subject to call by the chairman of the board, by the president, or by any two members of the board. The board shall meet at least once in ten different months of each calendar year unless an alternative schedule is approved in writing by the department, but in no event shall the board meet less frequently than once in each calendar quarter.
  2. Unless otherwise provided in the articles or bylaws:
    1. A majority of all the directors in office shall constitute a quorum for the transaction of business; and actions of a majority of those present at a meeting at which a quorum is present shall be actions of the board;
    2. The board of directors may designate three or more of its number to constitute an executive committee or other committees which, to the extent provided in such resolution, shall have and exercise the authority of the board of directors in regard to the business of the bank or trust company; and
    3. Any action which may be taken at a meeting of the directors or of the members of an executive or other committee may be taken without a meeting if a consent or consents in writing setting forth the action shall be signed by all of the directors or all of the members of the executive or other committee and filed with the secretary of the bank or trust company.

      (Ga. L. 1898, p. 78, § 4; Civil Code 1910, § 2818; Ga. L. 1917, p. 62, § 1; Ga. L. 1919, p. 135, art. 19, § 4; Code 1933, §§ 13-2004, 109-103; Ga. L. 1947, p. 476, § 1; Code 1933, § 41A-2204, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 28; Ga. L. 1988, p. 296, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 350.

C.J.S. - 9 C.J.S., Banks and Banking, § 98.

7-1-484. Oath of directors; liability of persons who have not subscribed to such oath.

  1. Each director, before assuming office, shall take an oath or affirmation that he will diligently and honestly perform his duties in the administration of the affairs of the bank or trust company, that he will not permit a willful violation of law by the bank or trust company, and that he meets the eligibility requirements of this chapter and of the articles and bylaws.
  2. A copy of the oath shall be signed by each director and shall be placed into the minutes of the meetings of the directors. No director shall be authorized to participate in the affairs of the board or receive any compensation for service as a director until the oath has been executed by such director. Any person seeking to act in the capacity of a director before subscribing to the oath and otherwise qualifying for service pursuant to the bylaws of the bank or the laws and regulations governing the operations of the bank shall be fully liable for his actions to the same extent as if that person had qualified to serve as a bank director.
  3. The oath shall not modify in any manner the legal duties of or the standard of care for directors in the exercise of such duties.

    (Ga. L. 1919, p. 135, art. 19, § 3; Code 1933, § 13-2003; Code 1933, § 41A-2205, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1366, § 12; Ga. L. 1990, p. 8, § 7; Ga. L. 2018, p. 214, § 8/HB 780.)

The 2018 amendment, effective May 3, 2018, added subsection (c). See Editor's notes for applicability.

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 338.

C.J.S. - 9 C.J.S., Banks and Banking, § 103.

7-1-485. Removal of directors; vacancies.

  1. The entire board of directors or an individual director may be removed without cause by the vote of shareholders entitled to cast at least a majority of the votes which all shareholders would be entitled to cast at an annual election of directors.
  2. The board may remove a director from office if:
    1. The director is adjudicated an incompetent by a court or is convicted of a felony;
    2. The director does not, within 60 days after his or her election or such longer time as the bylaws may specify, accept the office in writing or by attendance at a meeting and fulfill other requirements for holding the office;
    3. The director fails to attend regular meetings of the board for six successive monthly meetings or two successive quarterly meetings, if quarterly meetings have been approved by the department, without having been excused by the board;
    4. The director was an employee or duly elected officer of the bank or trust company and was discharged or resigned at the request of the board for reasons relating to performance of duties as an employee or officer of the bank or trust company;
    5. The director has been indicted for any crime involving moral turpitude, dishonesty, or breach of trust; or
    6. The director has failed to make payments on a loan or other extension of credit which causes a loss to a financial institution.
  3. Vacancies in the board of directors, whether caused by removal or otherwise and including vacancies resulting from an increase in the number of directors, may be filled by the remaining members of the board, even though less than a quorum. Each director so elected shall be a director until his successor is elected by the shareholders, who shall make such election at the next annual meeting of shareholders or at any special meeting called for that purpose prior thereto.

    (Ga. L. 1919, p. 135, art. 19, § 1; Code 1933, § 13-2001; Ga. L. 1947, p. 480, § 1; Ga. L. 1966, p. 590, § 6; Code 1933, § 41A-2206, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1366, § 13; Ga. L. 1989, p. 1211, § 9; Ga. L. 2017, p. 193, § 12/HB 143.)

The 2017 amendment, effective June 1, 2017, in subsection (b), substituted "The director" for "He" throughout; inserted "or her" near the middle of paragraph (b)(2); in paragraph (b)(3), substituted "successive monthly meetings or two successive quarterly meetings, if quarterly meetings have been approved by the department," for "successive meetings", and deleted "or" at the end; added a semicolon immediately following "company" at the end of paragraph (b)(4); and added paragraphs (b)(5) and (b)(6) before the period.

Cross references. - Right of department to require immediate suspension from office of director, officer, or employee of financial institution who is found to be dishonest, incompetent, or otherwise unqualified, § 7-1-71 .

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 329 et seq., 476.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 99, 104, 105.

7-1-486. Honorary and advisory positions.

The board of directors of any bank or trust company may appoint an individual as an honorary director or director emeritus or member of an advisory board. An individual so appointed may be compensated but may not vote at any meeting of the board of directors or be counted in determining a quorum and shall not have any responsibility or be subject to any liability imposed upon a director, or otherwise be deemed a director.

(Code 1933, § 41A-2207, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-487. Audits and financial reports.

  1. The board of directors shall at least once each year have made by independent certified public accountants an audit of the books and affairs of the bank or trust company, including such matters as may be required by the department and including, in the case of a trust company, accounts held in a fiduciary or other representative capacity. An audit of a bank holding company performed in accordance with this Code section may be made in lieu of individual audits of subsidiaries of the bank holding company. The department may by regulation establish minimum standards for audits and reports under this Code section.
  2. A report of the audit made under subsection (a) of this Code section shall be signed by the accountants who make it. A signed copy of the report shall be submitted to the board for approval or rejection and kept in the files of the bank or trust company. The bank or trust company shall submit the audit to the department in accordance with department regulations.

    (Code 1933, § 41A-2208, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1211, § 10; Ga. L. 1997, p. 485, § 16.)

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, §§ 116, 117.

7-1-488. Officers, agents, and employees; employee share plans.

  1. A bank or trust company shall have a president, a secretary, and such other officers as the directors may from time to time designate. An individual may hold more than one office, except that the individual shall not be both president and secretary.
  2. Except as otherwise provided in the articles or bylaws, the board of directors shall elect the officers, fix their compensation, and fill vacancies, however occurring. An officer elected or appointed by the board may be removed by the board at any time, whenever in its judgment the best interests of the institution will be served thereby, without prejudice to any contract right of such officer. The department shall immediately be notified in writing when the individual holding the position of chief executive officer or president of the bank changes.
  3. The officers, as between themselves and the bank or trust company, shall have such authority and perform such duties as may be provided in the bylaws adopted by the board.
  4. A bank or trust company may also employ such agents or employees as may be required for the prompt and orderly discharge of its business.
    1. Except as otherwise provided in the articles, a bank or trust company may adopt and carry out a plan, approved by the directors and the affirmative vote of a majority of the shares entitled to vote thereon, for the sale of shares, or for the granting of options for shares, to some or all of the officers and employees of the bank or trust company or of any affiliate of the bank or trust company or to a trustee on behalf of such employees, upon such terms and conditions and in such manner as may be provided by the bylaws or by the board. In any such plan:
      1. Such shares may be sold or optioned upon terms (not less than the par value thereof) which are deemed advantageous to the bank or trust company by the directors other than directors who may benefit by their action or, if the number of directors who will not benefit by the action is fewer than three, by the shareholders; and
      2. In the absence of fraud in the transaction, the judgment of the board of directors or the shareholders as to the adequacy of the consideration received for any rights or options to purchase shares under the plan shall be conclusive.
    2. Such a plan may be adopted whether or not it qualifies for special tax treatment under the laws of the United States.

      (Ga. L. 1898, p. 78, § 5; Civil Code 1910, § 2819; Ga. L. 1919, p. 135, art. 19, § 9; Ga. L. 1922, p. 63, § 1; Code 1933, §§ 13-2009, 109-104; Code 1933, § 13-912, enacted by Ga. L. 1966, p. 590, § 3; Ga. L. 1968, p. 1045, § 1; Ga. L. 1969, p. 958, § 1; Code 1933, § 41A-2209, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1366, § 14; Ga. L. 1995, p. 673, § 17; Ga. L. 2016, p. 390, § 7-11/HB 811.)

The 2016 amendment, effective July 1, 2016, inserted "or president" near the end of the last sentence of subsection (b).

JUDICIAL DECISIONS

Evidence of stock option. - When there was conflicting evidence as to the existence of a stock option, whether the plaintiff bank president was promised that the option would be submitted to the shareholders, and whether it was the plaintiff or the defendant bank who prevented the performance of a condition precedent, the trial court erred in granting the bank's motion for summary judgment. Hammond v. Bank of Newnan, 217 Ga. App. 49 , 456 S.E.2d 678 (1995).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 329 et seq., 476.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 100, 104, 105, 119.

ALR. - Powers of bank president or vice president, 1 A.L.R. 693 ; 67 A.L.R. 970 .

Remedies for determining right or title to office in unincorporated private association, 82 A.L.R.2d 1169.

Liability, under National Banking Act (12 USCS § 93), of national bank directors for retaliation against officer or employee who discloses or refuses to commit banking irregularity, 101 A.L.R. Fed. 377.

7-1-489. Fidelity bonds.

Any director who is authorized to handle money or negotiable assets on behalf of a bank or trust company and all officers and employees of a bank or trust company shall be bonded by a regularly incorporated surety company authorized to do business in this state, and the bank or trust company may pay the cost of such fidelity bonds. The form, amount, and surety of such fidelity bonds shall be such as are approved by the board of directors; but the department may require an additional amount or new or additional surety.

(Ga. L. 1919, p. 135, art. 19, § 10; Ga. L. 1920, p. 102, § 1; Ga. L. 1922, p. 63, § 1; Code 1933, § 13-2010; Code 1933, § 41A-2210, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2015, p. 344, § 10/HB 184.)

The 2015 amendment, effective July 1, 2015, inserted "fidelity" twice in this Code section.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 344, 476.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 102, 263.

7-1-490. Responsibility of directors and officers; delegation of investment decisions.

  1. Directors and officers of a bank or trust company shall discharge the duties of their respective positions in good faith and with the degree of diligence, care, and skill which an ordinarily prudent person would exercise under similar circumstances.
  2. In performing his or her duties, a director or officer, may be entitled to rely upon:
    1. Other officers, employees, or agents of the bank or trust company whom the director or officer reasonably believed to be reliable and competent in the functions performed; and
    2. Information, data, opinions, reports, or statements provided by other officers, employees, agents of the bank or trust company, legal counsel, public accountants, investment bankers, or other persons as to matters involving the skills, expertise, or knowledge reasonably believed to be reliable and within such person's professional or expert competence.
  3. There shall be a presumption that the process directors and officers followed in arriving at decisions was done in good faith and that such directors and officers have exercised ordinary care; provided, however, that this presumption may be rebutted by evidence that such process constitutes gross negligence by being a gross deviation of the standard of care of a director or officer in a like position under similar circumstances.
  4. A bank, through its board of directors, may delegate to a correspondent bank the power to determine, within the limits set by law, the investments in which its assets, including reserve assets, may be held, provided that the bank must obtain the prior written approval of the department for such delegation.
  5. Nothing in this Code section shall:
    1. In any instance when fairness is at issue, such as consideration of the fairness of a transaction to the bank or trust company as evaluated under paragraph (3) of subsection (b) of Code Section 14-2-861, alter the burden of proving the fact or lack of fairness otherwise applicable;
    2. Alter the fact or lack of liability of a director or officer under the Official Code of Georgia Annotated, including Code Sections 7-1-492 and 7-1-494;
    3. Affect any rights to which the bank or trust company or its shareholders may be entitled under another law of this state or of the United States; or
    4. Deprive a director or officer of the applicability, effect, or protection of the business judgment rule.

      (Code 1933, § 41A-2211, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1977, p. 730, § 7; Ga. L. 1982, p. 3, § 7; Ga. L. 2017, p. 693, § 1/HB 192.)

The 2017 amendment, effective July 1, 2017, rewrote this Code section. See Editor's note for applicability.

Editor's notes. - Ga. L. 2017, p. 693, § 4/HB 192, not codified by the General Assembly, provides that: "This Act shall apply only to causes of action arising on or after July 1, 2017."

Law reviews. - For article, "2013 Georgia Corporation and Business Organization Case Law Developments," see 19 Ga. St. B.J. 28 (April 2014). For annual survey on business associations, see 66 Mercer L. Rev. 15 (2014). For annual survey of business associations, see 67 Mercer L. Rev. 15 (2015). For article, "2014 Georgia Corporation and Business Organization Case Law Developments," see 20 Ga. St. Bar. J. 26 (April 2015). For article on the 2017 amendment of this Code section, see 34 Ga. St. U.L. Rev. 1 (2017). For annual survey on trial practice and procedure, see 69 Mercer L. Rev. 321 (2017).

JUDICIAL DECISIONS

Judicial notice. - After the FDIC brought claims against a bank's former directors and officers for negligence, breach of fiduciary duty, and gross negligence, a court declined to take judicial notice of facts in the FDIC's Officer of Inspector General's Audit Report of the Bank and its Congressional testimony that the defendants alleged rebutted allegations that the defendants were negligent or grossly negligent because at the motion to dismiss stage, it was not for the court to weigh those facts against allegations of the complaint and determine, as a matter of law, whether the defendants breached the standard of care required under Georgia law. FDIC v. Adams, F. Supp. 2d (N.D. Ga. Apr. 10, 2013).

Business judgment rule applies. - FDIC's claims against former officers and directors of a bank for ordinary negligence and breach of fiduciary duty were subject to the business judgment rule. The FDIC rebutted the business judgment presumption, and the FDIC's claims could go forward, as the allegations of the complaint, taken together, painted a picture of the officers and directors failing to implement any safeguards and ignoring the ones actually put in place so that they could pursue a rapid growth strategy and accumulate large profits in a short period of time. FDIC v. Adams, F. Supp. 2d (N.D. Ga. Apr. 10, 2013).

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, §§ 106, 107, 111.

ALR. - Powers of bank president or vice-president, 1 A.L.R. 693 ; 67 A.L.R. 970 .

Implied, apparent or ostensible, and presumed authority of bank cashier to surrender or waive some right of bank, 108 A.L.R. 713 .

Liability, under National Banking Act (12 USCS § 93), of national bank directors for retaliation against officer or employee who discloses or refuses to commit banking irregularity, 101 A.L.R. Fed. 377.

7-1-491. Financing involving directors or officers.

In addition to other provisions in this chapter and federal law, a bank or trust company shall not make loans or otherwise extend financing to any one of its directors or policy-making officers except on terms, rates, and conditions which are not preferential. Preferential terms, rates, and conditions shall be determined by comparison to those terms, rates, and conditions offered contemporaneously to other borrowers making substantially similar loan requests, having substantially similar credit histories, and offering substantially similar collateral. Such loans shall be made only after the application of prudent loan underwriting criteria normally applied to loan requests of a similar nature from applicants who are not directors and policy-making officers. Approval procedures for such loans should be designed to minimize any potential abuse by bank insiders.

(Ga. L. 1919, p. 135, art. 19, §§ 11, 12; Ga. L. 1920, p. 102, § 1; Code 1933, §§ 13-2011, 13-2012; Ga. L. 1968, p. 329, § 1; Code 1933, § 41A-2212, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1978, p. 1717, § 5; Ga. L. 1983, p. 602, § 12; Ga. L. 1984, p. 949, § 5; Ga. L. 1995, p. 673, § 18.)

Administrative Rules and Regulations. - Loans and discounts, Official Compilation of Rules and Regulations of State of Georgia, Department of Banking and Finance, Banks, Chapter 80-1-5.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 450 et seq.

ALR. - Transactions by which officers or directors of banks realize on their deposits as unlawful preference, 84 A.L.R. 1493 .

Construction and application of criminal statutes relating to loans by bank to officers, directors, stockholders, or employees of bank or of banking department, 90 A.L.R. 509 .

Construction and application of statutes prohibiting or limiting loans to bank's officers or directors, 49 A.L.R.3d 727.

7-1-492. Prohibitions applicable to directors, officers, and employees.

  1. No director, officer, or employee of a bank or trust company shall:
    1. Receive anything of value for procuring or attempting to procure any loan from or investment by the bank or trust company;
    2. Purchase, or directly or indirectly be interested in purchasing, from the bank or trust company for less than its face value any promissory note or other evidence of indebtedness issued by the bank or trust company;
    3. Purchase or sell any other asset to the bank or trust company except:
      1. Upon terms not less favorable to the bank or trust company than those offered to other persons or corporations; and
      2. With the prior approval of the board of directors or a committee thereof authorized to act for the board, unless the transaction is made in the regular course of business.
  2. No director shall be eligible to vote concerning any purchase or sale where he is or would be a party to the transaction.
  3. It shall be unlawful for any bank or trust company to lend to any officer, director, or employee any funds held in trust under powers granted in this chapter.

    (Code 1933, § 41A-2213, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1996, p. 848, § 7.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 450, 454.

C.J.S. - 9 C.J.S., Banks and Banking, § 499.

ALR. - Powers of bank president or vice-president, 1 A.L.R. 693 ; 67 A.L.R. 970 .

Transactions by which officers or directors of banks realize on their deposits as unlawful preference, 84 A.L.R. 1493 .

Implied, apparent or ostensible, and presumed authority of bank cashier to surrender or waive some right of bank, 108 A.L.R. 713 .

7-1-493. Actions against directors and officers.

  1. An action may be brought by any of the persons named in subsection (b) of this Code section against one or more directors or officers of a bank or trust company to procure for the benefit of the bank or trust company a judgment for the following relief:
    1. To compel the defendant to account for his or her official conduct, or to decree any other relief called for by his or her official conduct, in the following cases:
      1. The neglect of, failure to perform, or other violation of his or her duties in the management of the bank or trust company or in the disposition of corporate assets committed to his or her charge;
      2. The acquisition by himself or herself, transfer to others, loss, or waste of corporate assets due to any neglect of, failure to perform, or other violation of his or her duties;
      3. The appropriation, in violation of his or her duties, of any business opportunity of the bank or trust company;
    2. To enjoin a proposed unlawful conveyance, assignment, or transfer of corporate assets or other unlawful corporate transaction, where there is sufficient evidence that it will be made;
    3. To set aside an unlawful conveyance, assignment, or transfer of corporate assets, where the transferee knew of its unlawfulness and is made a party to the action.
  2. An action may be brought for the relief provided in this Code section and in Code Section 7-1-494, relating to the liability of directors in certain cases, by the bank or trust company, or by a receiver, trustee in bankruptcy, officer, director, or judgment creditor thereof, or by a shareholder in accordance with Code Sections 7-1-440 and 7-1-441, relating to derivative actions.
  3. No action shall be brought for the relief provided in this Code section more than four years from the time the cause of action accrued.
  4. This Code section shall not limit any liability otherwise imposed by law upon any director or officer or any third party, provided that after April 1, 1975, Code Section 14-4-65, relating to improper dividends and liability of officers, shall no longer be applicable to officers or directors of banks or trust companies.
  5. Notwithstanding the foregoing, a bank or trust company may provide in its articles of incorporation for the elimination or limitation of the personal liability of a director to the bank or trust company or its shareholders to the same extent as a business corporation incorporated under the provisions of Chapter 2 of Title 14.

    (Code 1933, § 41A-2214, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 29; Ga. L. 1987, p. 1586, § 8; Ga. L. 1993, p. 917, § 4; Ga. L. 2018, p. 214, § 9/HB 780.)

The 2018 amendment, effective May 3, 2018, inserted "or her" throughout subsection (a); inserted "or herself" in subparagraph (a)(1)(B); and substituted the present provisions of subsection (e) for the former provisions, which read: "Notwithstanding the foregoing, a bank or trust company may provide through an amendment to its articles of incorporation for the elimination or limitation of the personal liability of a director to the shareholders of the bank or trust company to the same extent as a business corporation incorporated under the provisions of Chapter 2 of Title 14, provided that such an amendment to the articles of incorporation must be adopted by the affirmative vote of two-thirds of the total shares outstanding." See Editor's notes for applicability.

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

Law reviews. - For article, "Statutes of Limitation: Counterproductive Complexities," see 37 Mercer L. Rev. 1 (1985).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 402 et seq., 416.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 512, 513.

ALR. - Constitutionality of statutes relating to personal liability of officers or directors of bank, 57 A.L.R. 888 .

False representation by officers or directors of bank or building and loan association that impairment of capital has been made good, as basis of action against them, 144 A.L.R. 1498 .

Liability, under National Banking Act (12 USCS § 93), of national bank directors for retaliation against officer or employee who discloses or refuses to commit banking irregularity, 101 A.L.R. Fed. 377.

Standard of liability applicable to action against directors or officers of failed depository institution pursuant to 12 USCS § 1821(k), 125 A.L.R. Fed. 435.

7-1-494. Liability of directors in certain cases.

  1. In addition to any other liabilities imposed by law upon directors of a bank or trust company:
    1. Directors of a bank or trust company who vote for or assent to the declaration of any dividend or other distribution of the assets of a bank or trust company to its shareholders which is not authorized by this chapter or is contrary to any restrictions contained in the articles shall be jointly and severally liable to the bank or trust company for the amount of such dividend which is paid or the value of such assets which are distributed in excess of the amount of such dividend or distribution which could have been paid or distributed without a violation of the provisions of this chapter or the restrictions in the articles to the extent that any depositor, creditor, or shareholder of the bank or trust company has suffered damage as a result thereof; and
    2. The directors of a bank or trust company who vote for or assent to any distribution of assets of a bank or trust company to its shareholders during the voluntary liquidation of the bank or trust company without the payment and discharge of, or making adequate provisions for, all known debts, obligations, and liabilities of the bank or trust company shall be jointly and severally liable to the bank or trust company for the value of such assets which are distributed, to the extent that such debts, obligations, and liabilities of the bank or trust company are not thereafter paid and discharged.
  2. A director of a bank or trust company who is present at a meeting of its board of directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered or certified mail or statutory overnight delivery to the secretary of the bank or trust company within 24 hours after the adjournment of the meeting. Such right to dissent shall not apply to a director who, being present at the meeting, failed to vote against such action.
  3. A director shall not be liable under subsection (a) of this Code section if he relied and acted in good faith upon financial information of the bank or trust company represented to him to be correct by the president or the officer of the bank or trust company having charge of its books of account or stated in a written report by an independent or certified public accountant or firm of such accountants to reflect fairly the financial condition of such bank or trust company; nor shall he be so liable if in good faith in determining the amount available for any such dividend or distribution he considered the assets to be represented fairly on the books of the bank.
  4. Any director against whom any claim shall be asserted under or pursuant to this Code section for the payment of a dividend or other distribution of assets of a bank or trust company and who shall be held liable thereon shall be entitled to contribution from the shareholders who, knowing such dividend or distribution to have been made in violation of this chapter, accepted or received any such dividends or assets in proportion to the amounts received by them respectively.
  5. Any director against whom any claim shall be asserted under or pursuant to this Code section shall be entitled to contribution from the other directors who voted for or assented to the action upon which the claim is asserted.
  6. No liability under this Code section shall be asserted more than six years from the time the cause of action accrued.

    (Code 1933, § 41A-2215, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2000, p. 1589, § 3.)

Editor's notes. - Ga. L. 2000, p. 1589, § 16, not codified by the General Assembly, provides that the amendment to this Code section is applicable with respect to notices delivered on or after July 1, 2000.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 402 et seq., 416.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 106, 107, 111, 123 et seq., 220 et seq., 513.

ALR. - Constitutionality of statutes relating to personal liability of officers or directors of bank, 57 A.L.R. 888 .

Running of statute of limitations against action against bank directors or officers for making excessive or unauthorized loans, 83 A.L.R. 1204 .

Personal liability of officers or directors of bank in respect of trust funds illegally deposited in bank, 112 A.L.R. 1214 .

Construction and application of statutes relating to civil liability of directors, officers or employees of bank, in case of false reports or statements, 114 A.L.R. 472 .

Standard of liability applicable to action against directors or officers of failed depository institution pursuant to 12 USCS § 1821(k), 125 A.L.R. Fed. 435.

PART 13 A MENDMENT OF ARTICLES

7-1-510. Authorized amendments; articles entirely restated; notice to Secretary of State.

  1. A bank or trust company may, in the manner provided in this part, amend its articles at any time in order to make any change therein which would then be authorized for inclusion in original articles under this chapter, including without limitation an amendment:
    1. To adopt a new name permitted to be used under this chapter;
    2. To renew the term for which it is to exist or to provide for perpetual duration;
    3. To change, add to, or diminish the statement of its purpose or purposes;
    4. To increase or diminish the aggregate number of shares which it has authority to issue or to reclassify the shares by changing the number, par value, designations, preferences, redemption provisions, or relative, participating, optional, or other special rights of the shares or the qualifications, limitations, or restrictions of such rights, either with or without an increase or decrease in the number of shares;
    5. To restate the articles in their entirety;
    6. To change its main office location to a new location; or
    7. In the case of a bank, to become a trust company and, in the case of a trust company, to become a bank, with or without retaining an existing capacity to engage in the banking or trust business as the case may be.
  2. Articles restated in their entirety shall state the street address and county of the current instead of the original main office of the bank or trust company and need not state the names or other information concerning the first directors or the incorporators.
  3. Articles need not be amended for the addition or change of a registered agent or the change of a registered office. The bank or trust company shall, however, notify in writing the department and the Secretary of State of such changes.

    (Ga. L. 1898, p. 78, § 7; Ga. L. 1910, p. 98, § 1; Civil Code 1910, § 2821; Ga. L. 1917, p. 81, § 1; Ga. L. 1919, p. 135, art. 9, § 1; Ga. L. 1919, p. 135, art. 10, § 1; Ga. L. 1920, p. 102, § 1; Ga. L. 1927, p. 344, §§ 5, 6; Code 1933, §§ 13-1001, 13-1101, 109-301, 109-302, 109-401, 109-505; Ga. L. 1943, p. 249, § 2; Ga. L. 1953, Jan.-Feb. Sess., p. 240, § 1; Ga. L. 1964, p. 75, § 1; Ga. L. 1965, p. 501, § 2; Ga. L. 1966, p. 692, §§ 28, 37; Ga. L. 1968, p. 1045, § 2; Code 1933, § 13-1201, enacted by Ga. L. 1969, p. 964, § 1; Ga. L. 1972, p. 727, § 4; Code 1933, § 109-302.1, enacted by Ga. L. 1973, p. 525, § 1; Code 1933, § 41A-2301, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1257, § 8; Ga. L. 1998, p. 795, § 21; Ga. L. 1999, p. 674, § 9.)

OPINIONS OF THE ATTORNEY GENERAL

Editor's notes. - In light of the similarity of the statutory provisions, opinions under former Code 1933, § 41A-2305 are included in the annotations for this section.

Department cannot qualify approval of proposed articles of amendment. - Notice required under former Code 1933, § 41A-2305 must unqualifiedly state approval or disapproval by the Department of Banking and Finance of proposed articles of amendment in the form in which they are submitted and the department may not in the department's approval modify articles or otherwise condition the department's approval on a particular method of operation under approved articles; any attempt to qualify the department's approval is beyond the jurisdiction of the department and therefore void. 1975 Op. Att'y Gen. No. 75-126 (decided under former Code 1933, § 41A-2305).

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 34.

7-1-511. Proposal and adoption of amendments.

  1. An amendment of the articles shall be proposed by adoption of a resolution by the board of directors directing that it be submitted to a vote at a meeting of shareholders.
  2. The resolution proposing an amendment or amendments shall contain the language of each amendment by setting forth in full the articles as they would be amended or any provision thereof as it would be amended or by setting forth in full any matter to be added to or deleted from the articles. A copy of the resolution or a summary thereof shall be included with the notice of the meeting required under Code Section 7-1-6.
  3. Except as provided in subsections (d) and (e) of this Code section, adoption of each amendment shall require the affirmative vote of the shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast thereon and, if any class is entitled to vote thereon as a class, of the holders of at least a majority of the outstanding shares of such class.
  4. If a proposed amendment would:
    1. Make any change in the preferences, redemption provisions, qualifications, limitations, restrictions, or special or relative rights of the shares of any class adverse to such class;
    2. Increase or decrease the par value of the shares of any class;
    3. Increase the authorized number of shares of any class;
    4. Limit or deny the existing preemptive rights of the shares of any class; or
    5. Authorize a new class of shares or increase the number of authorized shares of any class, senior or superior in any respect to the shares of any class previously authorized,

      the holders of the outstanding shares of such class shall be entitled to vote as a class on such amendment regardless of any limitation stated in the articles on the voting rights of such class.

  5. Any amendment for the purposes set forth in paragraph (7) of subsection (a) of Code Section 7-1-510 shall require for its adoption the affirmative vote of at least two-thirds of all the shares entitled to vote thereon or of each class entitled to vote thereon where voting by class is required.

    (Ga. L. 1917, p. 81, § 2; Ga. L. 1919, p. 135, art. 9, §§ 1, 2; Ga. L. 1920, p. 102, § 1; Ga. L. 1927, p. 344, § 6; Code 1933, §§ 13-1001, 13-1002, 13-2101, 109-402, 109-507; Ga. L. 1943, p. 249, § 2; Ga. L. 1953, Jan.-Feb. Sess., p. 240, § 1; Ga. L. 1957, p. 501, § 1; Ga. L. 1963, p. 550, § 1; Ga. L. 1965, p. 501, § 2; Ga. L. 1966, p. 463, § 2; Ga. L. 1966, p. 692, § 29; Ga. L. 1968, p. 1045, §§ 1, 2; Code 1933, § 13-1201, enacted by Ga. L. 1969, p. 964, § 1; Ga. L. 1972, p. 727, §§ 3, 4; Code 1933, § 41A-2302, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1999, p. 674, § 10.)

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 34.

7-1-512. Execution, contents, filing, and effect of articles of amendment.

  1. Upon the adoption of an amendment, articles of amendment shall be signed by two duly authorized officers of the bank or trust company under its seal and shall contain:
    1. The name of the bank or trust company;
    2. The street address and county of its main office;
    3. Whether it was incorporated with banking or trust powers or both;
    4. The time and place of the meeting of shareholders at which the shareholders approved the resolution of the board of directors, as originally proposed or as amended, and the kind and period of notice given to the shareholders;
    5. The number of shares entitled to vote on the amendment and, if the shares of any class are entitled to vote as a class, the number of shares of each such class;
    6. The number of shares voted for and against the amendment and, if shares of any class are entitled to vote as a class, the number of shares of each such class voted for and against the amendment; and
    7. The amendment adopted, which shall be set forth in full.
  2. The articles of amendment shall be filed with the department together with:
    1. The fee required by Code Section 7-1-862; and
    2. As soon as possible, a publisher's affidavit as proof of publication of the advertisement required by Code Section 7-1-513.
  3. The filing of articles of amendment shall constitute an application for a certificate of amendment. If the articles of amendment involve a change in the name of a bank or trust company, it shall reserve the proposed new name under the procedures of Code Section 7-1-131.

    (Code 1933, § 41A-2303, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 30; Ga. L. 1981, p. 1366, § 15; Ga. L. 1983, p. 602, § 13; Ga. L. 1989, p. 1257, § 9; Ga. L. 1998, p. 795, § 22; Ga. L. 2015, p. 344, § 11/HB 184.)

The 2015 amendment, effective July 1, 2015, deleted "in triplicate" following "department" in the introductory language of subsection (b).

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 34.

7-1-513. Certification of articles of amendment; delivery to bank or trust company; publication of notice.

When the articles of amendment are filed, the department shall certify one of the copies thereof and deliver the same to the bank or trust company. The bank or trust company shall cause to be published in a publication as specified in the rules, regulations, or written policies of the department a copy of the articles of amendment or, in lieu thereof, a statement in substantially the following form: NOTICE OF AMENDMENT An application for a certificate of amendment of its articles of incorporation has been made by (name of bank or trust company) by filing such application with the Department of Banking and Finance in accordance with the applicable provisions of Chapter 1 of Title 7 of the Official Code of Georgia Annotated, known as the "Financial Institutions Code of Georgia." The (purpose) (purposes) of said articles of amendment (is) (are) (state the purpose of each amendment affected by the articles of amendment).

The articles of amendment or the statement must be published once a week for two consecutive weeks with the first publication occurring within ten days of receipt by the newspaper of the articles of amendment or statement.

(Ga. L. 1919, p. 135, art. 9, §§ 3, 4; Code 1933, §§ 13-1003, 13-1004; Ga. L. 1966, p. 692, §§ 30, 31; Code 1933, § 41A-2304, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 31; Ga. L. 1989, p. 1257, § 10; Ga. L. 1998, p. 795, § 23.)

7-1-514. Approval or disapproval of articles of amendment.

  1. Upon receipt of the articles of amendment, the department shall conduct such investigation as it may deem necessary to determine:
    1. That the articles of amendment and supporting items satisfy the requirements of this chapter;
    2. Where the amendment would grant new powers or status to a bank or trust company, that the criteria for the granting of such powers or status as an original matter have been satisfied;
    3. Where the amendment decreases the capital stock of the institution, that the remaining capital stock will be adequate to support its anticipated banking or trust business;
    4. Where the amendment provides for a change to a new location, that the criteria for establishing a banking office at the new location have been satisfied; and
    5. That the interests of the shareholders, depositors, and the public will not be impaired by the amendment.
  2. Within 60 days after receipt of the articles of amendment, the department, in its discretion, shall approve or disapprove the articles of amendment on the basis of its investigation and criteria set forth in subsection (a) of this Code section. If the department shall approve the articles of amendment, it shall deliver its written approval to the Secretary of State with a copy of the amendment attached and notify the bank or trust company of its action. If the department shall disapprove the articles of amendment, it shall give written notice to the bank or trust company and shall furnish to the bank or trust company a statement generally setting out the unfavorable factors influencing its decision. The decision of the department shall be conclusive, except that it may be subject to judicial review as provided in Code Section 7-1-90.

    (Ga. L. 1919, p. 135, art. 9, § 5; Code 1933, § 13-1005; Ga. L. 1966, p. 590, § 4; Ga. L. 1966, p. 692, § 32; Ga. L. 1968, p. 1045, § 4; Code 1933, § 41A-2305, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1257, § 11; Ga. L. 1999, p. 674, § 11.)

OPINIONS OF THE ATTORNEY GENERAL

Notice must be unqualified. - Notice required under former Code 1933, § 41A-2305 must unqualifiedly state approval or disapproval by the Department of Banking and Finance of proposed articles of amendment in the form in which they are submitted and the department may not in the department's approval modify articles or otherwise condition the department's approval on a particular method of operation under approved articles; any attempt to qualify the department's approval is beyond the jurisdiction of the department and therefore void. 1975 Op. Att'y Gen. No. 75-126.

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 34.

7-1-515. Issuance of certificate of amendment.

If all the fees and charges required by law have been paid and, in the case of a change of name, if the proposed new name of the bank or trust company continues to be reserved or is available on the records of the Secretary of State, upon the receipt by the Secretary of State of the written approval of the department and of proof of publication of the amendments as required by Code Section 7-1-513, the Secretary of State shall immediately issue to the bank or trust company a certificate of amendment and shall retain a copy thereof along with the approved articles of amendment, the written approval of the department, and the proof of publication.

(Ga. L. 1919, p. 135, art. 9, § 7; Code 1933, § 13-1007; Ga. L. 1966, p. 692, § 34; Code 1933, § 41A-2306, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-516. Effect of certificate of amendment.

  1. As of the issuance of the certificate of amendment by the Secretary of State, each amendment shall become effective and the articles shall be deemed to be amended accordingly.
  2. The certificate of amendment shall be conclusive evidence of the performance of all conditions required by this chapter for amendment of articles, except as against the state.
  3. No amendment shall affect any existing cause of action in favor of or against the bank or trust company, any pending action in which the bank or trust company is a party, or existing rights of persons other than shareholders. If the amendment changes the name of the bank or trust company, no action by or against the institution shall be abated for that reason.

    (Code 1933, § 41A-2307, enacted by Ga. L. 1974, p. 705, § 1.)

PART 14 M ERGER AND CONSOLIDATION OF STATE BANKS AND TRUST COMPANIES

JUDICIAL DECISIONS

Constitutionality of impairment of shareholders' rights under part. - Application of provisions dealing with merger and consolidation of state banks does not impair the shareholders' rights in such a way as to offend the constitutional prohibition against retroactivity. Baugh v. Citizens & S. Nat'l Bank, 248 Ga. 180 , 281 S.E.2d 531 (1981).

OPINIONS OF THE ATTORNEY GENERAL

Disclosure and approval requirements for mergers involving banks are generally more difficult than the same procedures for nonbank corporations. 1981 Op. Att'y Gen. No. 81-103.

Banks are "corporations" for purposes of § 10-5-9(12). - Banks should be considered to fall within the term "corporation" as that term is used in registration exemption in O.C.G.A. § 10-5-9(12) since bank shareholders, in merger transactions, are adequately protected by other statutory provisions which effectuate the investor protection purpose of O.C.G.A. Ch. 5, T. 10. In addition, banks should be considered "corporations" because banks are given similar corporate powers as nonbank corporations, thereby evidencing intent on the part of the General Assembly to treat banks as corporations for purposes of general corporate law. 1981 Op. Att'y Gen. No. 81-103.

Language contained in former provisions on corporate merger (see now O.C.G.A § 14-2-1108 ) was not inconsistent with or contrary to the express provisions of the law governing financial institutions. 1972 Op. Att'y Gen. No. 72-169.

RESEARCH REFERENCES

ALR. - Novation where bank transfers its assets to another bank which assumes its obligation, 79 A.L.R. 82 .

7-1-530. Authority to merge or consolidate; merger, consolidation, or share exchange across state lines; required provisions of the merger plan.

  1. Upon compliance with the requirements of this part and other applicable laws and regulations, including any branching and minimum age laws and regulations, banks or trust companies may merge or consolidate, provided that an institution exercising trust powers alone may merge or consolidate only with another such trust company. Upon compliance with the requirements of this part and other applicable laws and regulations, including any branching and minimum age laws and regulations, a corporation other than a bank or trust company may acquire all of the outstanding shares of one or more classes or series of one or more banks or trust companies through a share exchange.
  2. A corporation other than a bank or trust company may be merged into or consolidated with, or may enter into a share exchange with, a bank or trust company, provided that:
    1. The resulting institution of the merger or consolidation is a bank or trust company;
    2. The resulting institution of the merger or consolidation, or the acquired bank or trust company in a share exchange, holds only assets and liabilities and is engaged only in activities which may be held or engaged in by a bank or trust company; and
    3. The merger, share exchange, or consolidation is not otherwise unlawful.
  3. A merger, share exchange, or consolidation pursuant to subsection (b) of this Code section shall be made by compliance with the requirements of this part. Title 14 shall not be applicable to such a merger, share exchange, or consolidation.
  4. A merger, share exchange, or consolidation across state lines involving one or more banks or trust companies shall also be subject to the provisions of Part 20 of this article.
  5. In the case of a merger of a Georgia state bank with any other bank or banks, with the Georgia bank as the resulting bank, any assets, lines of business, activities, or powers which may accrue to the resulting bank which would not be allowed for a Georgia state bank shall be provided for in the plan of merger. Such plan shall include the proposal for holding or disposal of such assets or the continuation or termination of such line of business, activity, or power. The department shall review the plan to determine whether, in the interest of safety and soundness and consistent with the other objectives of Code Section 7-1-3, the activity, power, asset, or line of business should be approved, denied, or phased out within a reasonable period of time, to be determined by the department.
  6. As used in this part, the term "share exchange" means a plan of exchange of all of the outstanding shares of one or more classes or series of shares in accordance with this part.
  7. Subject to the provisions of this part, this Code section does not limit the power of a corporation other than a bank or trust company to acquire all or part of the shares of one or more classes or series of a bank or trust company through a voluntary exchange of shares or otherwise.

    (Ga. L. 1919, p. 135, art. 13, § 1; Code 1933, § 13-1401; Ga. L. 1973, p. 278, § 1; Code 1933, § 41A-2401, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1996, p. 848, § 8; Ga. L. 1997, p. 485, § 17; Ga. L. 2000, p. 174, § 11; Ga. L. 2001, p. 970, § 5; Ga. L. 2003, p. 843, § 6; Ga. L. 2007, p. 502, § 4/SB 70; Ga. L. 2016, p. 390, § 2-7/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "one or more" following "laws and regulations," in the middle of the first sentence of subsection (a).

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1996, "article" was substituted for "chapter" in subsection (d).

Law reviews. - For article, "Business Associations," see 53 Mercer L. Rev. 109 (2001).

OPINIONS OF THE ATTORNEY GENERAL

Former Code 1933, § 41A-2401 (see now O.C.G.A. § 7-1-530 ) clearly had the effect of modifying pro tanto former Code 1933, § 22-1006 (see now O.C.G.A. § 14-2-1108 ): in cases of clear conflict between statutes the later repeals the earlier by implication. Moreover, even if the two had been enacted together, § 41A-2401 would control former § 22-1006 because it is the more specific provision. 1978 Op. Att'y Gen. No. 78-36.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 191 et seq., 234.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 159 et seq., 670.

7-1-531. Requirements for merger, share exchange, or consolidation plan; modification of plan.

  1. The requirements for a merger, share exchange, or consolidation which must be satisfied by the parties thereto are as follows:
    1. The parties shall adopt a plan stating the method, terms, and conditions of the merger, share exchange, or consolidation, including the rights under the plan of the shareholders of each of the parties and any agreement concerning the merger, share exchange, or consolidation. Said plan shall specify:
      1. The name that such bank or trust company shall have upon and after such merger, share exchange, or consolidation, which may be the name of any one of the institutions or the combined names of two or more of the institutions or such other name as stated;
      2. The persons who shall constitute the board of directors of the bank or trust company after the merger, share exchange, or consolidation;
      3. In the case of a merger or consolidation, the manner and basis of converting the shares of each merged or consolidated institution into shares or other securities or obligations of the surviving bank or trust company and, if any shares of any of the merged or consolidated institutions are not to be converted solely into shares or other securities of the surviving bank or trust company, the amount of cash or securities of any other corporation, or combination of cash and such securities, which is to be paid or delivered to the holders of such shares in exchange for or upon the surrender of such shares, which cash or securities may be in addition to or in lieu of the shares or other securities of the surviving bank or trust company;
      4. In the case of a share exchange, the terms and conditions of the share exchange and the manner and basis of exchanging the shares to be acquired for shares, obligations, or other securities of the acquiring or any other corporation or for cash or other property in whole or in part; and
      5. Such other provisions with respect to the proposed merger or consolidation as are deemed desirable.
    2. Adoption of the plan by each party thereto shall require the affirmative vote of at least:
      1. A majority of the directors; and
      2. Unless the article or bylaws require a greater vote, the shareholders entitled to cast a majority of the votes which all shareholders are entitled to cast thereon and, if any class of shares is entitled to vote thereon as a class, the holders of a majority of the outstanding shares of such class, at a meeting of shareholders; provided, however, that approval from the shareholders of the surviving bank or trust company is not required if the conditions set forth in subsection (h) of Code Section 14-2-1103 are satisfied.
    3. Whenever a meeting of shareholders is called for the purpose of taking action on a plan, the notice for such meeting shall include a copy or summary of the plan and a full statement of the rights and remedies of dissenting shareholders, the method of exercising them, and the limitations on such rights and remedies.
  2. Any modification of a plan which has been adopted shall be made by any method provided therein or, in the absence of such provision, by the same vote as that required for adoption.

    (Ga. L. 1919, p. 135, art. 13, §§ 1, 2; Code 1933, §§ 13-1401, 13-1402; Ga. L. 1973, p. 278, § 1; Code 1933, § 41A-2402, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2007, p. 502, § 5/SB 70; Ga. L. 2018, p. 214, § 10/HB 780.)

The 2018 amendment, effective May 3, 2018, in subparagraph (a)(2)(B), substituted "Unless the article or bylaws require a greater vote, the" for "The" at the beginning, substituted "a majority" for "two-thirds" near the middle, substituted "a majority" for "at least two-thirds" in the middle, and added the proviso at the end; and substituted "Whenever a meeting of shareholders is called for the purpose of taking action on a plan, the notice for such meeting" for "The notice" at the beginning of paragraph (a)(3). See Editor's notes for applicability.

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 191 et seq., 234.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 159 et seq., 670.

7-1-532. Execution, contents, and filing of articles of merger, share exchange, or consolidation; notice; filing amendment.

  1. Upon adoption of the plan of merger, share exchange, or consolidation as provided in Code Section 7-1-531, the parties to the merger, share exchange, or consolidation shall file with the department articles of a merger, share exchange, or consolidation as required by this Code section, together with the fee required by Code Section 7-1-862.
  2. The articles of merger, share exchange, or consolidation shall be signed by two duly authorized officers of each party to the plan under their respective seals and shall contain:
    1. The names of the parties to the plan and of the resulting bank or trust company or the acquiring corporation in a share exchange;
    2. The street address and county of the location of the main office and registered agent and registered office of each;
    3. The votes by which the plan was adopted and the time, place, and notice of each meeting in connection with such adoption;
    4. The names and addresses of the first directors of the resulting bank or trust company or the directors of the acquired corporation in a share exchange;
    5. In the case of a merger, any amendment of the articles of the resulting bank or trust company;
    6. In the case of a consolidation, the provisions required in articles of a new bank or trust company by paragraphs (4), (5), (6), (7), and (10) of subsection (a) of Code Section 7-1-392; and
    7. The plan.
  3. Together with the articles of merger, share exchange, or consolidation, the parties shall deliver to the department a copy of the notice of merger, share exchange, or consolidation and an undertaking, which may appear in the articles of merger, share exchange, or consolidation or be set forth in a letter or other instrument executed by an officer or any person authorized to act on behalf of such bank or trust company, that the request for publication of a notice of filing the articles of merger, share exchange, or consolidation and payment therefor will be made as required by subsection (d) of this Code section.
  4. No later than the next business day after filing the articles of merger, share exchange, or consolidation with the department, the parties shall mail or deliver to the publisher of a newspaper which is the official organ of the county where the main office of each party is located a notice which shall contain a statement that the articles of merger, share exchange, or consolidation have been filed with the department, the names of the institutions which are parties to the proposed merger, share exchange, or consolidation, and in the case of a merger the proposed name of the surviving bank or trust company, and shall designate a place where a copy of the articles of merger, share exchange, or consolidation may be examined. Subsections (b) and (c) of Code Section 7-1-7 shall also apply to the notice.
  5. The request for publication of the notice shall be accompanied by a check, draft, or money order in the proper amount in payment of the cost of publication. The notice shall be published once a week for two consecutive weeks commencing within ten days after receipt of the notice by the newspaper.
  6. In the event the plan is amended as provided in Code Section 7-1-531, the parties shall promptly file with the department an amendment to the articles of consolidation, share exchange, or merger reflecting such amendment of the plan.

    (Ga. L. 1922, p. 63, § 1; Code 1933, § 13-1403; Ga. L. 1972, p. 727, § 7; Code 1933, § 41A-2403, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1257, § 12; Ga. L. 1995, p. 673, § 19; Ga. L. 1998, p. 795, § 24; Ga. L. 1999, p. 81, § 7; Ga. L. 1999, p. 674, § 12; Ga. L. 2007, p. 502, § 6/SB 70; Ga. L. 2015, p. 344, § 12/HB 184.)

The 2015 amendment, effective July 1, 2015, deleted "in duplicate" following "file" in subsections (a) and (f).

7-1-533. Additional filings with department.

The parties to the plan shall also file with the department:

  1. An application and information desired by the department in order to evaluate the proposed merger, share exchange, or consolidation, which shall be made available in the form specified by the department;
  2. Applicable fees established by regulation of the department to defray the expenses of the investigation required by Code Section 7-1-534; and
  3. If the merger, share exchange, or consolidation involves the adoption of a new name, a certificate of the Secretary of State reserving said name under Code Section 7-1-131.

    (Ga. L. 1919, p. 135, art. 13, §§ 2, 3; Code 1933, § 13-1404; Code 1933, § 41A-2404, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1978, p. 1717, § 6; Ga. L. 1989, p. 1257, § 13; Ga. L. 1995, p. 673, § 20; Ga. L. 2007, p. 502, § 7/SB 70.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 234.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 159 et seq., 670.

7-1-534. Approval or disapproval by department.

  1. Upon receipt of the articles of consolidation, share exchange, or merger and the filings required by Code Section 7-1-533, the department shall conduct such investigation as it may deem necessary to ascertain whether:
    1. The articles of merger, share exchange, or consolidation and supporting items satisfy the requirements of this chapter;
    2. The plan and any modification thereof adequately protect the interests of depositors, other creditors, and shareholders;
    3. The requirements for a merger, share exchange, or consolidation under all applicable laws have been satisfied and the resulting bank or trust company or the acquired bank or trust company in a share exchange would satisfy the requirements of this chapter applicable to it; and
    4. The merger, share exchange, or consolidation would be consistent with adequate and sound banking or fiduciary practice and in the public interest on the basis of:
      1. The financial history and condition of the parties to the plan;
      2. Their prospects;
      3. The character of their management; and
      4. The convenience and needs of the area primarily to be served by the resulting institution, or by the acquiring corporation and the acquired bank or trust company in a share exchange.
  2. Within 90 days after receipt of the articles of merger, share exchange, or consolidation, the notice of merger or share exchange, and the filings required by Code Section 7-1-533, or within an additional period of not more than 30 days after an amendment to the application is received within the initial 90 day period, the department shall, in its discretion, approve or disapprove the articles on the basis of its investigation and the criteria set forth in subsection (a) of this Code section. Except as provided in Code Section 7-1-535, the department shall give the Secretary of State written notice of its approval with a copy of the articles of merger, share exchange, or consolidation and a copy of the notice of merger or share exchange attached. The department shall also give the parties to the plan written notice of its decision and, in the event of disapproval, a statement in general of the reasons for its decision. The decision of the department shall be conclusive, except that it may be subject to judicial review as provided in Code Section 7-1-90.

    (Code 1933, § 41A-2405, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1257, § 14; Ga. L. 1995, p. 673, § 21; Ga. L. 1996, p. 6, § 7; Ga. L. 2007, p. 502, § 8/SB 70.)

Cross references. - Requirement that department approve change in control of financial institutions generally, § 7-1-231 .

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 234.

7-1-535. Procedure after approval by department; federal approval or disapproval; issuance of certificate of merger, share exchange, or consolidation.

  1. If the laws of the United States require the approval of the merger, share exchange, or consolidation by any federal agency, the department may, at its option, after its approval, retain its notice to the Secretary of State until it receives notice of the decision of such agency. If such agency shall refuse to give its approval, the department may, at its option, notify the parties to the plan that the department's approval has been rescinded for that reason. If such agency gives its approval, the department shall deliver its written approval to the Secretary of State for issuance of a certificate of merger, share exchange, or consolidation by the Secretary of State and shall notify the parties to the plan.
  2. If all the taxes, fees, and charges required by law shall have been paid and if the name of the resulting bank or trust company in a merger or consolidation continues to be reserved or is available on the records of the Secretary of State, upon receipt of the written approval of the department, the Secretary of State shall issue to the resulting bank or trust company or the acquiring corporation in a share exchange a certificate of merger, share exchange, or consolidation with the approved articles of merger or consolidation attached thereto and shall retain a copy of such certificate, articles, and approval by the department.

    (Ga. L. 1922, p. 63, § 1; Code 1933, § 13-1403; Ga. L. 1972, p. 727, § 7; Code 1933, § 41A-2406, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1978, p. 1717, § 7; Ga. L. 2007, p. 502, § 9/SB 70.)

7-1-536. Effect of merger, share exchange, or consolidation.

  1. As of the issuance of the certificate of merger, share exchange, or consolidation by the Secretary of State, the merger, share exchange, or consolidation shall be effective.
  2. The certificate of merger, share exchange, or consolidation shall be conclusive evidence of the performance of all conditions precedent to the merger, share exchange, or consolidation and of the existence or creation of the bank or trust institution, except as against the state.
  3. When a merger or consolidation becomes effective, each party to the plan, except the resulting bank or trust company, shall cease to exist as a separate entity but shall continue in, and the parties to the plan shall be, a single corporation which shall be the bank or trust company and which shall have, without further act or deed, all the property, rights, powers, trusts, duties, and obligations of each party to the plan. When a share exchange becomes effective, the shares of each acquired bank or trust company are exchanged as provided in the plan, and the former holders of the shares are entitled only to the share exchange rights provided in the plan of share exchange or to their rights under Code Section 7-1-537.
  4. The articles of the resulting bank or trust company shall be, in the case of a merger, the same as its articles prior to the merger with any change stated in the articles of merger or, in the case of a consolidation, the provisions stated in the articles of consolidation.
  5. The resulting bank or trust company, or the acquired bank or trust company in a share exchange, shall have the authority to engage only in such business and exercise only such powers as are then permissible upon original incorporation under this chapter and shall be subject to the same prohibitions and limitations as it would then be subject to upon original incorporation. It may, however, subject to permission of the department as set out in Code Sections 7-1-530 and 7-1-555, engage in any business and exercise any right that any bank or trust company which is a party to the plan could lawfully exercise or engage in immediately prior to the merger, share exchange, or consolidation.
  6. No liability of any party to the plan or of its shareholders, directors, or officers shall be affected nor shall any lien on any property of a party to the plan be impaired by the merger, share exchange, or consolidation. Any claim existing or action pending by or against any party to the plan may be prosecuted to judgment as if the merger, share exchange, or consolidation had not taken place or the resulting bank or trust company may be substituted in its place.

    (Ga. L. 1919, p. 135, art. 13, § 5; Code 1933, §§ 13-1406, 13-1407; Code 1933, § 41A-2407, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2001, p. 970, § 6; Ga. L. 2007, p. 502, § 10/SB 70.)

JUDICIAL DECISIONS

Formal transfer not necessary. - Clear purpose of O.C.G.A. § 7-1-536 is to eliminate the necessity of a formal transfer or assignment of the property of the constituent bank to the consolidated bank. State Bank & Trust Co. v. Newby, 170 Ga. App. 865 , 318 S.E.2d 738 (1984).

Because creditor bank's claims, including the creditor's claim for fraud against the debtor, became claims of the successor bank by operation of merger between banks under the National Banking Act and Georgia law regarding merger of banks and corporations, the successor bank had standing to bring a non-dischargeability action. Wells Fargo Bank, N.A. v. Lovett (In re Lovett), 560 Bankr. 372 (Bankr. M.D. Ga. 2016).

Assignment of judgment not required. - Bank into which judgment creditor bank had merged did not have to produce evidence of assignment of judgment prior to instituting garnishment proceeding in that bank's name. State Bank & Trust Co. v. Newby, 170 Ga. App. 865 , 318 S.E.2d 738 (1984).

Succession to trusteeship upon merger. - When a utility corporation, as settlor, pursuant to former § 53-12-31 created an express trust, the purpose being to secure the corporation's obligation to furnish water and sewerage services to the properties located in a subdivision, and the bank named as trustee merged with another bank under the authority of former §§ 13-1406 and 13-1407, the second bank succeeded by operation of law to the trusteeship upon the merger with the first bank. Smith v. Hawks, 182 Ga. App. 379 , 355 S.E.2d 669 (1987).

Name of corporate bank defendant in legal proceeding. - In a suit brought by mortgagors against the mortgagor bank that was taken over by a successor bank, the appellate court erred in dismissing the successor bank's appeal under O.C.G.A. § 9-11-25 for lack of standing based on the trial court's failure to add or substitute it as the defendant because the two corporations were deemed the same entity under federal and state law by virtue of their merger; thus, the claims originally filed by and against the mortgagee bank could continue. Nat'l City Mortg. Co. v. Tidwell, 293 Ga. 697 , 749 S.E.2d 730 (2013).

Cited in Georgia R.R. Bank & Trust Co. v. McCullough, 241 Ga. 456 , 246 S.E.2d 313 (1978).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 234.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 159 et seq., 670.

ALR. - Liability of guarantor of or surety for bank deposit as affected by reorganization, merger, or consolidation of bank, 78 A.L.R. 381 .

7-1-537. Rights of dissenting shareholders; surrender of certificates.

  1. A shareholder of a bank or trust company which is a party to a plan of proposed merger, share exchange, or consolidation under this part who objects to the plan shall be entitled to the rights and remedies of a dissenting shareholder as determined under Chapter 2 of Title 14, known as the "Georgia Business Corporation Code."
  2. The bank or trust company into which the other or others have been merged or consolidated, or the acquiring corporation in a share exchange, as the case may be, shall have the right to require the return of the original certificates of stock held by each shareholder in each or either of the institutions and in lieu thereof:
    1. To issue to each shareholder new certificates for such number of shares of the institution into which the others shall have been merged or consolidated or of the acquiring corporation in a share exchange; or
    2. To cause to be paid or delivered to each shareholder the amount of cash or securities of any other corporation or combination of cash and such securities as, under the plan of merger, share exchange, or consolidation, the said shareholder may be entitled to receive.

      (Ga. L. 1919, p. 135, art. 13, §§ 4, 6; Code 1933, § 13-1405; Ga. L. 1973, p. 278, § 2; Code 1933, § 41A-2408, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 946, § 68; Ga. L. 1989, p. 1257, § 15; Ga. L. 2007, p. 502, § 11/SB 70.)

Editor's notes. - The amendment to this Code section by Ga. L. 1989, p. 946, § 68, was superseded by the amendment by Ga. L. 1989, p. 1257, § 15, which was enacted later.

Law reviews. - For survey article on business associations, see 34 Mercer L. Rev. 13 (1982).

JUDICIAL DECISIONS

Former Code Section 14-2-251 (see now O.C.G.A. § 14-2-1320 et seq.) and O.C.G.A. § 7-1-537 make no provision for conditional dissent by a shareholder to a plan or proposed merger. Baugh v. Citizens & S. Nat'l Bank, 248 Ga. 180 , 281 S.E.2d 531 (1981).

Corporation's power to impair shareholders' rights differs from state's power over corporations created by it. - There is a substantial difference between corporation's attempting to reserve right to impair vested rights of the corporation's shareholders through altering or amending the corporation's internal structure and retention by state of power to modify or withdraw charters granted to corporations created by the state. Baugh v. Citizens & S. Nat'l Bank, 248 Ga. 180 , 281 S.E.2d 531 (1981).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 194, 198, 238.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 159 et seq., 670.

ALR. - Constitutionality of recent legislation relating to merger, consolidation, or reorganization of banks as affected by rights of dissenting creditors or stockholders, 92 A.L.R. 1337 ; 96 A.L.R. 1445 ; 104 A.L.R. 1203 .

PART 15 C ONVERSIONS, MERGERS, AND CONSOLIDATIONS INVOLVING NATIONAL BANKS

Cross references. - Requirement that department approve change in control of financial institutions generally, § 7-1-231 .

RESEARCH REFERENCES

ALR. - Novation where bank transfers its assets to another bank which assumes its obligation, 79 A.L.R. 82 .

Constitutionality of recent legislation relating to merger, consolidation, or reorganization of banks as affected by rights of dissenting creditors or stockholders, 96 A.L.R. 1445 ; 104 A.L.R. 1203 .

Constitutionality, construction, and application of federal statute relating to power of national bank to engage in trust business, 153 A.L.R. 410 .

7-1-550. Authority for national bank or federal savings bank to state bank or trust company conversions, mergers, and consolidations; activities across state lines; conversion of federal savings bank to state bank.

  1. Subject to this part and any applicable branching law or regulation, a national bank located in this state may convert into, or merge or consolidate with, a bank or trust company upon:
    1. Compliance with the applicable laws of the United States, including any provisions thereof relating to approval of said conversion, merger, or consolidation by the shareholders and directors of the national bank and to dissenting rights of shareholders in such national bank, and compliance with any other requirements prescribed by the department to protect the shareholders or members or the safety and soundness of the institution;
    2. Adoption of any plan of merger or consolidation by the directors and shareholders of any party thereto existing under the laws of this state as required by paragraph (2) of subsection (a) of Code Section 7-1-531;
    3. Approval of the conversion, merger, or consolidation by the department as provided in this part; and
    4. Issuance of the appropriate certificate by the Secretary of State as provided in this part.
  2. A conversion, merger, or consolidation across state lines of any one or more national banks with a bank or trust company shall also be subject to the provisions of Part 20 of this article.
  3. A federal savings bank located in this state may apply to the department to convert to a state charter. The provisions of Code Section 7-1-293 shall apply to the resulting bank, and the conversion procedure shall be the same as for national bank conversions.

    (Ga. L. 1953, Jan.-Feb. Sess., p. 73, §§ 3, 4; Code 1933, § 41A-2501, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1982, p. 3, § 7; Ga. L. 1996, p. 848, § 9; Ga. L. 1997, p. 485, § 18; Ga. L. 1999, p. 674, § 13; Ga. L. 2005, p. 826, § 10/SB 82.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1996, "article" was substituted for "chapter" in subsection (b).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 191 et seq., 234, 238.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 529, 600, 601.

7-1-551. National bank to state bank or trust company conversions, mergers, and consolidations - Articles of conversion, merger, or consolidation.

  1. The party or parties desiring to consummate a conversion, merger, or consolidation authorized by Code Section 7-1-550 shall, upon requisite approval of the plan by their directors and shareholders, file with the department articles of conversion, merger, or consolidation, together with the fee required by Code Section 7-1-862.
  2. The articles of conversion shall be signed by two duly authorized officers of the national bank under its seal and shall contain:
    1. Its name and the name of the resulting bank or trust company;
    2. The street address and county of its main office;
    3. The name and initial registered agent and the street address where the initial registered office will be located;
    4. The votes by which the plan of conversion was adopted and the time, place, and notice of each meeting in connection with such adoption;
    5. The names and addresses of the first directors of the resulting bank or trust company;
    6. The provisions required in articles of a new bank or trust company by paragraphs (5), (6), (7), and (10) of subsection (a) of Code Section 7-1-392; and
    7. The plan of conversion.
  3. The articles of merger or consolidation shall be in the form specified by subsection (b) of Code Section 7-1-532.

    (Ga. L. 1953, Jan.-Feb. Sess., p. 73, §§ 5, 6; Code 1933, § 41A-2502, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1257, § 16; Ga. L. 1999, p. 81, § 7; Ga. L. 1999, p. 674, § 14; Ga. L. 2015, p. 344, § 13/HB 184.)

The 2015 amendment, effective July 1, 2015, deleted ", in triplicate," following "department" in the middle of subsection (a).

7-1-552. National bank to state bank or trust company conversions, mergers, and consolidations - Filings with department; publication of notice.

  1. In the case of a merger or consolidation, the parties shall make the filings and publication required by Code Sections 7-1-532 and 7-1-533.
  2. In the case of a conversion, the national bank shall also file with the department:
    1. Information desired by the department in order to evaluate the proposed conversion, in the form specified by the department;
    2. Applicable fees established by regulation of the department to defray the expenses of its investigation under Code Section 7-1-553; and
    3. A certificate of the Secretary of State showing that the proposed name of the resulting bank or trust company has been reserved under Code Section 7-1-131.
  3. In the case of a conversion, the national bank shall publish, in the manner prescribed by Code Section 7-1-532, a notice of the proposed conversion, setting forth its name and the name it proposes to use as a bank or trust company and designating the place where a copy of the plan of conversion may be examined. The notice shall be published in the county of the main office of the national bank.

    (Ga. L. 1953, Jan.-Feb. Sess., p. 73, § 9; Code 1933, § 41A-2503, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1995, p. 673, § 22.)

7-1-553. National bank to state bank or trust company conversions, mergers, and consolidations - Approval or disapproval by department; federal approval or disapproval.

  1. The department shall conduct such investigation as it may deem necessary to ascertain whether:
    1. In the case of a conversion:
      1. The articles of conversion and supporting items satisfy the requirements of this chapter;
      2. The plan adequately protects the interests of depositors, other than creditors and shareholders; and
      3. The requirements for a conversion under all applicable laws have been satisfied and the resulting institution would satisfy the requirements of this chapter applicable to it; and
    2. In the case of a merger or consolidation, the criteria stated in subsection (a) of Code Section 7-1-534 are satisfied.
  2. Within 90 days after receipt of the articles and the filings required by Code Section 7-1-552, the department shall, in its discretion, approve or disapprove the articles on the basis of its investigation and the criteria set forth in subsection (a) of this Code section. If the department shall approve the articles, it shall deliver its written approval with a copy of the articles attached to the Secretary of State and notify the national bank, and any other parties to the plan, of its action, provided that, if approval of any federal agency is required, the department may withhold, at its option, its approval from the Secretary of State until such federal approval is given. If required federal approval is not given, the department may, at its option, withdraw its approval for this reason. If the department shall disapprove, at its option, the application, it shall give written notice to the national bank and any other parties to the plan of its disapproval and a statement to them generally of the reasons for its decision. The decision of the department shall be conclusive, except that it may be subject to judicial review under Code Section 7-1-90.

    (Code 1933, § 41A-2504, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1977, p. 730, § 8; Ga. L. 1989, p. 1257, § 17.)

7-1-554. National bank to state bank or trust company conversions, mergers, and consolidations - Issuance of certificate of conversion, consolidation, or merger.

If all the taxes, fees, and charges required by law shall have been paid and if the name of the resulting bank or trust company continues to be reserved or is available on the records of the Secretary of State, upon the receipt of the written approval of the department, the Secretary of State shall immediately issue to the resulting bank or trust company a certificate of conversion, consolidation, or merger and shall retain a copy of such certificate, the articles, and the approval from the department.

(Ga. L. 1953, Jan.-Feb. Sess., p. 73, § 6; Ga. L. 1972, p. 727, § 6; Code 1933, § 41A-2505, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-555. National bank to state bank or trust company conversions, mergers, and consolidations - Effect of issuance of certificate.

  1. Issuance of a certificate of merger or consolidation shall have the same effect stated in Code Section 7-1-536.
  2. Issuance of a certificate of conversion shall have the following effect:
    1. As of the issuance of the certificate of conversion by the Secretary of State, the conversion shall become effective;
    2. The certificate of conversion shall be conclusive evidence of the performance of all conditions required by this chapter for conversion of a national bank into a state bank or trust company, except as against the state;
    3. When a conversion becomes effective, the existence of the national bank shall continue in the resulting bank or trust company which shall have (except as provided in paragraph (2) of this subsection), without further act or deed, all the property, rights, powers, trusts, duties, and obligations of the national bank;
    4. The articles of the resulting institution shall be the provisions stated in the articles of conversion;
    5. The bank or trust company shall have the authority to engage only in such lines of business and activities and exercise only such powers or hold such assets as are then permissible upon original incorporation under this chapter and shall be subject to the same prohibitions and limitations as it would then be subject to upon original incorporation; provided, however, that if the converting institution owns or holds assets, engages in any business, or has powers that would not be allowed for a state bank, then the plan of conversion shall include a plan for holding or disposal of such nonconforming assets or the continuation or termination of such line of business, activity, or power. The department shall review the plan to determine whether, in the interest of safety and soundness and the other objectives of Code Section 7-1-3, the activity, power, asset, or line of business should be approved, denied, or phased out within a reasonable period of time, to be determined by the department; and
    6. No liability of the national bank or of its shareholders, directors, or officers shall be affected, nor shall any lien on any property of the national bank be impaired, by the conversion. Any claim existing or action pending by or against the national bank may be prosecuted to judgment as if the conversion had not taken place, or the resulting bank or trust company may be substituted in its place.

      (Ga. L. 1953, Jan.-Feb. Sess., p. 73, §§ 7, 12; Code 1933, § 41A-2506, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1998, p. 795, § 25; Ga. L. 2000, p. 174, § 12; Ga. L. 2001, p. 970, § 7.)

RESEARCH REFERENCES

ALR. - Liability of guarantor of or surety for bank deposit as affected by reorganization, merger, or consolidation of bank, 78 A.L.R. 381 .

7-1-556. State bank or trust company to national bank or federal savings institution conversions, mergers, or consolidations.

  1. A bank or trust company may convert into, or merge or consolidate with, a national bank or a federal savings institution upon:
    1. Authorization by and compliance with the laws of the United States; and
    2. Adoption of a plan of conversion, merger, or consolidation by the affirmative vote of at least:
      1. A majority of its directors; and
      2. The holders of two-thirds of each class of its shares at a meeting held upon not less than ten days' notice to all shareholders.
  2. A state bank or trust company which converts into or merges or consolidates with a national bank or a federal savings institution shall:
    1. Notify the department of the proposed conversion, merger, or consolidation;
    2. Provide such evidence of the adoption of the plan of conversion, merger, or consolidation as the department may request;
    3. Notify the department of any abandonment or disapproval of the plan; and
    4. File with the department and with the Secretary of State a certificate of the approval of the conversion, merger, or consolidation by the appropriate federal regulator.
  3. Conversion, merger, or consolidation of a state institution into a national banking association or a federal savings institution shall be effective upon completion of the requirements in subsection (b) of this Code section, and its articles as an institution existing under the laws of this state shall be automatically terminated.

    (Code 1933, §§ 13-1305, 13-1306, 13-1307, 13-1308, 13-1309, enacted by Ga. L. 1949, p. 536, § 1; Ga. L. 1953, Jan.-Feb. Sess., p. 67, § 1; Code 1933, § 41A-2507, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1999, p. 674, § 15.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 191 et seq., 238.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 529, 600, 601.

7-1-557. Merger, consolidation, or share exchange of nonbank corporations into national banks.

A national bank located in this state may merge or consolidate with, or enter into a share exchange with, a corporation other than a bank or trust company, provided that:

  1. Such merger, share exchange, or consolidation is permitted by the laws of the United States and such laws are complied with;
  2. The laws governing the merger, share exchange, or consolidation of such corporation are complied with;
  3. The resulting institution of the merger or consolidation, or the acquired bank in a share exchange, is a national bank;
  4. The resulting institution of the merger or consolidation, or the acquired bank in a share exchange, holds only assets and liabilities and engages only in activities which may be held or engaged in by a national bank located in this state; and
  5. The merger, share exchange, or consolidation is not otherwise unlawful.

    (Code 1933, § 41A-2508, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2007, p. 502, § 12/SB 70.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 191 et seq., 234.

PART 16 S ALE AND OTHER DISPOSITION OF ASSETS

RESEARCH REFERENCES

ALR. - Character as holder in due course of bank which takes over assets and assumes liabilities of another bank, 76 A.L.R. 1329 .

7-1-570. Secured transactions and other dispositions of assets not requiring shareholder approval.

  1. Unless the articles or bylaws otherwise provide, the board of directors may authorize any of the following transactions without any vote or consent of the shareholders:
    1. Any mortgage or pledge of, or creation of a security interest in, or conveyance of title to, all or any part of the property and assets of the bank or trust company of any description, or any interest therein, for the purpose of securing the payment or performance of any contract, note, bond, or other obligation of the bank or trust company; or
    2. Any sale, lease, exchange, or other disposition of less than substantially all the property and assets of the bank or trust company.
  2. Any transaction made as permitted by this Code section without any vote or consent of the shareholders may be upon such terms and conditions and for such consideration as the board may deem to be in the best interests of the bank or trust company.

    (Code 1933, § 41A-2601, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 19 Am. Jur. 2d, Corporations, § 2667.

C.J.S. - 18 C.J.S., Corporations, § 285 et seq.

7-1-571. Sale, lease, exchange, or other disposition of assets requiring shareholder approval.

A sale, lease, exchange, or other disposition of all, or substantially all, the property and assets, with or without the good will, of a bank or trust company, in all cases other than those dealt with in Code Section 7-1-570, regarding secured transactions, may be made upon such terms and conditions which are otherwise legal and which shall be authorized in the following manner:

  1. The board of directors shall adopt a resolution recommending such sale, lease, exchange, or other disposition, specifying, to the extent that the board sees fit, any or all of the terms and conditions thereof and the consideration to be received by the bank or trust company therefor and directing the submission thereof to a vote at a meeting of shareholders, which may be either an annual or a special meeting;
  2. Written notice shall be given to each shareholder of record, whether or not entitled to vote at such meeting, in the manner provided in Code Section 7-1-6, and, whether the meeting is an annual or a special meeting, shall state that the purpose, or one of the purposes, is to consider the proposed sale, lease, exchange, or other disposition. The notice shall fairly summarize the material features of the proposed transaction and shall contain, where applicable, a clear and concise statement that, if the sale, lease, exchange, or other disposition is effected, shareholders may claim the rights of dissenting shareholders under this chapter;
  3. At such meeting the shareholders may authorize such sale, lease, exchange, or other disposition and may approve or fix, or may authorize the board of directors to fix, any or all of the terms and conditions thereof and the consideration to be received by the bank or trust company therefor. Such authorization shall require the affirmative vote of the holders of a majority of the shares of the corporation entitled to vote thereon, unless any class of shares is entitled to vote thereon as a class, in which event such authorization shall require the affirmative vote of the holders of a majority of the shares of each class of shares entitled to vote thereon as a class and of the total shares entitled to vote thereon. Any class of shares shall be entitled to vote as a class if the resolution proposing the sale, lease, exchange, or other disposition contains any provision which, if contained in a proposed amendment to the articles, would entitle such class of shares to vote as a class;
  4. If the shareholders approve the proposed sale or other disposition, the bank or trust company shall make application to the department for approval thereof in such form as may be specified by the department. The department shall, in its discretion, approve the sale or other disposition if the proposal is in conformity with law and if the interests of the public, depositors, trust beneficiaries, and other creditors of the bank or trust company are adequately protected;
  5. After such authorization by a vote of shareholders and by the department, the board of directors, nevertheless, in its discretion, may abandon such sale, lease, exchange, or other disposition of assets, subject to the rights of third parties under any contracts relating thereto, without further action or approval by shareholders;
  6. In the case of a sale, lease, exchange, or other disposition of all, or substantially all, the property and assets of a bank or trust company, a notice shall be published in each county in which the bank or trust company has an office engaged in the banking or trust business in the manner prescribed by subsection (c) of Code Section 7-1-552.

    (Code 1933, § 41A-2602, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 19 Am. Jur. 2d, Corporations, § 2659.

C.J.S. - 18 C.J.S., Corporations, § 285 et seq.

7-1-572. Right of shareholder to dissent.

A shareholder of a bank or trust company shall have the right to dissent from any sale, lease, exchange, or other disposition of all, or substantially all, the property and assets of a bank or trust company pursuant to Code Section 7-1-571, except for a sale wholly for cash where the shareholders' approval thereof is conditional upon the distribution of all, or substantially all, of the net proceeds of the sale to the shareholders in accordance with their respective interests within one year after the date of the sale. The shareholders' right of dissent shall be exercised as provided in Chapter 2 of Title 14, known as the "Georgia Business Corporation Code."

(Code 1933, § 41A-2603, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 946, § 69; Ga. L. 1989, p. 1257, § 18.)

Editor's notes. - The amendment to this Code section by Ga. L. 1989, p. 946, § 69, was superseded by the amendment by Ga. L. 1989, p. 1257, § 18, which was enacted later.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 194, 198, 238.

C.J.S. - 18 C.J.S., Corporations, §§ 378 et seq., 424 et seq.

PART 17 R EPRESENTATIVE OFFICES AND REGISTRATION

Editor's notes. - Ga. L. 1995, p. 673, effective July 1, 1995, repealed the Code section formerly codified at this part and enacted the current part. The former part consisted of Code Section 7-1-590 and was based on Ga. L. 1981, Ex. Sess., p. 8 (Code enactment Act) and Ga. L. 1985, p. 246, § 1; Ga. L. 1986, p. 458, § 7; Ga. L. 1987, p. 3, § 7.

Administrative Rules and Regulations. - Applications, registrations and notifications, Official Compilation of Rules and Regulations of State of Georgia, Department of Banking and Finance, Banks, Chapter 80-1-1.

7-1-590. Definitions.

As used in this part, the term:

  1. "Bank" and "bank holding company" shall have the same meaning as in Part 18 of this article. A "banking business" is the business which a bank is authorized to do pursuant to this title. The power to receive deposits or the performance of any transaction directly or through an affiliate or agent relative to a deposit account shall be presumed to constitute a banking business.
  2. "Domicile" means the home state as defined in paragraph (12) of Code Section 7-1-621 where a bank is chartered or where a bank holding company is incorporated.
  3. "Loan production office" is a form of a representative office, where the solicitation of loans or of leases of personal property may occur, but not the disbursement of loan proceeds nor any other banking business. It shall be established and registered as a representative office.
  4. "Representative office" is an office established by a bank, a bank holding company, or an agent or subsidiary of either for the purpose of conducting business activities other than a banking business. It shall not be considered to be a branch office or main office.
  5. "Trust production office" means a trust sales office of a qualifying individual or corporate fiduciary which office is not performing fiduciary activities. The trust institution desiring to establish such an office in this state must apply to the department on forms provided by the department, must be approved by the commissioner to engage in sales activities in this state, and must register and pay any fees required for a representative office under Code Section 7-1-593 . Sales activities shall consist primarily of marketing or soliciting in this state using mail, telephone, or electronic means or in person to act or propose to act as a fiduciary outside of this state. The department shall be permitted to examine such trust production offices to ascertain whether they are limiting their activities as prescribed. (Code 1981, § 7-1-590 , enacted by Ga. L. 1995, p. 673, § 23; Ga. L. 1997, p. 485, § 19; Ga. L. 1999, p. 674, § 16; Ga. L. 2018, p. 214, § 11/HB 780.)

The 2018 amendment, effective May 3, 2018, inserted "business activities" in the first sentence of paragraph (4). See Editor's notes for applicability.

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1997, "means" was substituted for "shall mean" in the first sentence in paragraph (5).

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

7-1-591. Establishment of representative office by bank or bank holding company domiciled in state.

A bank domiciled in this state and operating under the laws of this state or a subsidiary or agent of such bank may establish a representative office anywhere in the state upon registering with the department. A bank holding company domiciled in this state and operating under the laws of this state or a nonbank subsidiary or agent of such bank holding company may establish a representative office anywhere in this state upon registering with the department.

(Code 1981, § 7-1-591 , enacted by Ga. L. 1995, p. 673, § 23; Ga. L. 1999, p. 674, § 16; Ga. L. 2016, p. 390, § 2-8/HB 811.)

The 2016 amendment, effective July 1, 2016, in this Code section, substituted "the laws of this state" for "its laws or the laws of the United States" in the first and second sentences and added "upon registering with the department" at the end of the first and second sentences.

Cross references. - Requirement of maintenance of registered office by financial institutions in state, § 7-1-132 .

7-1-592. Establishment of representative office by bank or holding company domiciled in state or outside of state; conformance with requirements of primary regulator.

A bank or bank holding company domiciled in this state and operating under the laws of the United States or domiciled outside this state and operating under the laws of such other state or territory or of the United States, or its subsidiary or agent, may establish representative offices anywhere in this state, provided that such bank or bank holding company conforms to the requirements of its primary regulator.

(Code 1981, § 7-1-592 , enacted by Ga. L. 1995, p. 673, § 23; Ga. L. 1999, p. 674, § 16; Ga. L. 2016, p. 390, § 2-9/HB 811.)

The 2016 amendment, effective July 1, 2016, in this Code section, inserted "in this state and operating under the laws of the United States or domiciled" near the beginning and added the proviso at the end.

Cross references. - Requirement of maintenance of registered office by financial institutions in state, § 7-1-132 .

RESEARCH REFERENCES

ALR. - In personam jurisdiction under long-arm statute of nonresident banking institution, 9 A.L.R.4th 661.

7-1-593. Registration of bank or bank holding company having representative office in state.

  1. A bank or bank holding company domiciled in this state and having a representative office located in this state shall register with the department annually on forms prescribed by the department. Such registration shall be filed according to regulations issued by the department and shall list the names of all its Georgia representative offices, the street address of the offices, the nature of the business to be transacted in or through the offices, and such other information as the department may require. The department may consolidate these requirements with the holding company registration required in Parts 18, 19, and 20 of this article.
  2. The department may review the operations of any representative office annually or at such greater frequency as it deems necessary to assure that the office does not transact a banking business. (Code 1981, § 7-1-593 , enacted by Ga. L. 1995, p. 673, § 23; Ga. L. 1999, p. 674, § 16; Ga. L. 2016, p. 390, § 2-10/HB 811.)

The 2016 amendment, effective July 1, 2016, in subsection (a), inserted "domiciled in this state and" in the first sentence, deleted ", shall be accompanied by a registration fee prescribed by regulations of the department," following "issued by the department" in the second sentence, and deleted "and those for agency relationships" following "these requirements" in the last sentence.

7-1-594. Registration of banks or bank holding companies conducting agency relationships.

Repealed by Ga. L. 2016, p. 390, § 2-11/HB 811, effective July 1, 2016.

Editor's notes. - Ga. L. 2017, p. 774, § 7(6)/HB 323, part of an Act to revise, modernize, and correct the Code, repealed the reservation of this Code section.

This Code section was based on Code 1981, § 7-1-594 , enacted by Ga. L. 1995, p. 673, § 23.

PART 18 B ANK BRANCHES, OFFICES, FACILITIES, AND HOLDING COMPANIES

Administrative Rules and Regulations. - Applications, registrations, and notifications, generally, Official Compilation of Rules and Regulations of State of Georgia, Department of Banking and Finance, Banks, Chapter 80-1-1.

Rules governing bank holding companies, Official Compilation of Rules and Regulations of State of Georgia, Rules of Department of Banking and Finance, Chapter 80-6-1.

7-1-600. Definitions.

As used in this part, the term:

  1. "Bank" means any moneyed corporation authorized by law to receive deposits of money and commercial paper, to make loans, to discount bills, notes, and other commercial paper, to buy and sell bills of exchange, and to issue bills, notes, acceptances, or other evidences of debt, and shall include incorporated banks, savings banks, banking companies, trust companies, and other corporations doing a banking business and may include corporations who provide some or all of the financial services listed in this paragraph by technological means in lieu of or in addition to traditional geographically based delivery systems but, unless the context otherwise indicates, shall not include national banks or similar corporations. Such term shall include "main office" and any "branch office," unless the context indicates that it does not.
  2. "Bank holding company" means "bank holding company" as defined in Code Section 7-1-605.
  3. "Banking office" or "banking location" means either a main office or a branch office.
  4. "Banking services" shall include all those offerings or services resulting from the exercise of banking powers as granted to banks in this title or by other applicable federal or state law or regulation.
  5. "Branch office" means any location of a bank other than the main office where banking services are offered to the public. It does not include a representative office as defined in Code Section 7-1-590 or a bank extension as defined in Code Section 7-1-603. The department may provide by regulation that certain other activities do or do not constitute the formation of a branch office.
  6. "Main office" means the principal banking location of a bank as such location appears in the records of the department. A bank shall indicate its principal banking location with the department, and if it fails to do so, the department shall choose a banking location of such bank to be the main office and shall so notify such bank.

    (Ga. L. 1919, p. 135, art. 1, § 1; Ga. L. 1925, p. 119, § 1; Ga. L. 1927, p. 195, § 1; Code 1933, § 13-201; Ga. L. 1960, p. 67, § 2; Code 1933, § 13-201.1, enacted by Ga. L. 1960, p. 67, § 3; Ga. L. 1963, p. 602, § 1; Ga. L. 1970, p. 954, § 2; Ga. L. 1976, p. 168, § 1; Ga. L. 1986, p. 458, § 8; Ga. L. 1996, p. 6, § 7; Ga. L. 1997, p. 485, § 20; Ga. L. 1999, p. 674, § 17; Ga. L. 2016, p. 390, § 7-12/HB 811.)

The 2016 amendment, effective July 1, 2016, in paragraph (1), in the first sentence, deleted "building and loan associations or" following "national banks or", deleted "associations or" following "similar" in the middle, and deleted the proviso at the end, which read: "; provided, however, that Code Sections 7-1-590 through 7-1-594, providing for the registration of representative offices; Code Sections 7-1-601 and 7-1-602, regulating the operation and establishment of bank branch offices; Code Section 7-1-603, regulating the expansion of existing facilities; and Code Sections 7-1-604 through 7-1-608, restricting the acquisition and ownership of bank shares or assets and regulating the operation of banks and bank holding companies in this state, shall apply to national banks and all other persons, corporations, or associations, by whatever authority organized, doing a banking or trust business in this state.", and substituted "Such term" for "Bank" in the second sentence.

Cross references. - Applicability of "bank office" and "bank facility" definitions to definitions of "bank" and "branch" in the UCC, § 11-1-201(4).

Law reviews. - For annual survey of law of business associations, see 43 Mercer L. Rev. 85 (1991).

JUDICIAL DECISIONS

Authority to operate branch banks, construed with §§ 7-1-602 and 7-1-606 . - Although a bank holding company may change the corporate structure of the company's banking subsidiaries through merger, consolidation, or purchase, and may continue all of the banking activities of the component banks, a bank holding company may not, through the company's banking subsidiary, acquire "branch banks" and continue to operate the branches as such. First Nat'l Bank of Commerce v. Community Bankers Ass'n, 260 Ga. 371 , 394 S.E.2d 95 (1990).

Drive-in facilities. - Drive-in window would ordinarily fit within the definition of a bank facility. Jackson v. First Nat'l Bank, 349 F.2d 71 (5th Cir. 1965).

Drive-in facility clearly comes within the Georgia definition of a bank facility. Jackson v. First Nat'l Bank, 246 F. Supp. 134 (M.D. Ga. 1965).

Cited in Jackson v. First Nat'l Bank, 292 F. Supp. 156 (N.D. Ga. 1968); Independent Bankers Ass'n v. Dunn, 230 Ga. 345 , 197 S.E.2d 129 (1973).

OPINIONS OF THE ATTORNEY GENERAL

Mobile check cashing service would come under jurisdiction of State Banking Department. 1967 Op. Att'y Gen. No. 67-286.

Production Credit Associations are not banks, and statutes applicable to taxation of banks do not apply to Production Credit Associations located in the State of Georgia. 1957 Op. Att'y Gen. p. 312.

Public funds held by county officials may not be deposited in savings and loan associations. - Public funds held by county officials must be deposited in one or more solvent banks and may not be deposited in savings and loan associations. 1974 Op. Att'y Gen. No. 74-145.

When loan production office is a place of business. - When a loan production office performs all competitive and service-related functions in soliciting and servicing loans, it clearly is a place of business within the meaning of former Code 1933, § 13-201.1. 1974 Op. Att'y Gen. No. 74-12.

Classification of formerly established branch bank located in same county as principal office. - Place of banking business which is located within the county in which is located the principal office of the bank, and which was formerly a lawfully established branch bank within the meaning of former Code 1933, § 13-201.1 (see now O.C.G.A. § 7-1-600(5) ), is for purposes of former Code 1933, §§ 13-203 and 13-203.1 (see now O.C.G.A. §§ 7-1-601 and 7-1-602 ) to be treated as a bank office as defined by former Code 1933, § 13-201.1 (see now O.C.G.A. § 7-1-600(4) ). 1974 Op. Att'y Gen. No. 74-35.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 623 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 46, 47.

7-1-601. Branch offices.

  1. Branch offices may be established by banks doing a lawful banking business in Georgia with the prior approval of the department as follows:
    1. New or additional branch offices may be established de novo in the manner provided in Code Section 7-1-602;
    2. New or additional branch offices may be established through merger, share exchange, consolidation, or sale of assets pursuant to Part 14, 15, 16, 19, or 20 of this article;
    3. A bank may acquire a branch office from another bank without acquisition of the entire bank; or
    4. A bank with two or more existing banking offices in Georgia may redesignate its existing main office as a branch office in accordance with the procedures established by the department.
  2. A bank not doing a lawful banking business in Georgia may become the owner of a branch office in Georgia provided such transaction is consummated under Section 12 or 13 of the Federal Deposit Insurance Act, 12 U.S.C. Section 1811, et seq., as amended.
  3. Taxation of all banks shall be in the manner provided in Chapter 6 of Title 48.
  4. Each branch office will operate under the control and direction of the board of directors and executive officers of the bank, and the bank shall be responsible for adequately staffing the branch office to conduct the business of the branch office in accordance with this chapter, federal law, and the rules and regulations of the department.

    (Ga. L. 1919, p. 135, art. 1, § 3; Ga. L. 1920, p. 102, § 1; Ga. L. 1927, p. 195, § 1; Code 1933, § 13-203; Ga. L. 1960, p. 67, § 4; Ga. L. 1970, p. 954, § 3; Ga. L. 1975, p. 474, § 1; Ga. L. 1978, p. 1710, § 1; Ga. L. 1987, p. 1586, § 9; Ga. L. 1996, p. 181, § 9; Ga. L. 1996, p. 642, §§ 1, 2; Ga. L. 1996, p. 848, § 10; Ga. L. 1999, p. 674, § 17; Ga. L. 2007, p. 502, § 13/SB 70; Ga. L. 2016, p. 390, § 2-12/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted the former last sentence of paragraph (a)(3), which read: "However, an out-of-state bank with no lawfully established branch office in Georgia may not directly or indirectly make such an acquisition".

Cross references. - Status of branch or separate office of bank for purpose of computing time within which and determining place at or to which action may be taken or notices or orders given under the "Commercial Code," § 11-4-106 .

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1999, "Part" was substituted for "Parts" in paragraph (a)(2).

Law reviews. - For article discussing compliance with Federal Securities Act of 1933 in bank acquisitions and the issuance of securities of bank holding companies, see 14 Ga. St. B.J. 114 (1978). For review of 1996 banking and finance legislation, see 13 Ga. St. U.L. Rev. 1 (1996). For review of 1996 revenue and taxation legislation, see 13 Ga. U.L. Rev. 294 (1996). For comment on United States v. Citizens & S. Nat'l Bank, 422 U.S. 86, 95 S. Ct. 2099 , 45 L. Ed. 2 d 41 (1975), see 10 Ga. L. Rev. 641 (1976).

JUDICIAL DECISIONS

"Branch bank" not necessarily interchangeable with "bank". - Term "branch bank" is not necessarily interchangeable with "bank." Community Bankers Ass'n v. First Nat'l Bank of Commerce, 193 Ga. App. 569 , 388 S.E.2d 387 (1989), aff'd, 260 Ga. 371 , 394 S.E.2d 95 (1990).

Merger with branch not approved without merging entire bank. - Nothing in the Code expresses or implies any intent to permit approval of a bank holding company's merging or consolidating with, or acquiring control of, a branch bank by itself without merging or consolidating with, or acquiring control of, the entire bank. Community Bankers Ass'n v. First Nat'l Bank of Commerce, 193 Ga. App. 569 , 388 S.E.2d 387 (1989), aff'd, 260 Ga. 371 , 394 S.E.2d 95 (1990).

Using sister subsidiary of holding company which controls bank. - Fact that branch banking activities prohibited under former Code 1933, § 13-203 (see now O.C.G.A. § 7-1-601 ) are performed by sister subsidiary of holding company controlling the bank does not make such activities legal as such a contractual arrangement merely accomplishes indirectly what the bank is prohibited from doing directly. Jackson v. First Nat'l Bank, 430 F.2d 1200 (5th Cir. 1970), cert. denied, 401 U.S. 947, 28 L. Ed. 2 d 230, 91 S. Ct. 933 (1971), cert. denied, 401 U.S. 947, 91 S. Ct. 933 , 28 L. Ed. 2 d 230 (1971).

Georgia banks may not use armored cars to extend geographic reach of the bank's banking facility. Jackson v. First Nat'l Bank, 430 F.2d 1200 (5th Cir. 1970), cert. denied, 401 U.S. 947, 91 S. Ct. 933 , 28 L. Ed. 2 d 230 (1971).

Use of armored cars constituting branch banking. - Operation of armored truck bank messenger service of national bank, whose function is to transmit funds to bank, make change, transmit funds from the bank, and furnish teller service for payroll cashing, constitutes operation of a branch bank within the meaning of former Code 1933, § 13-203 (see now O.C.G.A. § 7-1-601 ). Jackson v. First Nat'l Bank, 292 F. Supp. 156 (N.D. Ga. 1968), aff'd, 430 F.2d 1200 (5th Cir. 1970), cert. denied, 401 U.S. 947, 91 S. Ct. 933 , 28 L. Ed. 230 (1971).

Armored cars owned by a bank, which picked up deposits, were engaged in branch banking, even though depositors using services offered by the armored cars entered into a contract with the bank that deposits delivered to the armored car would not be deemed received until the deposits were physically delivered into the hands of the teller on the bank's premises. Jackson v. First Nat'l Bank, 430 F.2d 1200 (5th Cir. 1970), cert. denied, 401 U.S. 947, 91 S. Ct. 933 , 28 L. Ed. 2 d 230 (1971).

Cited in Goodwin v. Citizens & S. Nat'l Bank, 209 Ga. 908 , 76 S.E.2d 620 (1953); Jackson v. First Nat'l Bank, 246 F. Supp. 134 (M.D. Ga. 1965).

OPINIONS OF THE ATTORNEY GENERAL

Former Code 1933, § 13-203 was constitutional. 1948-49 Op. Att'y Gen. p. 4.

Legislative intent behind former Code 1933, § 13-203 was to prohibit establishment of new and additional branch banks. 1971 Op. Att'y Gen. No. 71-102.

Branch banking and bank holding company restrictions apply to bank facilities conducting only trust business. 1980 Op. Att'y Gen. No. 80-156.

Mortgage banking and factoring subsidiaries are nonbanking activities and are not included in former Code 1933, § 13-203 which restricts branch banking. 1972 Op. Att'y Gen. No. 72-131.

Former Code 1933, § 13-203 restrictions are inapplicable to establishment of foreign branch office of state-chartered trust company. 1970 Op. Att'y Gen. No. 70-59.

State trust company not prohibited from establishing foreign branch office to develop new international business. 1970 Op. Att'y Gen. No. 70-59.

Mere change in physical location of branch bank is not establishment of such a bank. 1958-59 Op. Att'y Gen. p. 17.

Operation of savings and loan across county lines. - Only branch of a savings and loan association located in the county affected, which is lawfully controlled by a bank holding company or as to which the bank holding company has received the requisite approvals to acquire control, may be lawfully acquired by a banking subsidiary of a bank holding company through a purchase and assumption and operated across county lines as a branch of the banking subsidiary; provided, such acquisition is approved by the commissioner of banking and finance. 1988 Op. Att'y Gen. No. 88-13.

Merger of holding company's subsidiaries across county lines. - With respect to circumstances under which a bank holding company may merge two subsidiaries across county lines, there are two requirements: (1) the commissioner must approve, and (2) the merger must take place at the time the holding company acquires the bank which is to become a branch bank following merger. 1981 Op. Att'y Gen. No. 81-74.

Controlling geographical entity is the county. - For the purpose of determining whether a parent office of a national bank established on military reservation may establish a branch bank, the controlling geographical entity is the county, not the military reservation. 1975 Op. Att'y Gen. No. 75-141.

Exemption to subsection (c) under § 7-1-606(e) . - It seems clear that O.C.G.A. § 7-1-606(e) creates at least a limited exception to the branching prohibition of O.C.G.A. § 7-1-601(c) . 1981 Op. Att'y Gen. No. 81-74.

Parent bank directors must elect board of directors for branch bank. - When parent bank establishes a branch bank, the directors of the parent bank are required to elect either a board of directors or a loan committee for the branch bank. 1954-56 Op. Att'y Gen. p. 35.

Classification of formerly established branch bank located in same county as principal office. - Place of banking business which is located within the county in which is located the principal office of the bank, and which was formerly a lawfully established branch bank within the meaning of former Code 1933, § 13-201.1 (see now O.C.G.A. § 7-1-600(5) ) is for purposes of former Code 1933, §§ 13-203 and 13-203.1 (see now O.C.G.A. §§ 7-1-601 and 7-1-602 ) to be treated as a bank office as defined by former Code 1933, § 13-201.1 (see now O.C.G.A. § 7-1-600(4) ). 1974 Op. Att'y Gen. No. 74-35.

Finding of de facto branching not dependent upon finding that intermediary corporation is a sham and does no business on the corporation's own account. 1980 Op. Att'y Gen. No. 80-51.

Brokerage firm, in jointly operating an investment program, is not a branch. - When a brokerage firm, in operating an investment program in conjunction with a bank, is performing the firm's functions primarily for the firm's own benefit, it is in no sense a mere adjunct of the participating bank, and the program does not result in the operation of branches, offices, or facilities by the participating bank in violation of O.C.G.A. §§ 7-1-601 and 7-1-602 . 1981 Op. Att'y Gen. No. 81-59.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 623 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 22, 46, 47.

ALR. - Power of national bank to establish branches or maintain separate banking offices, 30 A.L.R. 927 ; 50 A.L.R. 1340 ; 136 A.L.R. 471 .

Branch banks, 50 A.L.R. 1340 ; 136 A.L.R. 471 .

Liability of guarantor of or surety for bank deposit as affected by reorganization, merger, or consolidation of bank, 78 A.L.R. 381 .

What is a "branch bank" within statutes regulating the establishment of branch banks, 23 A.L.R.3d 683.

7-1-602. Applications for branch offices.

  1. Application to establish a branch office shall be made to the department in such form as it may prescribe from time to time. The department shall exercise its discretion in its consideration of the application; but the department shall not approve the application until it has ascertained to its satisfaction that the public need and advantage will be promoted by the establishment of the proposed branch office, based upon the following factors:
    1. Reasonable opportunity for the proposed branch office to generate a sufficient profit;
    2. The character and fitness of the board of directors and management of the bank to command the confidence of the community and to warrant the belief that the business of the bank or trust company at the branch office will be honestly and efficiently conducted;
    3. The adequacy of the capital structure of the bank or trust company, particularly in view of the anticipated business to be generated by the proposed branch office; and
    4. The overall financial condition and safety and soundness of the applicant bank or trust company.

      Where the department by rule, regulation, or written policy has provided for expedited processing of applications or for notice procedures, it may abbreviate its review of these criteria.

  2. After receipt of a complete application, the department shall have 90 days within which to approve or disapprove such application.
  3. The department may approve an application contingent upon the satisfaction of additional conditions including the submission of information such as the date of opening and the capital outlay for the branch office. If the approval of a federal regulatory agency is required with respect to the branch office, the department may at its option withhold its written approval or disapproval until such federal approval is granted or denied or may withdraw its approval if the federal agency fails to act or refuses to grant approval. If the department disapproves the branch office, it shall notify the applicant of its disapproval and state generally in writing the unfavorable factors influencing its decision. The decision of the department is final, except that it may be subject to judicial review as provided in Code Section 7-1-90.
  4. The department may provide by regulation that a bank which meets certain financial and managerial criteria may, in lieu of application, file a written notification with the department at a time to be specified in such regulation. The department may waive publication requirements for such a procedure.
  5. All lawfully established banking locations existing on July 1, 1999, other than a bank's main office, shall be known and shall qualify as branch offices.
  6. In the event of merger or consolidation of two or more banks, pursuant to Parts 14 and 15 of this article, the surviving or resulting bank shall designate a main office and may retain and continue to operate any or all banking locations of each constituent bank as branch offices so long as they are consistent with and authorized by this part. In the event of the purchase of substantially all of the assets of a bank, subject to the review and approval by the commissioner of such transaction, the purchasing bank may retain and continue to operate any or all banking locations of the selling bank as branch offices so long as they are consistent with and authorized by this part.
  7. The department's approval may be revoked if conditions in the approval have not been satisfied or if other violations of law occur as a result of the branch office's opening or operation.

    (Code 1933, § 13-203.1, enacted by Ga. L. 1960, p. 67, § 5; Ga. L. 1963, p. 602, § 2; Ga. L. 1970, p. 954, § 4; Ga. L. 1973, p. 127, § 1; Ga. L. 1975, p. 473, § 1; Ga. L. 1978, p. 1710, § 3; Ga. L. 1978, p. 2068, § 1; Ga. L. 1980, p. 1082, § 1; Ga. L. 1983, p. 602, § 14; Ga. L. 1999, p. 674, § 17; Ga. L. 2000, p. 174, § 13; Ga. L. 2016, p. 390, § 2-13/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted the former last sentence of subsection (b), which read: "Under normal circumstances and workload, the department will issue an approval or disapproval of a branch office within 21 days or after the end of the public comment period, whichever is later."

Law reviews. - For article discussing compliance with Federal Securities Act of 1933 in bank acquisitions and the issuance of securities of bank holding companies, see 14 Ga. St. B.J. 114 (1978). For annual survey of law of business associations, see 43 Mercer L. Rev. 85 (1991). For comment on United States v. Citizens & S. Nat'l Bank, 422 U.S. 86, 95 S. Ct. 2099 , 45 L. Ed. 2 d 41 (1975), see 10 Ga. L. Rev. 641 (1976).

JUDICIAL DECISIONS

"Branch bank" not necessarily interchangeable with "bank". - Term "branch bank", as used in O.C.G.A. § 7-1-602(e) , is not necessarily interchangeable with "bank." Community Bankers Ass'n v. First Nat'l Bank of Commerce, 193 Ga. App. 569 , 388 S.E.2d 387 (1989), aff'd, 260 Ga. 371 , 394 S.E.2d 95 (1990).

Pertinent criteria in determining whether bank facility is a branch office. - To determine whether a bank facility is a branch office, the court should look to four pertinent factual criteria; i.e., distance separating main banking house and the facility, number of intervening structures, lack of physical connection between main banking house and the facility, and the economic effect of the facility on the balance of competition between area banks. Dunn v. First Nat'l Bank, 345 F. Supp. 853 (N.D. Ga. 1972).

Acquisition and operation of branch banks by holding company's subsidiary. - Although a bank holding company may change the corporate structure of the company's banking subsidiaries through merger, consolidation, or purchase, and may continue all of the banking activities of the component banks, a bank holding company may not, through the company's banking subsidiary, acquire "branch banks" and continue to operate those branches as such. First Nat'l Bank of Commerce v. Community Bankers Ass'n, 260 Ga. 371 , 394 S.E.2d 95 (1990).

Merger with branch not approved without merging entire bank. - Nothing in the Code expresses or implies any intent to permit approval of a bank holding company's merging or consolidating with, or acquiring control of, a branch bank by itself without merging or consolidating with, or acquiring control of, the entire bank. Community Bankers Ass'n v. First Nat'l Bank of Commerce, 193 Ga. App. 569 , 388 S.E.2d 387 (1989), aff'd, 260 Ga. 371 , 394 S.E.2d 95 (1990).

Cited in Jackson v. First Nat'l Bank, 246 F. Supp. 134 (M.D. Ga. 1965); Jackson v. First Nat'l Bank, 292 F. Supp. 156 (N.D. Ga. 1968); United States v. Citizens & S. Nat'l Bank, 422 U.S. 86, 95 S. Ct. 2099 , 45 L. Ed. 2 d 41 (1975).

OPINIONS OF THE ATTORNEY GENERAL

Legislative intent behind former Code 1933, § 13-203.1 was to provide for establishment and operation of new and additional bank offices and bank facilities. 1971 Op. Att'y Gen. No. 71-102.

Section empowers commissioner to regulate establishment of bank offices and facilities. - Former Code 1933, § 13-203.1 empowered the superintendent of banks, (now commissioner of banking and finance) to regulate the establishment of bank offices and bank facilities and to provide for criteria of examination and determination of public need and advantage in establishment of bank offices and bank facilities. 1971 Op. Att'y Gen. No. 71-102.

Establishment of multiple bank offices through use of mobile bank unit. - Georgia law does not prohibit a bank from establishing multiple bank offices or bank facilities, using a single mobile bank unit on a regular part-time basis. 1976 Op. Att'y Gen. No. 76-106.

In applying section, controlling geographical entity is the county. - For purpose of applying state law to parent office of national bank established on military reservation, the controlling geographical entity is the county, not the military reservation. 1975 Op. Att'y Gen. No. 75-141.

Parent office located on military reservation may operate office off reservation. - When two national banks whose parent banks are located in one county each have a branch bank in another county, even though it is on a military reservation, those banks may establish and operate additional offices in that first county off the military reservation. 1975 Op. Att'y Gen. No. 75-141.

Classification of formerly established branch bank. - Place of banking business which is located within the county in which is located the principal office of the bank, and which was formerly a lawfully established branch bank within the meaning of former Code 1933, § 13-201.1 (see now O.C.G.A. § 7-1-600(5) is for purposes of former Code 1933, §§ 13-203 and 13-203.1 (see now O.C.G.A. §§ 7-1-601 and 7-1-602 ) to be treated as a bank office as defined by former Code 1933, § 13-201.1 (see now O.C.G.A. § 7-1-600(4) ). 1974 Op. Att'y Gen. No. 74-35.

Brokerage firm, in jointly operating an investment program, is not a branch. - When a brokerage firm, in operating an investment program in conjunction with a bank, is performing the firm's functions primarily for the firm's own benefit, it is in no sense a mere adjunct of the participating bank, and the program does not result in the operation of branches, offices, or facilities by the participating bank in violation of O.C.G.A. §§ 7-1-601 and 7-1-602 . 1981 Op. Att'y Gen. No. 81-59.

RESEARCH REFERENCES

ALR. - Power of banking corporation to loan money for others, 33 A.L.R. 597 .

Branch banks, 50 A.L.R. 1340 ; 136 A.L.R. 471 .

What is a "branch bank" within statutes regulating the establishment of branch banks, 23 A.L.R.3d 683.

7-1-603. Extension of existing banking locations; automated teller machines, cash dispensing machines, point-of-sale terminals, and other extensions.

  1. An approved banking location may have an extension, which is not a branch or main office, at which banking activities may occur. The extensions described in this Code section do not require approval but may have certain restrictions or required notifications.
  2. The following are extensions:
    1. "Automated teller machine" means electronic equipment which performs routine banking transactions including, but not limited to, the taking of deposits for the public at locations off premises of a bank's main or branch office under regulations prescribed by the commissioner. This term includes electronic equipment that utilizes, or has the capability to utilize, live video chat with offsite bank personnel who may assist with banking services, including, but not limited to, account initiation.
    2. "Cash dispensing machine" means for the purposes of this part and as used in paragraph (4) of subsection (b) of Code Section 7-1-241 an automated or electronic terminal which dispenses cash or scrip redeemable for goods and services or for cash, goods, and services. Such machines may provide account information but may not initiate intrabank transactions other than those necessary and incidental to the dispensing of cash.
    3. "Point-of-sale terminal" means electronic equipment located in nonbank business outlets to record electronically with a bank transactions occurring as a result of the sale of goods or services.

      For purposes of this Code section, the terms "automated teller machine," "point-of-sale terminal," and "cash dispensing machine" shall not include personal communication devices such as telephones, computer terminals, modems, and other similar devices which are not accessible to the general public but are intended for use by a single bank customer. It is not the intent of this Code section to limit the ability of banks or other entities to utilize personal communication devices. The department may by regulation further define "automated teller machine," "point-of-sale terminal," "cash dispensing machine," and "personal communication device" consistent with the objectives set forth in Code Section 7-1-3.

  3. The following are restrictions on location of an extension:
    1. Any federally insured bank or credit union may operate automated teller machines throughout this state. These machines may be operated individually by any bank or credit union or jointly on a cost-sharing basis by two or more banks or credit unions;
    2. Any bank may operate cash dispensing machines throughout the state. Access to and use of cash dispensing machines may be available to all banks in this state on an individual or a shared basis; and
    3. A point-of-sale terminal may be located anywhere in the state.
  4. An extension not defined in subsection (b) is permitted, provided that such extension is located within the boundary lines of a single contiguous area of property owned or leased by the bank and used as a banking location, or if it is within 200 yards of such a banking location. Banking services may be performed at the extension. Written notification to the department is required for such extension.

    (Code 1933, § 13-203.2, enacted by Ga. L. 1966, p. 590, § 2; Ga. L. 1973, p. 526, § 1; Ga. L. 1975, p. 475, § 1; Ga. L. 1995, p. 673, § 24; Ga. L. 1997, p. 485, § 21; Ga. L. 1999, p. 674, § 17; Ga. L. 2003, p. 843, § 7; Ga. L. 2016, p. 390, § 2-14/HB 811; Ga. L. 2017, p. 774, § 7/HB 323.)

The 2016 amendment, effective July 1, 2016, added the second sentence in paragraph (b)(1); and substituted the present provisions of paragraph (c)(1) for the former provisions, which read: "Any Georgia state bank or credit union may operate automated teller machines throughout the state. Any bank not otherwise doing a lawful banking business in this state may operate automated teller machines throughout this state, provided such automated teller machines are unstaffed and not combined with a staffed facility. These machines may be operated individually by any bank or jointly on a cost-sharing basis by two or more banks or other financial institutions;".

The 2017 amendment, effective May 9, 2017, part of an Act to revise, modernize, and correct the Code, substituted "provided that such extension" for "provided such extension" near the beginning of the first sentence of subsection (d).

OPINIONS OF THE ATTORNEY GENERAL

Legislative intent. - Former Code 1933, § 13-203.2 would normally define the meaning of loan production offices only in reference to the remainder of that section, as opposed to banking law generally; when thus placed in context, the clear purpose of the enactment was to perfect Georgia's then existing legislation relating to expansion or extension of existing parent banks, branch banks, bank offices, and bank facilities. 1976 Op. Att'y Gen. No. 76-116.

Loan production offices may not be expanded or extended. - Former Code 1933, § 13-203.2 (see now O.C.G.A. § 7-1-603 ) meant that loan production offices, though the offices remain bank facilities for all other purposes pursuant to former Code 1933, § 13-201 (see now O.C.G.A. § 7-1-600(2) ), may not be expanded or extended. 1976 Op. Att'y Gen. No. 76-116.

Foreign state banks may not maintain, directly or indirectly, loan production offices within this state. 1976 Op. Att'y Gen. No. 76-116.

Automated teller operations limited to financial institutions. - Nonfinancial institution may not establish and operate on the institution's own behalf an unmanned automated teller facility which provides cash withdrawal services. 1985 Op. Att'y Gen. No. 85-2.

RESEARCH REFERENCES

ALR. - Branch banks, 50 A.L.R. 1340 ; 136 A.L.R. 471 .

What is a "branch bank" within statutes regulating the establishment of branch banks, 23 A.L.R.3d 683.

7-1-604. Banking business prohibited except as allowed by Title 7 or applicable federal law.

No bank shall carry on or conduct or do a banking business in this state except in accordance with the provisions of this title or federal law directly applicable to the bank. A "banking business" is the business which a bank is authorized to do pursuant to this title.

(Code 1933, § 13-204.1, enacted by Ga. L. 1967, p. 105, § 1; Ga. L. 1970, p. 954, § 5; Ga. L. 1999, p. 674, § 17; Ga. L. 2016, p. 390, § 2-15/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted "title or federal law directly applicable to the bank" for "title which govern entry into this state to conduct such a business" in the first sentence and substituted "A 'banking business'" for "'A banking business'" at the beginning of the second sentence.

JUDICIAL DECISIONS

Georgia banks may not use armored cars to extend geographic reach of their banking facility. Jackson v. First Nat'l Bank, 430 F.2d 1200 (5th Cir. 1970), cert. denied, 401 U.S. 947, 91 S. Ct. 933 , 28 L. Ed. 2 d 230 (1971).

Use of armored cars violating section. - Operation of armored truck bank messenger service of national bank, whose function is to transmit funds to bank, make change, transmit funds from bank, and furnish teller service for payroll cashing, constitutes carrying on, conducting, or doing bank business through banking facilities other than on premises of place of business of national bank and as such is illegal. Jackson v. First Nat'l Bank, 292 F. Supp. 156 (N.D. Ga. 1968), aff'd, 430 F.2d 1200 (5th Cir. 1970), cert. denied, 401 U.S. 947, 91 S. Ct. 933 , 28 L. Ed. 2 d 230 (1971).

Armored cars owned by a bank, which picked up deposits, were engaged in branch banking, even though the depositors using the services offered by the armored cars entered into a contract with the bank that the deposits delivered to the armored car would not be deemed received until the deposits were physically delivered into the hands of the teller on the bank's premises. Jackson v. First Nat'l Bank, 430 F.2d 1200 (5th Cir. 1970), cert. denied, 401 U.S. 947, 91 S. Ct. 933 , 28 L. Ed. 2 d 230 (1971).

OPINIONS OF THE ATTORNEY GENERAL

Participation of bank with brokerage in offering investment program. - Actions of a bank, participating with a brokerage in offering a particular type of investment program, do not constitute the business of banking in violation of O.C.G.A. § 7-1-241 or O.C.G.A. § 7-1-604 . 1981 Op. Att'y Gen. No. 81-59.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 19 et seq., 178.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 29, 44, 45.

ALR. - What is a "branch bank" within statutes regulating the establishment of branch banks, 23 A.L.R.3d 683.

7-1-605. Bank holding companies - Definitions; when company deemed to control shares.

    1. Except as provided in paragraph (5) of this subsection, "bank holding company" means any company which has control over any bank or over any company that is or becomes a bank holding company by virtue of this part.
    2. Any company has "control" over a bank or over any company if:
      1. The company directly or indirectly or acting through one or more other persons owns, controls, or has power to vote 25 percent or more of any class of voting securities of the bank or company;
      2. The company controls in any manner the election of a majority of the directors or trustees of the bank or company; or
      3. The commissioner determines, after notice and opportunity for hearing, that the company directly or indirectly exercises a controlling influence over the management or policies of the bank or company.
    3. For the purposes of any proceeding under subparagraph (C) of paragraph (2) of this subsection, there is a presumption that any company which directly or indirectly owns, controls, or has power to vote less than 5 percent of any class of voting securities of a given bank or company does not have control over that bank or company.
    4. In any administrative or judicial proceeding under this part, other than a proceeding under subparagraph (C) of paragraph (2) of this subsection, a company may not be held to have had control over any given bank or company at any given time unless that company, at the time in question, directly or indirectly owned, controlled, or had power to vote 5 percent or more of any class of voting securities of the bank or company, or had already been found to have control in a proceeding under subparagraph (C) of paragraph (2) of this subsection.
    5. Notwithstanding any other provision of this subsection:
      1. No bank and no company owning or controlling voting shares of a bank is a bank holding company by virtue of its ownership or control of shares in a fiduciary capacity, except as provided in paragraphs (2) and (3) of subsection (c) of this Code section. For the purpose of the preceding sentence, bank shares shall not be deemed to have been acquired in a fiduciary capacity if the acquiring bank or company has sole discretionary authority to exercise voting rights with respect thereto, except that this limitation is applicable in the case of a bank or company acquiring such shares prior to July 1, 1976, only if the bank or company has the right, consistent with its obligations under the instrument, agreement, or other arrangement establishing the fiduciary relationship, to divest itself of such voting rights and fails to exercise that right to divest within a reasonable period not to exceed one year after July 1, 1976; and
      2. No company is a bank holding company by virtue of its ownership or control of shares acquired in securing or collecting a debt previously contracted in good faith until two years after the date of acquisition.
    6. For the purposes of this part, any successor to a bank holding company shall be deemed to be a bank holding company from the date on which the predecessor company became a bank holding company.
  1. As used in this Code section and in Code Sections 7-1-606 through 7-1-608, the term:
    1. "Bank" means the same as defined in Code Section 7-1-600.
    2. "Company" means any corporation, limited liability company, partnership, business trust, association, commercial entity regardless of organizational structure, or any other trust unless by its terms it must terminate within 25 years or not later than 21 years and ten months after the death of individuals living on the effective date of the trust, but shall not include any corporation the majority of the shares of which are owned by the United States or by any state or any qualified family partnership as defined in the federal Bank Holding Company Act of 1956, as amended.
    3. The "Georgia Bank Holding Company Act" shall mean and include this Code section and Code Sections 7-1-606 through 7-1-608 together with Part 19 of this article and any applicable rules and regulations.
    4. "Subsidiary," with respect to a specified bank holding company, means:
      1. Any company 25 percent or more of whose voting shares (excluding shares owned by the United States or by any company wholly owned by the United States) is directly or indirectly owned or controlled by such bank holding company or is held by it with power to vote;
      2. Any company the election of a majority of whose directors is controlled in any manner by such bank holding company; or
      3. Any company with respect to the management or policies of which such bank holding company has the power, directly or indirectly, to exercise a controlling influence, as determined by the commissioner after notice and opportunity for hearing.
    5. "Successor" shall include any company which acquires directly or indirectly from a bank holding company shares of any bank, when and if the relationship between such company and the bank holding company is such that the transaction effects no substantial change in the control of the bank or beneficial ownership of such shares of such bank. The commissioner may, by regulation, further define the term "successor" to the extent necessary to prevent evasion of the purposes of this part.
  2. For the purposes of this part:
    1. Shares owned or controlled by any subsidiary of a bank holding company shall be deemed to be indirectly owned or controlled by such bank holding company;
    2. Shares held or controlled directly or indirectly by trustees for the benefit of:
      1. A company;
      2. The shareholders or members of a company; or
      3. The employees (whether exclusively or not) of a company;

        shall be deemed to be controlled by such company; and

    3. Shares transferred after July 1, 1976, by any bank holding company (or by the company which, but for such transfer, would be a bank holding company) directly or indirectly to any transferee that is indebted to the transferor, or has one or more officers, directors, trustees, or beneficiaries in common with or subject to control by the transferor, shall be deemed to be indirectly owned or controlled by the transferor unless the commissioner, after opportunity for hearing, determines that the transferor is not in fact capable of controlling the transferee.

      (Code 1933, § 13-207, enacted by Ga. L. 1960, p. 67, § 6; Ga. L. 1973, p. 281, § 1; Ga. L. 1976, p. 168, § 2; Ga. L. 1998, p. 795, § 26; Ga. L. 1999, p. 674, § 17; Ga. L. 2016, p. 390, § 7-13/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted "corporation, limited liability company, partnership, business trust, association, commercial entity regardless of organizational structure," for "corporation, partnership, business trust, association, or similar organization," near the beginning of paragraph (b)(2).

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1997, in subsection (a), "subparagraph (C) of paragraph (2)" was substituted for "subparagraph (2)(C)" in paragraphs (a)(3) and (a)(4).

Pursuant to Code Section 28-9-5, in 1999, "this Code section and Code Sections 7-1-606 through 7-1-608" was substituted for "Code Sections 7-1-605 through 7-1-608" in paragraph (b)(3).

Law reviews. - For article, "Bank Directors: Understanding Their Role, Responsibility and Liability," see 40 Mercer L. Rev. 587 (1989). For comment on United States v. Citizens & S. Nat'l Bank, 422 U.S. 86, 95 S. Ct. 2099 , 45 L. Ed. 2 d 41 (1975), see 10 Ga. L. Rev. 641 (1976).

JUDICIAL DECISIONS

Cited in Independent Bankers Ass'n v. Dunn, 230 Ga. 345 , 197 S.E.2d 129 (1973); United States v. Citizens & S. Nat'l Bank, 372 F. Supp. 616 (N.D. Ga. 1974), aff'd, 422 U.S. 86, 95 S. Ct. 2099 , 45 L. Ed. 2 d 41 (1975).

OPINIONS OF THE ATTORNEY GENERAL

Commissioner has discretion to promulgate rules for regulation and examination. - Amendments to Georgia bank holding company statutes commit promulgation of rules for regulation, examination and control of bank holding companies doing business in Georgia to discretion of the commissioner, who should exercise the commissioner's discretion in the issuance of rules and regulations to extent necessary to effectuate the purposes of the bank holding company statutes. 1976 Op. Att'y Gen. No. 76-76.

Acquisition of security interest in bank's shares clearly brings transactions within the scope of former Code 1933, § 13-207. 1976 Op. Att'y Gen. No. 76-26.

Unless shareholders are mere intermediaries shares not attributed to company. - Former Code 1933, § 13-207 (see now O.C.G.A. § 7-1-605 ) does not attribute to a company shares of stock of a bank held by the company's shareholders, unless the company is in control of the arrangement or is exercising control over the bank, using the company's shareholder as an intermediary. 1976 Op. Att'y Gen. No. 76-76.

Branch banking and bank holding company restrictions apply to bank facilities conducting only trust business. 1980 Op. Att'y Gen. No. 80-156.

Independent trustees of profit-sharing plan may be deemed a bank holding company. - Independent trustees of the profit-sharing plan for the employees of a bank would, in the event that the trust should directly or indirectly own, control, or hold, with the power to vote, more than 5 percent of the voting shares of two or more banks, be a bank holding company within the meaning of Georgia bank holding company laws. 1974 Op. Att'y Gen. No. 74-151.

Agreements not within subparagraph (a)(5)(B). - Agreement made in the course of securing previously contracted debt which transfers control of the shares of stock in the bank does not fall within the reach of former Code 1933, § 13-207 (see O.C.G.A. § 7-1-605 ) provided that shares are disposed of within two years from the date of acquisition. 1976 Op. Att'y Gen. No. 76-26.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 21.

7-1-606. Bank holding companies - Actions unlawful without prior approval of commissioner; exceptions.

    1. On and after July 1, 1976, it shall be unlawful, except with the prior approval of the commissioner:
      1. For any action to be taken that causes any company to become a bank holding company;
      2. For any action to be taken that causes a bank to become a subsidiary of a bank holding company;
      3. For any bank holding company to acquire direct or indirect ownership or control of any voting shares of any bank if, after such acquisition, such company will directly or indirectly own or control 5 percent or more of the voting shares of such bank;
      4. For any bank holding company or subsidiary thereof, other than a bank, to acquire all or substantially all of the assets of a bank;
      5. For any bank holding company to merge or consolidate with, or enter into a share exchange with, any other bank holding company; or
      6. For any bank holding company to take any action which would violate the federal Bank Holding Company Act of 1956, as amended.
    2. Notwithstanding paragraph (1) of this subsection, this prohibition shall not apply to:
      1. Shares acquired by a bank:
        1. In good faith in a fiduciary capacity, except where such shares are held under a trust that constitutes a company as defined in paragraph (2) of subsection (b) of Code Section 7-1-605 and except as provided in paragraphs (2) and (3) of subsection (c) of Code Section 7-1-605; or
        2. In the regular course of securing or collecting a debt previously contracted in good faith, but any shares acquired after July 1, 1976, in securing or collecting any such previously contracted debt shall be disposed of within a period of two years from the date on which they were acquired;
      2. Additional shares acquired by a bank holding company in a bank in which such bank holding company owned or controlled a majority of the voting shares prior to such acquisition; or
      3. Transactions for which the department has established by rule, regulation, or written policy a streamlined or alternative procedure, if such procedure specifically dispenses with the need for approval by the commissioner.

        For the purpose of this paragraph, bank shares acquired after July 1, 1976, shall not be deemed to have been acquired in good faith in a fiduciary capacity if the acquiring bank or company has sole discretionary authority to exercise voting rights with respect thereto; but, in such instances, acquisitions may be made without prior approval of the commissioner if the commissioner, upon application filed within 90 days after the shares are acquired, approves retention or, if retention is disapproved, the acquiring bank disposes of the shares or its sole discretionary voting rights within two years after issuance of the order of disapproval.

    1. The commissioner shall not approve nor shall any other procedure authorize:

      (A) Any acquisition or merger or share exchange or consolidation under this Code section which would result in a monopoly or which would be in furtherance of any combination or conspiracy to monopolize or to attempt to monopolize the business of banking in any part of the State of Georgia; or

      (B) Any other proposed acquisition or merger or share exchange or consolidation under this Code section whose effect in any section of the state may be substantially to lessen competition, or to tend to create a monopoly, or which in any other manner would be in restraint of trade, unless it finds that the anticompetitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served.

    2. In every case, the department shall take into consideration the financial and managerial resources and future prospects of the company or companies and the banks concerned and the convenience and needs of the community to be served.
  1. Nothing contained in this Code section shall affect the obligation of any person or company to comply with the provisions of any order of any court or of the commissioner entered prior to July 1, 1976.
  2. The commissioner shall not grant any such contemplated approval until he or she shall first cause reasonable public notice of the proposed action to be given in the area to be affected and until he or she shall first afford to the public an opportunity to submit, for the commissioner's consideration, information, objections, and opinions as to the proposed action and its effect. The notice requirement may not apply in the case of a streamlined procedure where the holding company meets certain qualifying criteria established by rule, regulation, or written policy of the department.
  3. Notwithstanding any other provisions of this part, a bank holding company which lawfully controls a bank or has received the requisite approvals under this Code section to acquire control of a bank may, with the approval of the commissioner, or as otherwise provided in this chapter or by departmental rule or regulation, either at the time such control is obtained or at any time thereafter, merge or consolidate such bank with another of such bank holding company's banking subsidiaries or have another of such bank holding company's banking subsidiaries acquire all or substantially all of the assets of such bank and consequently operate as a branch office of such other banking subsidiary. Nothing in this subsection shall be deemed to supersede, rescind, or modify any provision, requirement, or condition of this Code section which would otherwise be applicable to any acquisition of a banking subsidiary by a bank holding company under this Code section, nor shall it be deemed to supersede, rescind, or modify any provision, requirement, or condition of Part 14, 15, 16, 19, or 20 of this article which would otherwise be applicable to the merger of banks or the acquisition or sale of all or substantially all of the assets of a bank.

    (Code 1933, § 13-207.1, enacted by Ga. L. 1976, p. 168, § 3; Ga. L. 1980, p. 542, § 1; Ga. L. 1985, p. 1506, § 1; Ga. L. 1997, p. 143, § 7; Ga. L. 1998, p. 795, § 27; Ga. L. 1999, p. 674, § 17; Ga. L. 2007, p. 502, § 14/SB 70.)

U.S. Code. - The federal Bank Holding Company Act, referred to in subparagraph (a)(1)(F) of this Code section, is codified as 12 U.S.C. § 1841 et seq.

Law reviews. - For annual survey of law of business associations, see 43 Mercer L. Rev. 85 (1991).

JUDICIAL DECISIONS

Purpose of subparagraph (a)(1)(C). - It is unlawful for any bank holding company to acquire or hold direct or indirect ownership or control of more than five percent of the voting shares of any bank. The purpose of the law is to preserve independence of such banks from the holding company. Independent Bankers Ass'n v. Board of Governors, 516 F.2d 1206 (D.C. Cir. 1975) (decided under former Code 1933, § 13-207(a)(2) as it read prior to revision by Ga. L. 1976, p. 168, § 3).

Acquisition and operation of branch banks by holding company's subsidiary. - Although a bank holding company may change the corporate structure of its banking subsidiaries through merger, consolidation, or purchase, and may continue all of the banking activities of the component banks, a bank holding company may not, through its banking subsidiary, acquire "branch banks" and continue to operate them as such. First Nat'l Bank of Commerce v. Community Bankers Ass'n, 260 Ga. 371 , 394 S.E.2d 95 (1990).

"Branch" not necessarily interchangeable with "bank". - Term "branch", as used in O.C.G.A. § 7-1-606(e) , is not necessarily interchangeable with "bank". Community Bankers Ass'n v. First Nat'l Bank of Commerce, 193 Ga. App. 569 , 388 S.E.2d 387 (1989), aff'd, 260 Ga. 371 , 394 S.E.2d 95 (1990).

Merger with branch not approved without merging entire bank. - Nothing in the Code expresses or implies any intent to permit approval of a bank holding company's merging or consolidating with, or acquiring control of, a branch bank by itself without merging or consolidating with, or acquiring control of, the entire bank. Community Bankers Ass'n v. First Nat'l Bank of Commerce, 193 Ga. App. 569 , 388 S.E.2d 387 (1989), aff'd, 260 Ga. 371 , 394 S.E.2d 95 (1990).

OPINIONS OF THE ATTORNEY GENERAL

Exemption to branching prohibition under § 7-1-601(c) . - It seems clear that O.C.G.A. § 7-1-606(e) creates at least a limited exception to branching prohibition of O.C.G.A. § 7-1-601(c) . 1981 Op. Att'y Gen. No. 81-74.

Operation of savings and loan across county lines. - Only branch of a savings and loan association located in the county affected, which is lawfully controlled by a bank holding company or as to which the bank holding company has received the requisite approvals to acquire control, may be lawfully acquired by a banking subsidiary of a bank holding company through a purchase and assumption and operated across county lines as a branch of the banking subsidiary; provided, such acquisition is approved by the commissioner of banking and finance. 1988 Op. Att'y Gen. No. 88-13.

Merger of subsidiaries of holding company across county lines. - With respect to circumstances under which a bank holding company may merge two subsidiaries across county lines, there are two requirements: (1) the commissioner must approve, and (2) merger must take place at the time the holding company acquires the bank which is to become a branch bank following merger. 1981 Op. Att'y Gen. No. 81-74.

Careful phrasing of O.C.G.A. § 7-1-606(e) and its placement into existing statutes are inconsistent with an intent to authorize bank holding companies generally to merge their subsidiaries across county lines. 1981 Op. Att'y Gen. No. 81-74.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 21, 194 et seq., 234.

7-1-607. Bank holding companies that control a bank - Registration, reporting, examinations, and control.

  1. On July 1, 1976, and annually thereafter on dates established by the commissioner, each bank holding company that controls a bank chartered by the department shall register with the commissioner on forms provided or prescribed by him or her, which may include such information with respect to the financial condition, operation, management, and intercompany relationships of the bank holding company and its subsidiaries and related matters as the commissioner may deem necessary or appropriate to carry out the purposes of this part.
  2. The commissioner is authorized to issue such regulations and orders as may be necessary to enable him or her to administer and carry out the purposes of this Code section.
  3. The commissioner from time to time may require reports under oath to keep him or her informed as to whether the provisions of this Code section and such regulations and orders thereunder issued by him or her have been complied with; may make examinations of each bank holding company and each subsidiary thereof, the cost of which may be assessed against and paid by such holding company; and shall, as far as possible, use the reports of examination made by the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, or the Board of Governors of the Federal Reserve System for the purposes of this Code section.
  4. Bank holding companies that control a bank chartered by the department and subsidiaries or affiliates thereof shall be regulated, controlled, and examined by the commissioner to the same extent that he or she regulates, controls, and examines state banks under his or her jurisdiction, which would be in addition to the authority of the Federal Reserve Board as fixed by the laws of the United States. The commissioner is authorized, directed, and required to promulgate, with precision, rules and regulations and investment procedures in the regulation, examination, and control of bank holding companies that control a bank chartered by the department.

    (Code 1933, § 13-207.2, enacted by Ga. L. 1976, p. 168, § 4; Ga. L. 1999, p. 674, § 17; Ga. L. 2016, p. 390, § 2-16/HB 811; Ga. L. 2017, p. 193, § 13/HB 143.)

The 2016 amendment, effective July 1, 2016, inserted "that controls a bank" near the beginning of subsection (a); deleted "and prevent evasions thereof, and for the purpose of lessening the regulatory burden to waive certain requirements associated with the annual reporting requirements for bank holding companies that do not have their principal place of business in Georgia and do not own Georgia banks" following "Code section" in subsection (b); and, in subsection (d), in the first sentence, inserted "that control a bank" near the beginning, deleted "and other financial institutions" following "examines state banks" in the middle, and substituted "holding companies that control a bank" for "holding companies doing business in this state" at the end of the last sentence.

The 2017 amendment, effective June 1, 2017, inserted "chartered by the department" near the middle of subsection (a) and in the first and second sentences of subsection (d).

OPINIONS OF THE ATTORNEY GENERAL

Commissioner has discretion to promulgate rules for regulation and examination. - Amendments to Georgia bank holding company statutes commit promulgation of rules for regulation, examination and control of bank holding companies doing business in Georgia to discretion of the commissioner, who should exercise the commissioner's discretion in issuance of rules and regulations to the extent necessary to effectuate the purposes of bank holding company statutes. 1976 Op. Att'y Gen. No. 76-76.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 21.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1192, 1194.

7-1-608. Bank holding companies - Lawful and unlawful acquisitions, formations, and mergers; waivers.

  1. It shall be unlawful for a bank holding company to acquire direct or indirect ownership or control of any voting shares of any bank, including any federal savings and loan association or federal savings bank, if, after such acquisition, such bank holding company will directly or indirectly own or control 5 percent or more of the voting shares of such bank, or for any company to become a bank holding company as a result of the acquisition of control of such bank, unless:
    1. The bank being acquired is either a "bank" for the purposes of the federal Bank Holding Company Act of 1956, as amended (12 U.S.C. Section 1841), or a "savings and loan," a "state savings and loan," a "savings bank," or a "federal savings bank" whose deposits are insured under a federal deposit insurance program; and
    2. Such bank of the type described in paragraph (1) of this subsection has been in existence and continuously operating or incorporated as a bank for a period of three years or more prior to the date of acquisition.
  2. Notwithstanding the provisions of this Code section, the following activities are permitted. These activities regarding acquisitions by purchase and by formation are to be considered exceptions to the three-year age requirement contained in paragraph (2) of subsection (a) of this Code section:
    1. A bank holding company may acquire all or substantially all of the shares of a bank or trust company organized solely for the purpose of facilitating the acquisition of a federal or state chartered bank, savings and loan association, savings bank, or other corporation doing a banking business in this state or the trust department of such institutions, which has been in existence and continuously operating or incorporated as such an institution or exercising trust powers for the minimum period prescribed in subsection (a) of this Code section;
    2. A company may become a bank holding company by virtue of acquiring control of a bank if neither the company nor any other company controlled by or controlling such company controls any other bank domiciled in this state or elsewhere;
    3. A bank holding company registered with the department and lawfully owning a bank or a branch of a bank which was formed by the acquisition and subsequent merger of or share exchange with a Georgia bank, which bank or branch does a lawful banking business in this state, may acquire control through formation of a de novo bank in Georgia, provided that departmental approval and any required federal approvals are obtained. No out-of-state bank holding company may enter Georgia to do a banking business by formation of a de novo bank; and
    4. A de novo bank established or formed pursuant to paragraph (3) of this subsection shall be subject to the three-year age requirement contained in paragraph (2) of subsection (a) of this Code section. A bank holding company may, however, merge or consolidate a de novo bank which may be less than three years old and that is established pursuant to paragraph (3) of this subsection into another bank owned by that holding company.
  3. The department may waive the application of the three-year age requirement in the case of a bank that has been found by federal or state regulators to be:
    1. Insolvent or in an unsafe or unsound condition to transact its business;
    2. In a condition where it has generally suspended payment of its obligations without authority of law; or
    3. Under any plan, order, or agreement of any kind with the FDIC under Section 12, 13, or 38 of the Federal Deposit Insurance Act, 12 U.S.C. Section 1811, et seq., as amended.
  4. The commissioner may waive the three-year age requirement contained in paragraph (2) of subsection (a) of this Code section if the commissioner determines that the proposed acquisition will result in material improvement of the safety and soundness of an institution that is in less than satisfactory condition at the time of the proposed acquisition. No such waiver will be authorized unless the commissioner determines that the proposed acquisition will not present undue safety and soundness risks to the financial institutions involved. In making such determination, the commissioner shall consider the financial condition and regulatory safety and soundness ratings of the institutions affected and the ability of management to administer and supervise the resulting institution.

    (Code 1933, § 13-207.3, enacted by Ga. L. 1976, p. 168, § 5; Ga. L. 1980, p. 1081, § 1; Ga. L. 1981, p. 1008, § 1; Ga. L. 1983, p. 602, § 15; Ga. L. 1985, p. 246, § 2; Ga. L. 1987, p. 1586, § 10; Ga. L. 1993, p. 917, § 5; Ga. L. 1996, p. 848, § 11; Ga. L. 1997, p. 143, § 7; Ga. L. 1999, p. 674, § 17; Ga. L. 2000, p. 174, § 14; Ga. L. 2002, p. 670, § 1; Ga. L. 2007, p. 502, § 15/SB 70; Ga. L. 2015, p. 344, § 14/HB 184; Ga. L. 2016, p. 390, § 7-4/HB 811.)

The 2015 amendment, effective July 1, 2015, added subsection (d).

The 2016 amendment, effective July 1, 2016, deleted "building and loan association," following "savings bank," in the middle of paragraph (b)(1).

Law reviews. - For article discussing compliance with Federal Securities Act of 1933 in bank acquisitions and the issuance of securities of bank holding companies, see 14 Ga. St. B.J. 114 (1978).

OPINIONS OF THE ATTORNEY GENERAL

Scope of application. - Prohibition of former Code 1933, § 13-207.3 applies equally to out-of-state banks and bank holding companies and to those organized in Georgia, or, in the case of national banks, located in Georgia. 1980 Op. Att'y Gen. No. 80-156.

Former Code 1933, § 13-207.3 was not designed to prohibit "phantom bank reorganizations." 1980 Op. Att'y Gen. No. 80-156.

Former Code 1933, § 13-207.3 prohibits transactions whereby a bank's trust department becomes a separate corporation wholly owned by the bank or the bank's parent. 1980 Op. Att'y Gen. No. 80-156.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 518, 613.

7-1-609. Civil actions by department to enforce part.

The department may bring an appropriate civil action to enforce any provision of this part, whether by injunction or otherwise, in any superior court of this state having jurisdiction of one or more of the defendants.

(Code 1933, § 13-208, enacted by Ga. L. 1960, p. 67, § 7; Ga. L. 1970, p. 954, § 6.)

JUDICIAL DECISIONS

Construction of word "may" in section. - Rule for construction of word "may" in a statute is, that when such statute concerns public interest, or affects rights of third persons, the word "may," shall be construed to mean "must" or "shall." Independent Bankers Ass'n v. Dunn, 230 Ga. 345 , 197 S.E.2d 129 (1973).

Commissioner may proceed against state or national banks. - It is clear that the superintendent (now commissioner) is authorized to bring an action to enjoin a state bank for violation of the state's branching laws and the superintendent is likewise authorized to proceed against national banks for violation of Georgia's laws. Jackson v. First Nat'l Bank, 349 F.2d 71 (5th Cir. 1965).

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, §§ 145, 155.

7-1-610. National bank rights.

National banks shall have the same but no greater rights under or by virtue of this part than the rights granted to banks and trust companies organized under the laws of this state.

(Ga. L. 1960, p. 67, § 2.)

JUDICIAL DECISIONS

Cited in Jackson v. First Nat'l Bank, 349 F.2d 71 (5th Cir. 1965).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 1 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, § 1 et seq.

7-1-611. Penalties for violations.

Any bank, bank holding company, or company (as defined in Code Section 7-1-605) which violates subsection (a) of Code Section 7-1-601 or any provision of Code Section 7-1-602, Code Section 7-1-603, or Code Sections 7-1-605 through 7-1-608 shall be subject to civil monetary penalties of not less than $500.00 nor more than $5,000.00 unless it shall cease and desist therefrom within 60 days after notice of any such violation served on it by the department. Each day on which such violation occurs shall constitute a separate offense.

(Code 1933, § 13-9938, enacted by Ga. L. 1960, p. 67, § 8; Ga. L. 2000, p. 136, § 7; Ga. L. 2016, p. 390, § 7-14/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted "shall be subject to civil monetary penalties of" for "shall, upon conviction, be fined" in the first sentence of this Code section.

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 32.

7-1-612. Power of banks to contract with other banks for trust services.

Notwithstanding any other provisions of this part to the contrary, any bank or trust company which does not exercise trust powers as provided in this chapter, whether or not such powers have been incorporated into its articles, may, with the consent of the department, contract with any bank or trust company exercising trust powers to provide for the latter bank or trust company to offer trust services through the branches and offices of the former bank or trust company.

(Code 1981, § 7-1-612 , enacted by Ga. L. 1983, p. 602, § 16; Ga. L. 1986, p. 1244, § 2.)

PART 19 I NTERSTATE ACQUISITIONS OF BANKS AND BANK HOLDING COMPANIES

Law reviews. - For article, "Georgia's Interstate Banking Legislation," see 20 Ga. St. B.J. 186 (1984). For note on the 1994 amendments of Code Sections 7-1-620 to 7-1-626 and enactment of Code Section 7-1-627 (now repealed) of this part, prior to the 1996 revision of this part, see 11 Ga. St. U.L. Rev. 50 (1994).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 8 et seq.

7-1-620. Purpose of this part.

This part governs the acquisition of banks having banking offices in Georgia by bank holding companies controlling bank subsidiaries having banking offices outside this state. It further governs the acquisition of banks having banking offices outside this state by bank holding companies controlling bank subsidiaries having banking offices in Georgia. It sets forth application, notice, and other related requirements. Acquisitions of banks having banking offices only in Georgia by bank holding companies controlling only bank subsidiaries having banking offices solely in Georgia are governed by the provisions of Code Sections 7-1-605 through 7-1-608.

(Code 1981, § 7-1-620 , enacted by Ga. L. 1996, p. 279, § 1; Ga. L. 2004, p. 631, § 7; Ga. L. 2016, p. 390, § 2-17/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "registration," following "notice," in the third sentence.

Editor's notes. - Ga. L. 1996, p. 279, § 1, redesignated former Code Section 7-1-620 as present Code Section 7-1-621.

Law reviews. - For review of 1996 banking and finance legislation, see 13 Ga. St. U.L. Rev. 1.

7-1-621. Definitions.

As used in this part, the term:

  1. "Acquire," as applied to a bank holding company, means any of the following actions or transactions:
    1. The merger or consolidation with another bank holding company;
    2. The acquisition of the direct or indirect ownership or control of voting shares of another bank holding company or bank if, after such acquisition, such bank holding company will directly or indirectly own or control more than 5 percent of any class of voting shares of such bank holding company or bank;
    3. The direct or indirect acquisition of all or substantially all of the assets of another bank holding company or bank; or
    4. The taking of any other action that would result in the direct or indirect control of another bank holding company or bank.

      "Acquire" shall also include a transaction where a bank subsidiary of a bank holding company merges or consolidates with, or acquires all or substantially all of the assets of, another bank.

  2. "Bank" means any "insured bank" as such term is defined in 12 U.S.C. Section 1813(h) of the Federal Deposit Insurance Act or any institution eligible to become such, provided that the term "bank" shall not include any "foreign bank" (which is defined as in 12 U.S.C. Section 3101 of the International Banking Act of 1978). The term "bank" as used in this part shall include any savings and loan association or state savings and loan association as such terms are defined in Code Section 7-1-4 and shall include federal savings banks and similar banking entities chartered under the laws of any state and whose deposits are insured under a federal deposit insurance program.
  3. "Bank holding company" means any company which is a bank holding company under Code Section 7-1-605.
  4. "Bank supervisory agency" means:
    1. The Office of Comptroller of Currency, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and any successor to those agencies; and
    2. The agency of a state with primary responsibility for chartering and supervising banks.
  5. "Banking office" or "banking location" means a main office or a branch office as such terms are defined in this chapter or any other office at which a bank accepts deposits.
  6. "Commissioner" means the commissioner of banking and finance then in office and, where appropriate, all of his or her successors and predecessors in office.
  7. "Control" means that which is set forth in Code Section 7-1-605.
  8. "Deposits" means, with respect to a bank, all demand, time, and savings deposits of individuals, partnerships, corporations, the United States government, and states and political subdivisions in the United States. Determinations of deposits shall be made by reference to regulatory reports of condition or similar reports filed by such bank with state or federal regulatory authorities.
  9. "Georgia bank" means a bank whose home state is Georgia.
  10. "Georgia bank holding company" means a bank holding company that:
    1. Has its principal place of business in the State of Georgia; and
    2. Is not controlled by a bank holding company other than a Georgia bank holding company.
  11. "Georgia state bank" means a bank chartered under the laws of the State of Georgia.
  12. "Home state" means any state in the United States:
    1. With respect to a state bank, the state by which the bank is chartered;
    2. With respect to a national bank, the state in which the main office of the bank is located; or
    3. With respect to a foreign bank, the state determined to be the home state of the foreign bank under 12 U.S.C. Section 3103(c) of the International Banking Act.
  13. "Home state regulator" means, with respect to an out-of-state state bank, the bank supervisory agency of the state in which such bank is chartered.
  14. "Host state" means a state, other than the home state of a bank, in which the bank maintains or seeks to establish and maintain a branch.
  15. "Insured depository institution" shall have the same meaning as set forth in 12 U.S.C. Section 1813(c)(2) and (3) of the Federal Deposit Insurance Act, provided that the term "insured depository institution" shall not include any "foreign bank" (which is defined as in 12 U.S.C. Section 3101 of the International Banking Act of 1978).
  16. "Interstate merger transaction" means:
    1. The merger or consolidation of banks with different home states and the conversion of branches of any bank involved in the merger or consolidation into branches of the resulting bank; or
    2. The purchase of all or substantially all of the assets of a bank whose home state is different from the home state of the acquiring bank.
  17. "Out-of-state bank" means a bank whose home state is not Georgia, but the term does not include a foreign bank.
  18. "Out-of-state bank holding company" means a bank holding company other than a Georgia bank holding company.
  19. "Out-of-state state bank" means a bank chartered under the laws of a state other than Georgia.
  20. "Principal place of business" of a bank holding company means the state of charter in which the aggregate deposits of the bank subsidiaries of such bank holding company are largest.
  21. "Resulting bank" means a bank that has resulted from an interstate merger transaction under Part 20 of this article.
  22. "State" means any state of the United States, including the District of Columbia.
  23. "Subsidiary" means that which is set forth in Code Section 7-1-605 . (Code 1981, § 7-1-620 , enacted by Ga. L. 1984, p. 1467, § 1; Ga. L. 1987, p. 251, § 1; Ga. L. 1988, p. 13, § 7; Ga. L. 1994, p. 215, § 1; Code 1981, § 7-1-621 , as redesignated by Ga. L. 1996, p. 279, § 1; Ga. L. 1997, p. 143, § 7; Ga. L. 1999, p. 674, § 18; Ga. L. 2000, p. 174, § 15; Ga. L. 2015, p. 5, § 7/HB 90; Ga. L. 2016, p. 390, § 2-18/HB 811; Ga. L. 2017, p. 193, § 14/HB 143.)

The 2015 amendment, effective March 13, 2015, part of an Act to revise, modernize, and correct the Code, deleted "the Office of Thrift Supervision," preceding "and any successor" in subparagraph (4)(A).

The 2016 amendment, effective July 1, 2016, in paragraph (2), in the first sentence, substituted "'insured bank' as such term is defined in 12 U.S.C. Section 1813(h) of the Federal Deposit Insurance Act" for "insured institution as such term is defined in Section 3(h) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1813(h)", in the second sentence, deleted "building and loan association," following "include any", and deleted a comma following "loan association"; substituted the present provisions of paragraph (7) for the former provisions, which read: "'Control' means that which is set forth either in Code Section 7-1-605 or Section 2(a) of the federal Bank Holding Company Act of 1956, as amended, 12 U.S.C. Section 1841(a)"; substituted "12 U.S.C. Section 3103(c)" for "12 U.S.C. Section 3101(c)" in subparagraph (12)(C); added the proviso at the end of paragraph (15); and substituted the present provisions of paragraph (23) for the former provisions, which read: "'Subsidiary' means that which is set forth either in Code Section 7-1-605 or Section 2 of the federal Bank Holding Company Act of 1956, as amended, 12 U.S.C. Section 1841."

The 2017 amendment, effective June 1, 2017, substituted the present provisions of paragraph (3) for the former provisions, which read: "'Bank holding company' means any company which is a bank holding company under either Code Section 7-1-605 or Section 2(a) of the federal Bank Holding Company Act of 1956, as amended, 12 U.S.C. Section 1841(a).".

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1996, "banking and finance" was substituted for "the Department of Banking and Finance" in paragraph (6) and "Federal Deposit Insurance" was substituted for "FDI" in paragraph (15).

Editor's notes. - Ga. L. 1996, p. 279, § 1, effective April 1, 1996, redesignated former Code Section 7-1-621 as present Code Section 7-1-622.

Law reviews. - For article, "Bank Directors: Understanding Their Role, Responsibility and Liability," see 40 Mercer L. Rev. 587 (1989).

7-1-622. Provisions applicable to interstate acquisitions or mergers by bank holding companies; eligibility of applicants; commissioner's ruling required.

  1. A bank holding company may acquire a bank in Georgia, and a bank holding company having its principal place of business in this state may acquire a bank having banking offices in another state, upon compliance with the provisions of Code Sections 7-1-605 through 7-1-612 and in particular Code Section 7-1-606, which provisions shall be expressly applicable to any such acquisition. Compliance with all applicable regulations, payment of applicable fees, and registration of the holding company shall be required. The restrictions of this Code section shall apply.
  2. Notwithstanding anything contained in subsection (a) of this Code section and subject to the permitted acquisitions of subsection (b) of Code Section 7-1-608, no bank or bank holding company may:
    1. Directly or indirectly acquire a Georgia bank unless such bank has been in existence and continuously operated or incorporated as a bank for a period of three years or more prior to the date of acquisition. Notwithstanding the foregoing, nothing shall prohibit an out-of-state bank holding company from acquiring all or substantially all of the shares of a Georgia bank organized solely for the purpose of facilitating the acquisition of a bank which has been in existence and continuously operated as a bank for the requisite three-year period; or
    2. Directly or indirectly acquire a bank having banking offices in Georgia if:
      1. Immediately before the consummation of the acquisition for which an application is filed, the applicant (including any insured depository institution affiliate of the applicant) controls any insured depository institution or any branch of an insured depository institution in this state; and
      2. The applicant (including all insured depository institutions which are affiliates of the applicant), upon consummation of the acquisition, would control 30 percent or more of the total amount of deposits of insured depository institutions in this state. The commissioner may by regulation adopt a procedure whereby the foregoing limitations on concentration of deposits may be waived upon showing of good cause. This restriction shall not apply, in the discretion of the commissioner, to transactions complying with paragraph (1) of subsection (b) of Code Section 7-1-623.
  3. The commissioner must rule on any application seeking approval to engage in a transaction under this Code section not later than 90 days following the date of submission of a completed application seeking such approval. If the commissioner decides to hold a public hearing in connection with the application, the time limit specified may be extended to 30 days after the conclusion of the hearing. If the commissioner fails to rule on the application within the requisite period, the proposed transaction shall stand approved.
  4. If any acquisition involves or takes the form of an interstate merger transaction, the banks involved must comply with filing and other requirements in Part 20 of this article in addition to subsection (b) of this Code section.
  5. This part is not intended to discriminate against out-of-state bank holding companies or against foreign bank holding companies in any manner that would violate Section 3(d) of the Bank Holding Company Act, as amended by the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. (Code 1981, § 7-1-621 , enacted by Ga. L. 1984, p. 1467, § 1; Ga. L. 1994, p. 215, § 2; Code 1981, § 7-1-622 , as redesignated by Ga. L. 1996, p. 279, § 1; Ga. L. 1997, p. 485, § 22; Ga. L. 1999, p. 674, § 19; Ga. L. 2002, p. 670, § 2.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1996, "article" was substituted for "chapter" in subsection (d).

Editor's notes. - Ga. L. 1996, p. 279, § 1, effective April 1, 1996, redesignated former Code Section 7-1-622 as present Code Section 7-1-623.

7-1-623. Acquisitions not requiring department approval.

  1. Subject to any applicable restrictions or exceptions provided for in subsection (b) of Code Section 7-1-622, a bank holding company having a bank subsidiary with banking offices in Georgia may acquire a bank that does not have banking offices in this state, and a bank holding company may acquire an out-of-state bank with branch offices in Georgia, but shall notify the department at least 30 days prior to the consummation of the proposed transaction. The notification requirements of this subsection shall be satisfied by furnishing the department with a copy of the application or applications filed with applicable bank supervisory agencies seeking approval for the proposed transaction and such other information as the department shall request. In lieu of furnishing the entire application, the applicant may submit to the department a description of the transaction within the same time frame. In this event, the department shall request further information only if needed. The department may, for good cause shown, object to the transaction by letter to the bank holding company and to the appropriate federal or state regulator before consummation of the transaction.
  2. A bank holding company may engage in the transactions described in paragraphs (1) and (2) of this subsection without the necessity of complying with Code Section 7-1-622 , provided that it notifies the department not less than 30 days following the consummation of the transaction.
    1. The acquisition of a Georgia bank, if such acquisition has been consummated with assistance from the Federal Deposit Insurance Corporation under Section 13(c) of the Federal Deposit Insurance Act, as amended, 12 U.S.C. Section 1823(c); or
    2. The acquisition of a Georgia bank, if such acquisition has been consummated in the regular course of securing or collecting a debt previously contracted in good faith, as provided in and subject to the requirements of Section 3(a) of the federal Bank Holding Company Act of 1956, as amended, 12 U.S.C. Section 1842(a). If the bank acquired under this provision has banking offices in Georgia, the bank or bank holding company must divest the securities or assets acquired within two years of the date of acquisition. The department may, in its discretion, permit the bank or bank holding company to retain such interest for up to three additional periods of one year each. (Code 1981, § 7-1-622 , enacted by Ga. L. 1984, p. 1467, § 1; Ga. L. 1988, p. 13, § 7; Ga. L. 1994, p. 215, § 3; Code 1981, § 7-1-623 , as redesignated by Ga. L. 1996, p. 279, § 1; Ga. L. 1999, p. 674, § 20; Ga. L. 2016, p. 390, § 2-19/HB 811.)

The 2016 amendment, effective July 1, 2016, in subsection (a), deleted ", which may or may not have an out-of-state bank subsidiary having only branch offices in Georgia," following "bank holding company" in the first sentence, and deleted the former last sentence, which read: "Annual registration of the holding company with the department is required so long as it has banking offices in Georgia."

Editor's notes. - Ga. L. 1996, p. 279, § 1, effective April 1, 1996, redesignated former Code Section 7-1-623 as present Code Section 7-1-624.

7-1-624. Prohibited acquisitions.

  1. Except as expressly permitted under this part, Part 20 of this article, or by federal law, no bank holding company may acquire a bank or a bank holding company controlling a bank chartered by the department.
  2. In the event any bank holding company makes an acquisition that is prohibited by this part, the commissioner shall require such bank holding company to divest itself immediately of its direct or indirect ownership or control of any Georgia banks or banking offices located in Georgia. The commissioner shall also have the power to enforce any other prohibitions in this part by requiring divestitures of nonconforming banks, bank holding companies, or assets. Alternatively, the commissioner shall have the power to impose fines and penalties or exercise such other remedies as are provided in this chapter, including, but not limited to, judicial actions. (Code 1981, § 7-1-623 , enacted by Ga. L. 1984, p. 1467, § 1; Ga. L. 1985, p. 149, § 7; Ga. L. 1994, p. 215, § 4; Code 1981, § 7-1-624 , as redesignated by Ga. L. 1996, p. 279, § 1; Ga. L. 1997, p. 143, § 7; Ga. L. 2016, p. 390, § 2-20/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted "chartered by the department" for "having banking offices in Georgia" at the end of subsection (a); and substituted the present provisions of the second and third sentences of subsection (b) for the former provisions, which read: "In addition, the commissioner shall have the power to enforce any other prohibitions in this part by requiring divestitures of nonconforming banks, bank holding companies, or assets through the imposition of fines and penalties or through the exercise of such other remedies as are provided in this chapter, including but not limited to judicial actions."

Editor's notes. - Ga. L. 1996, p. 279, § 1, effective April 1, 1996, redesignated former Code Section 7-1-624 as present Code Section 7-1-625.

7-1-625. Provisions applicable to, and qualification of, bank holding companies in state; reciprocal agreements; confidentiality of reports.

  1. Any bank holding company controlling a bank having banking offices in Georgia shall be subject to the provisions of Code Sections 7-1-605 through 7-1-612 and the rules and regulations of the department applicable to bank holding companies.
  2. Any bank holding company that has a bank subsidiary with banking offices in Georgia that is not otherwise organized under the laws of this state or qualified to do business in this state shall qualify to do business in this state as a foreign corporation. Such bank holding company shall agree to be bound by all the provisions of Code Sections 7-1-605 through 7-1-612 and by the provisions of this part. Any bank holding company having a Georgia bank subsidiary shall promptly advise the department of any changes in its registered office and agent.
  3. The department may enter into cooperative and reciprocal agreements with the bank regulatory authorities of any state for the periodic examination of bank holding companies and may accept reports of examination and other records from such authorities in lieu of conducting its own examinations. The department may enter into joint actions with other regulatory bodies having concurrent jurisdiction or may enter into such actions independently to carry out its responsibilities under this title and assure compliance with the laws of this state. Any examinations or reports originated by Georgia or by another bank supervisory agency shall be deemed and treated as confidential according to Georgia law, and such confidentiality shall not be affected by the sharing of the examinations or reports. The department shall not be obligated to provide or disclose such examinations and reports to any third party. Agreements to share such examinations or reports shall contain provisions for dealing with confidentiality and subpoenas. (Code 1981, § 7-1-624 , enacted by Ga. L. 1984, p. 1467, § 1; Ga. L. 1994, p. 215, § 5; Code 1981, § 7-1-625 , as redesignated by Ga. L. 1996, p. 279, § 1; Ga. L. 2018, p. 214, § 12/HB 780.)

The 2018 amendment, effective May 3, 2018, deleted "and shall advise the department of the location of its initial registered office within this state and the name of its initial registered agent at such location" following "foreign corporation" at the end of the first sentence of subsection (b). See Editor's notes for applicability.

Editor's notes. - Ga. L. 1996, p. 279, § 1, effective April 1, 1996, redesignated former Code Section 7-1-625 as present Code Section 7-1-626.

Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

7-1-626. Severability; construction with other laws.

  1. It is the express intention of the Georgia General Assembly to provide a unified and orderly method of permitting limited interstate banking. Thus, if any provision of this part establishing the framework within which interstate banking may occur or providing for registration, approval, and supervisory powers of the department and the commissioner is determined by final, nonappealable order of any Georgia or federal court of competent jurisdiction to be invalid or unconstitutional, the remaining provisions of this part shall not be affected and shall continue to apply to any bank, bank holding company, foreign bank, or other person or circumstance.
  2. Nothing contained in this part shall be construed to amend or modify the provisions of any other part of this chapter governing the supervision or regulation of banks and bank holding companies, as defined in this part, or the organization and powers of the department and the commissioner with respect thereto as provided in such other parts. (Code 1981, § 7-1-625 , enacted by Ga. L. 1984, p. 1467, § 1; Ga. L. 1994, p. 215, § 6; Code 1981, § 7-1-626 , as redesignated by Ga. L. 1996, p. 279, § 1.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1996, in the second sentence of subsection (a), "may occur or" was substituted for "may occur," and a comma was deleted following "commissioner."

Editor's notes. - Ga. L. 1996, p. 279, § 1, repealed former Code Section 7-1-626 , which was based on Code 1981, § 7-1-626 , enacted by Ga. L. 1987, p. 1586, § 11; Ga. L. 1993, p. 917, § 6, relating to rights of bank holding companies consisting of building and loan associations.

7-1-627. Resolution to except bank or bank holding company from acquisition; severability.

Repealed by Ga. L. 1996, p. 279, § 1, effective April 1, 1996.

Editor's notes. - This Code section was based on Code 1981, § 7-1-627 [repealed], enacted by Ga. L. 1994, p. 215, § 7.

PART 20 I NTERSTATE BANKING AND BRANCHING BY MERGER

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 162 et seq.

7-1-628. Purpose and scope of part.

  1. It is the purpose of this part to permit interstate banking and branching by merger under Section 102 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, subject to the limitations and requirements set out in this part and in Parts 14, 15, 18, and 19 of this article.
  2. The scope of this part covers mergers where, upon consummation of the interstate merger transaction, the resulting bank will have banking locations in Georgia and at least one other state. It provides for certain approval, notice, and other requirements. Mergers involving banks having present and resulting branches located only in this state are governed by Parts 14 and 15 of this article. To the extent a bank participating in an interstate merger transaction is owned or controlled by a bank holding company, the applicable provisions of Part 19 of this article shall also apply.
  3. In authorizing the expansion of interstate banking to this state, and in the interests of its citizens, the General Assembly finds that primary consideration should be given to the following:
    1. Affording protection and promoting convenience to bank depositors and other customers of financial institutions in this state;
    2. Preserving the advantages of a sound dual banking system and the competitive equality of state chartered institutions with federally chartered institutions; and
    3. Providing to the Department of Banking and Finance sufficient powers and responsibilities to implement these considerations.
  4. This part is not intended to discriminate against out-of-state bank holding companies or against foreign bank holding companies in any manner that would violate Section 3(d) of the Bank Holding Company Act, as amended by the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. (Code 1981, § 7-1-628 , enacted by Ga. L. 1996, p. 279, § 2; Ga. L. 1998, p. 128, § 7; Ga. L. 2016, p. 390, § 2-21/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "registration," following "approval, notice," in the second sentence of subsection (b); in subsection (c), added "and" at the end of paragraph (c)(2), deleted former paragraph (c)(3), which read: "Supervising, regulating, and keeping records of all persons, firms, corporations, associations, and other business entities who furnish depository, lending, and associated financial services in this state; and", and redesignated former paragraph (c)(4) as present paragraph (c)(3).

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1996, a comma was added in three places in paragraph (c)(3).

7-1-628.1. Definitions.

As used in this part, the term:

  1. "Bank" shall have the same meaning as "insured bank" in 12 U.S.C. Section 1813(h) of the Federal Deposit Insurance Act, provided that the term "bank" shall not include any "foreign bank" (which is defined as in 12 U.S.C. Section 3101 of the International Banking Act of 1978).
  2. "Bank holding company" shall have the same meaning as set forth in 12 U.S.C. Section 1841(a)(1) of the Bank Holding Company Act.
  3. "Bank supervisory agency" shall mean:
    1. Office of Comptroller of Currency, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and any successor to those agencies; and
    2. The agency of a state with primary responsibility for chartering and supervising banks.
  4. "Branch" in the context of this part shall have the same meaning as "domestic branch" in 12 U.S.C. Section 1813(o) of the Federal Deposit Insurance Act. Nothing contained in this part shall be construed to amend or modify the provisions of any other part of this article.
  5. "Commissioner" means the commissioner of banking and finance then in office and, where appropriate, all of his or her successors and predecessors in office.
  6. "Control" means that which is set forth in Code Section 7-1-605.
  7. "Deposits" means, with respect to a bank, all demand, time, and savings deposits of individuals, partnerships, corporations, the United States government, and states and political subdivisions in the United States. Determinations of deposits shall be made by reference to regulatory reports of condition or similar reports filed by such bank with state or federal regulatory authorities.
  8. "Georgia bank" means a bank whose home state is Georgia.
  9. "Georgia bank holding company" means a bank holding company that:
    1. Has its principal place of business in the State of Georgia; and
    2. Is not controlled by a bank holding company other than a Georgia bank holding company.
  10. "Georgia state bank" means a bank chartered under the laws of the State of Georgia.
  11. "Home state" means:
    1. With respect to a state bank, the state by which the bank is chartered;
    2. With respect to a national bank, the state in which the main office of the bank is located; or
    3. With respect to a foreign bank, the state determined to be the home state of the foreign bank under 12 U.S.C. Section 3103(c) of the International Banking Act.
  12. "Home state regulator" means, with respect to an out-of-state state bank, the bank supervisory agency of the state in which such bank is chartered.
  13. "Host state" means a state, other than the home state of a bank, in which the bank maintains or seeks to establish and maintain a branch.
  14. "Insured depository institution" shall have the same meaning as set forth in 12 U.S.C. Section 1813(c)(2) and (3) of the Federal Deposit Insurance Act, provided that the term "insured depository institution" shall not include any "foreign bank" (which is defined as in 12 U.S.C. Section 3101 of the International Banking Act of 1978).
  15. "Interstate merger transaction" means:
    1. The merger or consolidation of banks with different home states and the conversion of branches of any bank involved in the merger or consolidation into branches of the resulting bank; or
    2. The purchase of all or substantially all of the assets of a bank whose home state is different from the home state of the acquiring bank.
  16. "Out-of-state bank" means a bank whose home state is not Georgia, but the term does not include a foreign bank.
  17. "Out-of-state bank holding company" means a bank holding company other than a Georgia bank holding company.
  18. "Out-of-state state bank" means a bank chartered under the laws of a state other than Georgia.
  19. "Principal place of business" of a bank holding company means the state of charter in which the aggregate deposits of the bank subsidiaries of such bank holding company are largest.
  20. "Resulting bank" means a bank that has resulted from an interstate merger transaction under this part.
  21. "State" means any state of the United States, including the District of Columbia.
  22. "Subsidiary" means that which is set forth in Code Section 7-1-605 . (Code 1981, § 7-1-628.1 , enacted by Ga. L. 1996, p. 279, § 2; Ga. L. 1999, p. 674, § 21; Ga. L. 2000, p. 174, § 16; Ga. L. 2016, p. 390, § 2-22/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted "'insured bank'" for "set forth" near the beginning of paragraph (1); substituted the present provisions of paragraph (6) for the former provisions, which read: "'Control' means that which is set forth either in Code Section 7-1-605 or Section 2(a) of the federal Bank Holding Company Act of 1956, as amended, 12 U.S.C. Section 1841(a)"; substituted "12 U.S.C. Section 3103(c)" for "12 U.S.C. Section 3101(c)" in subparagraph (11)(C); added the proviso at the end of paragraph (14); and substituted the present provisions of paragraph (22) for the former provisions, which read: "'Subsidiary' means that which is set forth either in Code Section 7-1-605 or Section 2 of the federal Bank Holding Company Act of 1956, as amended, 12 U.S.C. Section 1841."

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1996, "Federal Deposit Insurance" was substituted for "FDI" in paragraphs (1), (4), and (14); "article" was substituted for "chapter" in paragraph (4); "banking and finance" was substituted for "the Department of Banking and Finance" in paragraph (5); and "State" was substituted for "state" in subparagraph (9)(A).

7-1-628.2. Mergers permitted; applicable provisions.

Interstate merger transactions between out-of-state banks and Georgia banks including Georgia state banks shall be permitted provided that the applicable conditions, approvals, and filing requirements are met by participating banks and bank holding companies. The approval procedure for mergers involving banks having offices located only in this state are governed by Parts 14 and 15 of this article. To the extent a bank participating in a merger is owned or controlled by a bank holding company, the provisions of Part 19 of this article shall also apply to the transaction.

(Code 1981, § 7-1-628.2 , enacted by Ga. L. 1996, p. 279, § 2; Ga. L. 1997, p. 485, § 23.)

7-1-628.3. Prohibited interstate merger transactions.

  1. Except as otherwise expressly provided in this subsection, an interstate merger transaction shall not be permitted under this part if:
    1. Immediately before the merger, any two or more banks involved in the transaction (including all insured depository institutions which are affiliates of any such bank) have a branch in this state; and
    2. Upon consummation of such transaction, the resulting bank (including all insured depository institutions that would be "affiliates," as defined in 12 U.S.C. Section 1841(k) of the resulting bank) would control 30 percent or more of the total amount of deposits held by all insured depository institutions in this state. The 30 percent limitation shall not apply, in the discretion of the commissioner, to transactions complying with paragraph (1) of subsection (b) of Code Section 7-1-623. The commissioner may by regulation adopt a procedure whereby the foregoing limitations on concentration of deposits may be waived upon showing good cause.
  2. An interstate merger transaction shall not be permitted under this part unless the Georgia bank shall have been in existence and continuously operating or incorporated as a bank on the date of such merger or acquisition for a period of at least three years, subject to any applicable exception contained in Code Section 7-1-608 . (Code 1981, § 7-1-628.3 , enacted by Ga. L. 1996, p. 279, § 2; Ga. L. 1997, p. 485, § 23; Ga. L. 1999, p. 674, § 22; Ga. L. 2002, p. 670, § 3; Ga. L. 2015, p. 344, § 15/HB 184.)

The 2015 amendment, effective July 1, 2015, deleted "subsection (b) of" preceding "Code Section 7-1-608" at the end of subsection (b).

7-1-628.4. Permissible interstate merger transactions.

  1. A Georgia state bank may enter into an interstate merger transaction where the Georgia state bank is the resulting bank, and as a result the Georgia state bank may establish, maintain, and operate one or more branches in another state. The Georgia state bank must seek approval for the merger pursuant to the provisions in Part 14 of this article and must comply with federal law.
  2. An out-of-state bank may enter into an interstate merger transaction with a Georgia bank, and an out-of-state bank resulting from such transaction may maintain and operate branches in Georgia. The requirements of Code Section 7-1-628.5 shall be met by the resulting bank. In order to consummate such a merger with a resulting out-of-state state bank, a Georgia state bank shall comply with Code Sections 7-1-531 through 7-1-533 and 7-1-537, except that the format of the articles of merger submitted in accordance with Code Section 7-1-532 may be in conformity with the resulting bank's home state law if such law requires a format different from that specified by Code Section 7-1-532. A Georgia state bank shall comply with Code Section 7-1-556 if a national bank or a federal savings bank is to be the resulting bank.
  3. Any out-of-state bank which lawfully establishes a branch in this state or which subsequently becomes the owner of or controls interstate branches in Georgia, if such transaction is not covered by subsection (a) or (b) of this Code section, shall comply with the requirements in Code Section 7-1-628.5 . (Code 1981, § 7-1-628.4 , enacted by Ga. L. 1996, p. 279, § 2; Ga. L. 1999, p. 674, § 23.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1996, "article" was substituted for "chapter" in the second sentence of subsection (a).

7-1-628.5. Requirement for out-of-state bank that is resulting bank of interstate merger transaction.

  1. An out-of-state bank that will be the resulting bank pursuant to an interstate merger transaction involving a Georgia state bank shall notify the commissioner of the proposed merger not later than the date on which it files an application for an interstate merger transaction with the responsible federal bank supervisory agency, provide such information as required by rule or regulation or as the commissioner may otherwise specify, and pay any filing fee required by regulation.
  2. Prior to consummation of an interstate merger between an out-of-state bank and a Georgia state bank, the resulting bank shall provide the commissioner with satisfactory evidence of all required approvals from all relevant bank supervisory agencies.
  3. Prior to consummation of an interstate merger between an out-of-state bank and a Georgia state bank, and continuously thereafter, the out-of-state bank shall maintain deposit insurance issued by a federal public body while it has a branch or any other location in this state.
  4. Any holding company of the resulting bank from an interstate merger transaction between an out-of-state bank and a Georgia state bank shall comply with Part 19 of this article and Code Sections 7-1-605 through 7-1-612 . (Code 1981, § 7-1-628.5 , enacted by Ga. L. 1996, p. 279, § 2; Ga. L. 1998, p. 128, § 7; Ga. L. 1999, p. 674, § 24; Ga. L. 2016, p. 390, § 2-23/HB 811; Ga. L. 2017, p. 193, § 15/HB 143.)

The 2016 amendment, effective July 1, 2016, deleted the subsection (a) designation; in paragraph (2), inserted "required by rule or regulation or as", and inserted "otherwise" near the end; added "and" at the end of paragraph (3); substituted the present provisions of paragraph (4) for the former provisions, which read: "An out-of-state bank holding company that may be the owner of the resulting bank shall provide satisfactory evidence to the commissioner of compliance with applicable requirements of Article 15 of Chapter 2 of Title 14 of the Georgia Business Corporation Code, 'Foreign Corporations,' and shall notify the department of its location, any changes in its initial registered office within this state, and the name of its registered agent at such location. An out-of-state resulting bank shall notify the department of the location of its initial office, any subsequent registered office, and the name of its current registered agent;"; deleted former paragraphs (5) and (6), relating to bank holding company attempting to establish interstate branches and certifying compliance, respectively; and deleted former subsection (b), relating to facilitation between state regulatory authorities resulting from interstate merger.

The 2017 amendment, effective June 1, 2017, rewrote this Code section.

7-1-628.6. Powers of out-of-state banks branching into Georgia.

  1. An out-of-state state bank which establishes and maintains one or more branches in Georgia under this part may conduct any activities at such branch or branches that are authorized under the law of this state for Georgia state banks.
  2. A Georgia state bank may conduct any activities at any branch outside Georgia that are authorized by Georgia law or that are permissible for a bank chartered by the host state where the branch is located, except to the extent such activities are expressly prohibited by the laws of this state or by any regulation or order of the commissioner applicable to the Georgia state bank and except where the activity is one that requires approval from the department, in which case such approval must be secured; provided, however, that the commissioner may waive any prohibition or requirement for approval if he or she determines, by order or regulation, that the involvement of out-of-state branches of the Georgia state bank in particular activities would not threaten the safety or soundness of such bank.
  3. An out-of-state bank that has established or acquired a branch in Georgia under this part may establish or acquire additional branches in Georgia to the same extent, but to no greater extent, that any Georgia bank may establish or acquire a branch in Georgia under applicable federal and state law. Notification to the department from the bank is required at the same time as the application is made to the federal regulator. A letter describing the transaction shall constitute the required notification and may be written and sent by the bank or the home state regulator. (Code 1981, § 7-1-628.6 , enacted by Ga. L. 1996, p. 279, § 2; Ga. L. 1999, p. 674, § 25; Ga. L. 2001, p. 970, § 8; Ga. L. 2016, p. 390, § 2-24/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted ", and if an activity is one that requires the prior approval of the commissioner, such approval must be secured prior to commencing such activity" at the end of subsection (a).

Law reviews. - For article, "Business Associations," see 53 Mercer L. Rev. 109 (2001).

7-1-628.7. Examinations and reports; powers of commissioner.

  1. To the extent consistent with subsection (c) of this Code section, the commissioner may make such examinations of any branch established and maintained in this state by an out-of-state state bank as the commissioner may deem necessary to determine whether the branch is being operated in compliance with the laws of this state and in accordance with safe and sound banking practices. The provisions of Parts 3 and 4 of Article 1 of this chapter are applicable to examinations.
  2. The commissioner may prescribe requirements for periodic reports regarding any out-of-state bank that operates a branch in Georgia pursuant to this part. The required reports shall be provided by such bank or by the bank supervisory agency having primary responsibility for such bank. Any reporting requirements prescribed by the commissioner under this subsection shall be: (1) consistent with the reporting requirements applicable to Georgia state banks; and (2) appropriate for the purpose of enabling the commissioner to carry out his or her responsibilities under this Code section.
  3. The commissioner may enter into cooperative, coordinating, and information sharing agreements with any other bank supervisory agencies or any organization affiliated with or representing one or more bank supervisory agencies with respect to the periodic examination or other supervision of any branch in Georgia of an out-of-state state bank or of any branch of a Georgia state bank in any host state, and the commissioner may accept such parties' reports of examination and reports of investigation in lieu of conducting his or her own examinations or investigations. Agreements to share should contain provisions for dealing with confidentiality and subpoenas.
  4. Notwithstanding any other law to the contrary, the commissioner may enter into contracts with any bank supervisory agency that has concurrent jurisdiction over a Georgia state bank or an out-of-state state bank operating a branch in this state pursuant to this part to engage the services of such agency's examiners at a reasonable rate of compensation, to provide the services of the commissioner's examiners to such agency at a reasonable rate of compensation, or for another arrangement that the commissioner may find expedient and reasonable.
  5. If appropriate in the discretion of the commissioner and pursuant to an interstate agreement with the pertinent host state regulator for the purpose of facilitating the regulation and supervision of a multistate Georgia state bank, the department may approve and collect from its chartered bank, as agent and home state regulator, examination and supervision fees assessed by a state where the Georgia bank has a branch and may remit such fees to the assessing out-of-state regulator. Such fees shall not be considered revenue payable to the State of Georgia.
  6. In order to facilitate or implement interstate efforts to regulate and supervise a multistate Georgia state bank, the department may adjust its normal supervision examination fee assessment schedule and other rates and charges. Such adjustment may include any examination and supervision fees assessed by host state regulators, pursuant to subsection (e) of this Code section, as a part of the standard supervision and examination assessment.
  7. The commissioner may enter into joint examinations or joint enforcement actions with other bank supervisory agencies having concurrent jurisdiction over any branch in Georgia of an out-of-state state bank or any branch of a Georgia state bank in any host state, provided that the commissioner may at any time take such actions independently if he or she deems such actions to be necessary or appropriate to carry out his or her responsibilities under this part or to ensure compliance with the laws of this state, but provided further that, in the case of an out-of-state state bank, the commissioner shall recognize the exclusive authority of the home state regulator over corporate governance matters and the primary responsibility of the home state regulator with respect to safety and soundness matters.
  8. Each out-of-state bank that maintains one or more branches in this state may be assessed and, if assessed, shall pay supervisory and examination fees in accordance with the laws of this state and regulations of the department.
  9. Any examinations or reports originated by Georgia or by another bank supervisory agency shall be deemed and treated as confidential according to Georgia law, and such confidentiality shall not be affected by the sharing of the examination or reports. The department shall not be obligated to provide or disclose such examinations or reports to any third party. (Code 1981, § 7-1-628.7 , enacted by Ga. L. 1996, p. 279, § 2; Ga. L. 2000, p. 174, § 17.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1996, "chapter" was substituted for "title" in the second sentence of subsection (a) and the designations "(1)" and "(2)" were substituted for "(i)" and "(ii)" in subsection (b).

7-1-628.8. Restrictions on de novo branches.

  1. A "de novo branch" means a branch of a bank which:
    1. Is originally established by the bank as a branch; and
    2. Does not become a branch of the bank as a result of the acquisition of another bank or of a branch of another bank or as the result of the merger, consolidation, or conversion of any such bank or branch.
  2. An out-of-state bank that does not have a branch in Georgia and that meets the requirements of this article may establish and maintain a de novo branch in this state to the extent that any Georgia bank could establish such a de novo branch.
  3. A Georgia state bank may establish and maintain a de novo branch in another state. Such Georgia state bank shall comply with the provisions of this article, including, but not limited to, obtaining approval from the department prior to establishing the branch. (Code 1981, § 7-1-628.8 , enacted by Ga. L. 1996, p. 279, § 2; Ga. L. 1997, p. 485, § 24; Ga. L. 2002, p. 670, § 4; Ga. L. 2016, p. 390, § 2-25/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted the present provisions of subsection (b) for the former provisions, which read: "No out-of-state bank shall establish or maintain a de novo branch in this state unless such bank has lawfully established a branch in Georgia, and then only to the extent that any Georgia bank could establish such a de novo branch."; and substituted the present provisions of subsection (c) for the former provisions, which read: "By enacting this Code section and Code Section 7-1-628.9, the General Assembly intends to permit entry into Georgia only by acquisition of or merger with an entire bank, subject to the three-year rule contained in Code Sections 7-1-608, 7-1-622, and 7-1-628.3".

7-1-628.9. Conditions under which out-of-state bank permitted to establish and maintain branches through in-state acquisition; conditions under which Georgia banks permitted to establish and maintain branches in another state through acquisition.

  1. An out-of-state bank that does not have a branch in Georgia and that meets the requirements of this article may establish and maintain a branch in this state through the acquisition of a branch.
  2. A Georgia state bank may establish and maintain a branch in another state through the acquisition of a branch in compliance with the provisions of this article, including, but not limited to, obtaining approval from the department prior to acquiring the branch. (Code 1981, § 7-1-628.9 , enacted by Ga. L. 1996, p. 279, § 2; Ga. L. 2016, p. 390, § 2-26/HB 811.)

The 2016 amendment, effective July 1, 2016, designated the existing provisions of this Code section as subsection (a) and substituted the present provisions of subsection (a) for the former provisions, which read: "Unless otherwise expressly permitted by Georgia law or regulation, no bank may acquire a branch of any other bank in Georgia without the acquisition of the entire bank, unless the acquiring bank could lawfully establish a branch in the geographic area where the branch to be acquired is located"; and added subsection (b).

7-1-628.10. Enforcement actions by commissioner.

If the commissioner determines that a branch maintained by an out-of-state state bank in this state is being operated in violation of any provision of the laws of this state or that such branch is being operated in an unsafe and unsound manner, the commissioner shall have the authority to take all such enforcement actions as he or she would be empowered to take if the branch were a Georgia state bank, provided that the commissioner shall promptly give notice to the home state regulator of each enforcement action taken against an out-of-state state bank and, to the extent practicable, shall consult and cooperate with the home state regulator in pursuing and resolving said enforcement action.

(Code 1981, § 7-1-628.10 , enacted by Ga. L. 1996, p. 279, § 2.)

7-1-628.11. Regulations; administrative fees.

The commissioner may promulgate such regulations and may provide for the payment of such reasonable filing, application, assessment, and administrative fees as he or she determines to be necessary or appropriate in order to implement the provisions of this part.

(Code 1981, § 7-1-628.11 , enacted by Ga. L. 1996, p. 279, § 2.)

7-1-628.12. Reports required of out-of-state state banks.

The commissioner may require an out-of-state state bank that maintains or seeks to establish a branch in this state to submit to the department its consolidated reports of condition and income in the form specified by the Federal Financial Institutions Examination Council. In order to determine compliance with Georgia law on deposit concentration limits or other areas of state compliance, other reporting of banks may be required by the commissioner.

(Code 1981, § 7-1-628.12 , enacted by Ga. L. 1996, p. 279, § 2.)

7-1-628.13. Notice of merger, consolidation, or other transaction involving out-of-state bank.

Each out-of-state state bank that has established and maintains a branch or which intends to establish a branch in this state pursuant to this part or the person seeking to obtain control of the out-of-state state bank shall give to the commissioner at least 30 days' written notice (or, in the case of an emergency transaction, such shorter notice as is consistent with applicable state or federal law) of any merger, consolidation, or other transaction that would cause a change of control with respect to such bank or any bank holding company that controls such bank, with the result that an application would be required to be filed pursuant to the federal Change in Bank Control Act of 1978, as amended, 12 U.S.C. Section 1817(j), or the federal Bank Holding Company Act of 1956, as amended, 12 U.S.C. Section 1841, et seq., or any successor statutes thereto.

(Code 1981, § 7-1-628.13 , enacted by Ga. L. 1996, p. 279, § 2; Ga. L. 2004, p. 631, § 7.)

7-1-628.14. Severability; construction with other laws.

  1. If any provision of this part or the application of such provision is found by any court of competent jurisdiction in the United States to be invalid as it pertains to any bank, bank holding company, foreign bank, or other person or circumstances, or is found to be superseded explicitly by federal law, the remaining provisions of this part shall not be affected and shall continue to apply to any bank, bank holding company, foreign bank, or other person or circumstance.
  2. Nothing contained in this part shall be construed to amend or modify the provisions of any other part of this chapter governing the supervision or regulation of banks and bank holding companies, as defined in this chapter, or with respect to the organization and powers of the department and the commissioner as provided in such other parts. (Code 1981, § 7-1-628.14 , enacted by Ga. L. 1996, p. 279, § 2.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1996, "part" was substituted for "section" in subsection (a).

7-1-628.15. Tax treatment.

  1. All banks engaged in interstate banking and branching in this state shall be obliged to adhere to the tax laws and regulations of Title 48 which pertain to such activities.
  2. The Department of Revenue shall address the tax treatment of financial organizations before June 1, 1997, in order to provide timely and appropriate taxation of banks which have adjusted their corporate structures according to this part and federal law. (Code 1981, § 7-1-628.15 , enacted by Ga. L. 1996, p. 279, § 2.)

ARTICLE 3 CREDIT UNIONS

Cross references. - Credit Union Deposit Insurance Corporation, T. 7, C. 2.

Exemption from securities-registration provisions of securities issued by or guaranteed by credit union, § 10-5-8.

Administrative Rules and Regulations. - Credit unions generally, Official Compilation of Rules and Regulations of State of Georgia, Rules of Department of Banking and Finance, Chapters 80-2-1 et seq.

Law reviews. - For article, "Small Loans Under Georgia Laws," see 3 Mercer L. Rev. 227 (1952).

PART 1 G ENERAL PROVISIONS; ORGANIZATION

JUDICIAL DECISIONS

Approved certificate of incorporation is prerequisite to recovery on contract. - Holding of approved certificate of incorporation in accordance with O.C.G.A. Pt. 1, Ch. 1, T. 7 is condition precedent to recovery on contract by credit union. Georgia Cent. Credit Union v. Weems, 157 Ga. App. 439 , 278 S.E.2d 88 (1981).

In contract action, proper organization and licensing must be proved. - In its action on a promissory note, whether the credit union was properly organized and licensed in accordance with O.C.G.A. Pt. 1, Ch. 1, T. 7 at the time of the transaction was a matter to be proved by the credit union rather than a matter to be raised defensively by the borrower. Georgia Cent. Credit Union v. Weems, 157 Ga. App. 439 , 278 S.E.2d 88 (1981).

7-1-630. Initial subscribers; contents and filing of articles; other required filings; fee for investigation; selection of initial directors.

  1. Any number of persons, not less than eight, having a common bond, as defined in subsection (b) of this Code section, may incorporate for the purpose of organizing a credit union in accordance with this article. The persons so desiring to become incorporated shall execute articles which shall set forth the following:
    1. The name of the proposed credit union;
    2. The territory in which it will operate;
    3. The location where its initial registered office will be located;
    4. The names and addresses of the subscribers, their occupation, length of service, and that each has subscribed to one share and paid for same;
    5. The names and addresses of the original directors;
    6. The proposed field of membership specified in detail and having the same common bond as the subscribers;
    7. That the purpose and nature of the business are to conduct a credit union with the rights and powers granted by this article; and
    8. The term of the existence of the credit union, which shall be perpetual unless otherwise limited.
  2. For purposes of this article, "common bond" is described as that specific relationship of occupation, association, or interest; residence or employment within a well-defined neighborhood, community, or rural district; employees of a common employer; or members of a bona fide cooperative, educational, fraternal, professional, religious, rural, or similar organization which tends to create a mutual interest between persons sharing the relationship. Persons related by blood, adoption, or marriage to or living in the same household with a person within such common bond and the surviving spouses of deceased members shall also be considered within the common bond.
  3. The subscribers shall file the articles with the department together with the fee specified in Code Section 7-1-862. The department shall certify a copy of the articles and return it to the subscribers.
  4. The subscriber shall file with the department a certificate from the Secretary of State attesting that the name of the proposed credit union has been reserved as authorized by Code Section 7-1-131.
  5. The subscriber shall file with the department a copy of the proposed bylaws setting forth the following:
    1. The date of the annual meeting, the manner of conducting the same, the number of members constituting a quorum and regulations as to voting, and the manner of notification of the meeting, which shall comply with Code Section 7-1-6;
    2. The number of directors, which must be not less than five nor more than 25, all of whom must be members, and their powers and duties, together with the duties of the officers elected by the board of directors;
    3. The qualifications for membership of those coming within the initial common bond as required by this article;
    4. The conditions under which shares may be issued, paid for, transferred, and withdrawn; deposits received and withdrawn; loans made and repaid; and funds otherwise invested; and
    5. The charges which shall be made, if any, for failure to meet obligations punctually; whether or not the credit union shall have the power to borrow; the method of receipting for money; the manner of accumulating a reserve; the manner of determining and paying interest and dividends; and such other matters consistent with this article as may be requisite to the organization and operation of the proposed credit union.
  6. The subscriber shall pay such fee as shall be established by regulation of the department to defray the cost of the investigation required by Code Section 7-1-632, provided that the department shall not be required to set such fee if in its judgment the fee would discourage the organization of credit unions under this article.
  7. The subscriber shall select at least five qualified persons who agree to serve on the board of directors.  A signed agreement to serve in these capacities until the first annual meeting or until the election of their successors, whichever is later, shall be executed by those who so agree and filed with the department along with the proposed bylaws.

    (Ga. L. 1925, p. 165, § 1; Code 1933, § 25-101; Code 1933, § 41A-3001, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1244, § 1; Ga. L. 1989, p. 1257, § 19; Ga. L. 2005, p. 826, § 11/SB 82; Ga. L. 2015, p. 344, § 16/HB 184; Ga. L. 2016, p. 390, § 3-1/HB 811; Ga. L. 2017, p. 193, § 16/HB 143.)

The 2015 amendment, effective July 1, 2015, in subsection (c), deleted "in triplicate" following "articles" in the first sentence, and substituted "a copy" for "one copy" in the second sentence; and, in subsection (e), substituted "a copy of the" for "two copies of" in the introductory paragraph, and inserted "nor more than 25" near the beginning of paragraph (e)(2).

The 2016 amendment, effective July 1, 2016, deleted ", except that, if the credit union maintains an office and the board of directors so determines, notice of the annual meeting or of any special meeting may be given by posting such notice in a conspicuous place in the office of the credit union at least ten days prior to such meeting" following "Code Section 7-1-6" at the end of paragraph (e)(1).

The 2017 amendment, effective June 1, 2017, inserted "or employment" near the middle of the first sentence of subsection (b).

OPINIONS OF THE ATTORNEY GENERAL

Former Code 1933, §§ 25-101, 25-108, and 25-109 (see now O.C.G.A. §§ 7-1-630 , 7-1-651 , and 7-1-653 ) indicate that each credit union has complete control over membership, and that eight persons could form a credit union and limit membership to the original eight incorporators. 1948-49 Op. Att'y Gen. p. 434.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 5 et seq., 189. 18A Am. Jur. 2d, Corporations, § 199-211.

C.J.S. - 12 C.J.S., Building and Loan Associations, Savings and Loan Associations, and Credit Unions, §§ 12, 13, 31, 32.

7-1-631. Additional filings with department.

Reserved. Repealed by Ga. L. 2005, p. 826, § 12, effective May 5, 2005.

Editor's notes. - This Code section was based on Ga. L. 1925, p. 165, § 2; Code 1933, § 41A-3002, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1244, § 2; Ga. L. 1989, p. 1211, § 11.

7-1-632. Approval or disapproval by department; certificate of incorporation.

  1. The department shall make an appropriate investigation of the articles and bylaws for the purpose of determining:
    1. Whether the articles and bylaws conform to this article;
    2. The general character and qualifications of the subscribers and the financial stability and future prospects of the sponsoring company, if any;
    3. The economic advisability of establishing the proposed credit union and such other facts and circumstances bearing on the proposed credit union as in the opinion of the department may be relevant;
    4. That a common bond exists in accordance with Code Section 7-1-630; and
    5. That the subscribers and person or corporation sponsoring the credit union are in agreement as to the services, if any, that the sponsor will provide.
  2. If the department determines to its satisfaction that the proposed credit union meets the criteria set forth above, it shall, within 90 days from receipt of the articles and in compliance with Code Section 7-1-630, send a copy of the articles and written approval of the articles to the Secretary of State after making such changes in the articles or bylaws consistent with this article and with the consent of the subscribers that it deems appropriate. Such approval shall indicate any changes made to the articles including changes from the proposed field of membership. If the department shall disapprove the articles, the procedures of subsection (b) of Code Section 7-1-635 shall be followed.
  3. Upon receipt of the approval of the department, the Secretary of State shall thereupon issue a certificate attesting to the incorporation of the credit union. The credit union shall, however, confine itself to organizational activities until it receives a permit to do business.

    (Ga. L. 1925, p. 165, § 3; Code 1933, § 25-103; Code 1933, § 41A-3003, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1983, p. 602, § 17; Ga. L. 1989, p. 1257, § 20; Ga. L. 2005, p. 826, § 13/SB 82.)

RESEARCH REFERENCES

Am. Jur. 2d. - 18 Am. Jur. 2d, Corporations, § 40.

C.J.S. - 18 C.J.S., Corporations, § 56 et seq.

7-1-633. Organizational meeting of directors; commencing of business.

  1. Within 30 days after receipt of the certificate of incorporation from the Secretary of State, an organizational meeting of the board of directors named in the articles of incorporation shall be held for the purpose of accepting the certificate and bylaws, appointing a credit committee or, in lieu thereof, loan officers and a supervisory committee, and electing or appointing the officers, as provided in Code Section 7-1-655, who shall serve until the first directors' meeting after the first annual meeting. Notice of the meeting shall be given at least five days prior to the date of the meeting.
  2. When the organization has been completed, the credit union shall notify the department of this fact and may commence business subject to its obtaining deposit insurance as required in Code Section 7-1-666.

    (Ga. L. 1925, p. 165, §§ 4, 13; Code 1933, §§ 25-106, 25-113; Ga. L. 1956, p. 742, § 2; Ga. L. 1968, p. 465, § 6; Code 1933, § 41A-3004, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1244, § 3; Ga. L. 2004, p. 458, § 4.)

RESEARCH REFERENCES

Am. Jur. 2d. - 18 Am. Jur. 2d, Corporations, §§ 44, 45. 19 Am. Jur. 2d, Corporations, § 1081.

C.J.S. - 18 C.J.S., Corporations, § 66.

7-1-634. Amendment of articles and bylaws; fee for investigation; approval or denial by department.

  1. Amendments to the bylaws of a credit union may be adopted and amendments of the articles may be requested by the affirmative vote of two-thirds of the authorized number of members of the board of directors at any duly held meeting thereof if the members of the board have been given prior written notice of said meeting and the notice has contained a copy of the proposed amendment or amendments. No amendment of the bylaws or of the articles shall become effective until approved in writing by the department.
  2. Every proposed amendment of the articles shall be filed with the department together with the fee specified in Code Section 7-1-862. Proposed amendments of the bylaws shall be filed with the department.
  3. The credit union may amend its bylaws to change its field of membership by adding additional groups of persons subject to the following conditions:
    1. Each new group must have a common bond that meets one of the descriptions in subsection (b) of Code Section 7-1-630; and
    2. The credit union must pay such fee as may be established by the department to defray the cost of investigation.
  4. The department shall grant or deny approval of a complete and accepted application to amend the bylaws within 90 days, subject to safety and soundness and other criteria established by the department for these applications.
  5. The department shall maintain a permanent record of any approved amendment to the bylaws of a credit union which changes the field of membership proposed in the original articles or as subsequently amended.

    (Ga. L. 1925, p. 165, §§ 6, 11; Code 1933, §§ 25-104, 25-121; Ga. L. 1967, p. 595, § 3; Code 1933, § 41A-3005, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1976, p. 1681, § 2; Ga. L. 1983, p. 602, § 18; Ga. L. 1989, p. 1257, § 21; Ga. L. 1995, p. 673, § 25; Ga. L. 2005, p. 826, § 14/SB 82; Ga. L. 2015, p. 344, § 17/HB 184.)

The 2015 amendment, effective July 1, 2015, deleted "in triplicate" following "filed" in the first sentence of subsection (b).

OPINIONS OF THE ATTORNEY GENERAL

Department may not disapprove bylaws which fully comply with Title 7, Article 3, Part 1. - Superintendent (now commissioner) may not disapprove a bylaw which fully complies with the law or credit unions; the superintendent may only disapprove those bylaws which do not conform to the law. 1972 Op. Att'y Gen. No. 72-109.

RESEARCH REFERENCES

Am. Jur. 2d. - 18 Am. Jur. 2d, Corporations, §§ 96, 170, 171.

C.J.S. - 12 C.J.S., Building and Loan Associations, Savings and Loan Associations, and Credit Unions, §§ 18, 22.

7-1-635. Procedures for department.

  1. The department shall, in its discretion, approve or disapprove of proposed amendments to the articles or to the bylaws within 90 days after they are submitted by the credit union and within that time shall so advise the Secretary of State of any changes to the articles and inform the credit union in writing of its approval or disapproval.
  2. If the department should disapprove any articles or proposed amendments to articles or bylaws, it shall state the reasons for its disapproval.  The subscribers or credit union shall have reasonable time, not more than 90 days from the date of disapproval or such additional time as the department may allow, to correct any matters causing its disapproval. If such matter is corrected, the department shall then advise the Secretary of State and credit union in writing of its approval of changes to the articles or the credit union alone in writing of its approval in the case of amendment of the bylaws.
  3. Final action by the department in approving or disapproving articles or amendments thereto or to the bylaws shall be conclusive, except that it may be subject to judicial review under Code Section 7-1-90.

    (Ga. L. 1967, p. 595, § 4; Code 1933, § 41A-3006, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1257, § 22; Ga. L. 2005, p. 826, § 15/SB 82.)

OPINIONS OF THE ATTORNEY GENERAL

Department may not disapprove bylaws which fully comply with Title 7, Article 3, Part 1. - Superintendent (now commissioner) may not disapprove a bylaw which fully complies with the law or credit unions; the superintendent may only disapprove those bylaws which do not conform to the law. 1972 Op. Att'y Gen. No. 72-109.

RESEARCH REFERENCES

Am. Jur. 2d. - 18 Am. Jur. 2d, Corporations, § 119.

7-1-635.1. Out-of-state credit unions.

  1. A credit union organized in another state may conduct business and establish a place of business in this state with the approval of the department. The department must find that the out-of-state credit union:
    1. Is a credit union organized under laws of a state other than the State of Georgia or of the United States, which state grants similar authority to credit unions organized under the laws of this state;
    2. Is financially solvent and operates in conformance with the laws and regulations of its charter jurisdiction; and
    3. Has deposit insurance issued by a federal public body that is comparable to that required for credit unions chartered in this state.
  2. The out-of-state credit union must agree to:
    1. Grant loans at rates not in excess of the rates permitted for credit unions incorporated under the laws of Georgia;
    2. Comply with the same consumer protection provisions that credit unions incorporated under this chapter must obey; and
    3. Designate and maintain an agent for the service of process in this state.
  3. The department may examine the operations of any out-of-state credit union for the purpose of determining that the scope of its activities does not exceed that allowed pursuant to this chapter and that the facility is otherwise operating in compliance with the applicable laws of this state. The department may by regulation establish minimum requirements for the maintenance of books and records in sufficient form to enable the department to carry out its responsibilities under this Code section.
  4. The department may enter into cooperative and reciprocal agreements with the credit union regulatory authority of any government for the periodic examination of credit union offices and facilities of any kind located within this state and may accept reports from such authorities in lieu of conducting its own examination for compliance with the laws of this state.
  5. A credit union which is approved under this Code section shall be exempt from the requirements of Article 15 of Chapter 2 of Title 14.

    (Code 1933, § 41A-3008, enacted by Ga. L. 1981, p. 753, § 1; Ga. L. 1989, p. 1257, § 23; Ga. L. 2005, p. 826, § 16/SB 82; Ga. L. 2015, p. 344, § 18/HB 184.)

The 2015 amendment, effective July 1, 2015, inserted "issued by a federal public body that is" in the middle of paragraph (a)(3).

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1989, "does" was substituted for "do" in the first sentence of subsection (c).

Pursuant to Code Section 28-9-5, in 2005, "; and" was added at the end of paragraph (a)(2).

7-1-636. Effect on articles and duration of existing credit unions.

  1. Nothing in this chapter shall be construed to impair the validity of the articles of a credit union existing on April 1, 1975.
  2. Each credit union existing on April 1, 1975, shall have perpetual duration unless its articles are amended under this chapter to provide for a limited period of duration.

    (Code 1933, § 41A-3007, enacted by Ga. L. 1974, p. 705, § 1.)

OPINIONS OF THE ATTORNEY GENERAL

Credit unions in existence prior to April 1, 1975. - Current state law governing credit unions which were in existence and validly operating prior to April 1, 1975, allows those credit unions to maintain the fields of membership that they possessed prior to April 1, 1975. 2004 Op. Att'y Gen. No. 2004-6.

PART 2 C REDIT UNION CONSERVATORS

Effective date. - This part became effective July 1, 2015.

Editor's notes. - Ga. L. 2015, p. 344, § 19/HB 184, redesignated former Part 2 of Article 3 of Chapter 1, which consisted of Code Sections 7-1-650 through 7-1-670, as Part 3 of Article 3 of Chapter 1.

7-1-640. Appointment of conservators; authority; reporting requirement.

  1. The department may, in its discretion, appoint itself or a third party as conservator for a credit union when the credit union:
    1. Is insolvent or in an unsafe and unsound condition;
    2. Has suspended payment of obligations without authority of law;
    3. Has violated its articles or an order, statute, rule, or regulation and the department determines that its continued control of its own affairs threatens injury to the public, the financial community, members, or creditors; or
    4. Requests the department, by its board of directors, to appoint a conservator for the benefit of members or creditors.
  2. The right of the department to act as conservator of a credit union shall be in addition to all other rights, remedies, and powers of the department.
  3. The department may, in its discretion, before or after taking conservatorship, petition the principal court of a credit union for the appointment of a conservator pursuant to Code Section 7-1-643.
  4. The conservator shall conduct the business of the credit union and take steps toward the removal of the causes and conditions that have necessitated the appointment of a conservator. The conservator shall be immediately authorized to:
    1. Assume all powers of the members, directors, officers, and committees of the credit union;
    2. Take charge of the credit union and all of its property, books, records, and effects;
    3. Take any and all actions to operate the credit union in its own name or to conserve its assets as directed by the department, including, but not limited to, terminating or adopting any executory contracts to which the credit union may be a party;
    4. Take all necessary measures to preserve, protect, and recover any assets or property of the credit union, including any claim or cause of action belonging to or which may be asserted by the credit union, and administer the same in its own name as conservator;
    5. File, prosecute, and defend any suit that has been filed or may be filed by or against the credit union that is deemed by the conservator to be necessary to protect all interested parties or any property affected thereby;
    6. Exercise all rights, powers, and duties conferred on the credit union by this chapter; and
    7. Take any other actions that are necessary or incidental to carrying out the role of conservator.
  5. The conservator shall make reports to the department from time to time as may be required by the department. (Code 1981, § 7-1-640 , enacted by Ga. L. 2015, p. 344, § 19/HB 184.)

7-1-641. Certificate of appointment.

  1. The department shall, immediately after appointing a conservator, file with the principal court of a credit union a certificate to be known as a certificate of appointment.
  2. The certificate of appointment shall set forth the basis for the department's appointment of a conservator and state the name of the conservator.
  3. If the department does not appoint a conservator prior to the date of the filing of the certificate of appointment or it appoints a new or additional conservator, the department shall file a supplement to the certificate of appointment setting forth such facts.
  4. The certificate of appointment and any supplement will be listed in the judgment index in the name of the credit union as defendant and the department as plaintiff. (Code 1981, § 7-1-641 , enacted by Ga. L. 2015, p. 344, § 19/HB 184.)

7-1-642. Costs; immunity.

  1. All costs incident to conservatorship will be charged against the assets of the credit union to be allowed and paid as the department may determine.
  2. The department, its employees, and third parties acting as conservators are not subject to liability for actions related to a conservatorship, including, but not limited to, the appointment of a conservator, and no department funds shall be required to be expended on behalf of the credit union, its creditors, employees, or members, or any other party or entity. (Code 1981, § 7-1-642 , enacted by Ga. L. 2015, p. 344, § 19/HB 184.)

7-1-643. Appointment of department as conservator.

  1. Whenever any court, upon the initiation of the department or other person entitled by law to institute such proceedings, determines that a conservator should be appointed, for any reason whatsoever, it shall appoint the department as conservator. Except as provided in subsection (c) of this Code section, such court shall appoint only the department as conservator of a credit union.
  2. When appointed conservator by a court, the department shall serve in the same manner and with the same limitations and shall have the same rights, powers, and duties as if it were to become conservator without appointment by a court pursuant to Code Section 7-1-640. No court shall impose upon the department as conservator any duties or restrictions in conflict with this chapter.
    1. In any proceeding for the appointment of a conservator of a credit union whose shares are insured by a public body of the United States, the court may, upon the recommendation of the department, whether or not the department is a party, appoint such public body as conservator.
    2. If a public body accepts the appointment, it shall have all the rights, powers, and duties of the department as conservator under this chapter and all the rights, powers, and duties as conferred by other applicable law.
    3. The posting of a bond shall not be required when a public body acts as conservator. (Code 1981, § 7-1-643 , enacted by Ga. L. 2015, p. 344, § 19/HB 184.)

7-1-644. Bond.

  1. If the department appoints a conservator other than a public body of the United States that insures the shares of a credit union, an employee of the department, or the department itself, the conservator and any assistants shall provide a bond, payable to the credit union and executed by a surety company authorized to do business in this state.
  2. The amount of such bond shall be approved by the department and be in an amount to ensure the faithful discharge of duties in connection with the conservatorship and take into account the amount of money under the control of the conservator.
  3. The cost of such bond shall be paid from the assets of the credit union.
  4. Any person injured by a breach of the conditions on such bond has a right to bring a civil remedy in order to seek to collect on such bond.
  5. A bond of a credit union shall be deemed satisfactory if the department determines it covers a conservator and any assistants. (Code 1981, § 7-1-644 , enacted by Ga. L. 2015, p. 344, § 19/HB 184.)

7-1-645. Show cause requirement; appointment of receiver; role of conservator; limitation on court's role.

  1. No later than ten days after the date a conservator is appointed pursuant to Code Section 7-1-640, a credit union may apply to its principal court for an order requiring the department to show cause why it should not be enjoined from continuing the conservatorship.
  2. If at any time the department determines that a credit union is not in a condition to continue business under a conservator, the department may appoint a receiver in accordance with Code Section 7-1-150.
  3. A conservator may conduct the business of a credit union and take steps toward the removal of the causes and conditions that have necessitated the appointment of a conservator until such time as:
    1. The department shall permit such credit union to continue business subject to such terms and conditions as may be imposed by the department;
    2. Such credit union is liquidated in accordance with the provisions of subsection (b) of this Code section; or
    3. Otherwise ordered by the principal court of such credit union.
  4. Except as provided in this chapter, no court shall take any action, except at the request of the department, to restrain or affect the exercise of powers or functions of a conservator. (Code 1981, § 7-1-645 , enacted by Ga. L. 2015, p. 344, § 19/HB 184.)

PART 3 O PERATION AND REGULATION

Editor's notes. - Ga. L. 2015, p. 344, § 19/HB 184, redesignated former Part 2 of Article 3 of Chapter 1, which consisted of Code Sections 7-1-650 through 7-1-670, as Part 3 of Article 3 of Chapter 1.

7-1-650. Powers.

A credit union shall have, in addition to the powers common to all corporations under the laws of this state, the power to:

  1. Receive funds from its members or other financial institutions in the form of shares and deposits on accounts or as evidenced by certificates of deposit issued by the credit union but shall not have the power to offer third-party payment services except as authorized under Code Section 7-1-670;
  2. Receive savings deposits from nonmembers, provided that such deposits are:
    1. Insured by or through a federal public body or are expressly authorized by state or federal law;
    2. Made in such a manner as expressly authorized by the bylaws;
    3. Not deposited in a share draft account; and
    4. Not bearing a greater rate of interest than the rate of interest paid to members for the same class of deposit;
  3. Make loans to members subject to approval by its credit committee or authorized employees pursuant to Code Section 7-1-658;
  4. On the authority of its board of directors or by employees authorized by the board of directors, invest:
    1. In obligations of the United States, including bonds and securities upon which payment of principal and interest is fully guaranteed by the United States; obligations issued by banks for cooperatives, federal land banks, federal intermediate credit banks, federal home loan banks, the Federal Home Loan Bank Board, or any corporation designated in Section 846 of Title 31 of the United States Code as a wholly owned government corporation; or in obligations, participations, or other instruments of or issued by or fully guaranteed as to principal and interest by the Federal National Mortgage Association or the Government National Mortgage Association;
    2. In general and direct obligations of the State of Georgia, its counties, districts, and municipalities which have been validated as provided by law, if no more than 25 percent of the shares and deposits of a credit union shall be invested in the obligations of any one such obligor;
    3. In loans to other credit unions, provided the loans do not exceed 10 percent of the shares, deposits, and surplus of the investing credit union;
    4. By depositing its funds in banks, savings and loan associations, and credit unions; by purchasing certificates of deposit and savings certificates which such financial institutions are authorized to issue; and by selling or purchasing federal or correspondent (daily) funds, whole loans, or loan participations through such financial institutions; subject to limitations prescribed in regulations issued by the department; and
    5. In any other types of investments authorized by the department, including commercial paper, provided that such investments shall not, in the aggregate, exceed 10 percent of the shares, deposits, and surplus of the investing credit union or 15 percent of its equity capital, as defined by the department, in authorized investments issued by any single obligor;
  5. Borrow from any source, provided that the total of such borrowings shall at no time exceed 50 percent of paid-in shares, deposits, and surplus. The department may, notwithstanding the other provisions of this Code section, temporarily waive the requirements of this paragraph to permit an individual credit union to borrow for emergency purposes;
  6. Undertake, with the approval of the department, other activities which are not inconsistent with this chapter or regulations adopted pursuant thereto; provided, however, that no such approval shall be granted unless the commissioner determines the activities do not present undue safety and soundness risks to the credit union involved;
  7. Organize and engage in business without having any stated amount of capital subscribed or paid in other than that derived from the subscribers' qualifying shares, commence business with only such capital authorized and paid in as may be provided in its bylaws, and provide for the payment and withdrawal thereof as and in the manner provided by its bylaws;
  8. Purchase, hold, and convey real estate for the following purposes only:
    1. Such real estate as the credit union occupies or intends to occupy primarily for the transaction of its business, subject to the prior approval of the department except to the extent authorized by regulation;
    2. Such real estate as shall be conveyed to it in satisfaction of debt previously contracted in the course of its business; and
    3. Such real estate as it shall purchase at sales under judgments, decrees, or mortgage foreclosures pursuant to mortgages or security deeds held by it;
  9. Hold real estate acquired in the cases provided for by subparagraphs (B) and (C) of paragraph (8) of this Code section and real estate which has ceased to be used primarily as credit union premises, subject to a determination by a majority vote of its directors at least once each year as to the advisability of retaining any such property and provided that no such property is held for more than five years without the prior written approval of the department;
  10. Hold property other than real estate, which is acquired in satisfaction of debts previously contracted and which a credit union is not otherwise authorized to own, for no longer than six months unless such time period is extended by the department;
  11. Dispose of property held pursuant to paragraphs (9) and (10) of this subsection through financing by the credit union without the advance of additional funds irrespective of the purchasers' membership in the credit union and of ordinarily applicable collateral margin requirements;
  12. Provide, in its articles of incorporation approved by a majority of its membership present and voting, for the elimination or limitation of personal liability of a director to the credit union or its members in their capacity as shareholders of the credit union to the same extent as a bank or trust company operating under the provisions of this chapter; and
  13. Subject to any rules and regulations enacted by the department and in compliance with federal law and applicable provisions regarding insurable interests in Chapter 24 of Title 33, purchase, hold, or fund insurance on the life of any of its directors, officers, or employees, or any other person whose death might cause financial loss to the credit union, or, pursuant to any contract lawfully obligating the credit union as guarantor or surety, on the life of the principal obligor.

    (Ga. L. 1925, p. 165, § 8; Code 1933, § 25-105; Ga. L. 1956, p. 742, § 1; Ga. L. 1968, p. 465, § 3; Code 1933, § 41A-3101, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1979, p. 417, § 1; Ga. L. 1981, p. 1244, § 4; Ga. L. 1987, p. 1586, §§ 12-14; Ga. L. 1989, p. 1211, § 12; Ga. L. 1990, p. 300, § 1; Ga. L. 1999, p. 674, § 26; Ga. L. 2005, p. 826, § 17/SB 82; Ga. L. 2015, p. 5, § 7/HB 90; Ga. L. 2016, p. 390, § 3-2/HB 811; Ga. L. 2017, p. 193, § 17/HB 143; Ga. L. 2018, p. 214, § 13/HB 780.)

The 2015 amendment, effective March 13, 2015, part of an Act to revise, modernize, and correct the Code, added "and" at the end of paragraph (9).

The 2016 amendment, effective July 1, 2016, deleted "building and loan associations," following "funds in banks," near the beginning of subparagraph (4)(D); substituted "pursuant thereto; provided, however, that" for "pursuant thereto, including such powers as are afforded to federally chartered credit unions, either directly, through a subsidiary corporation, or in cooperation with other credit unions; provided, however," in paragraph (6); and substituted the present provisions of the first sentence of paragraph (9) for the former provisions, which read: "No real estate acquired in the cases provided for by subparagraphs (B) and (C) of paragraph (8) of this Code section and no real estate which has ceased to be used as credit union premises shall be held for a longer period than five years, unless the time shall be extended by the department."

The 2017 amendment, effective June 1, 2017, rewrote this Code section.

The 2018 amendment, effective May 3, 2018, deleted "and" at the end of paragraph (11); in paragraph (12), substituted "in its articles of incorporation approved by a majority" for "through an amendment to its bylaws approved by two-thirds" near the beginning, inserted "credit union or its" in the middle, and added "; and" at the end; and added paragraph (13). See Editor's notes for applicability.

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1987, "subparagraphs (B) and (C) of paragraph (8)" was substituted for "subparagraph (8)(B) and (C)" in the first sentence of paragraph (9).

Pursuant to Code Section 28-9-5, in 1988, in paragraph (7), a correction was made in the word "business" the second time it appears.

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

JUDICIAL DECISIONS

Credit union may accept security deed as loan collateral. - Credit union has authority to accept title to real estate in the form of a security deed as collateral for loans which the credit union makes. Cole v. Georgia Cent. Credit Union, 243 Ga. 60 , 252 S.E.2d 485 (1979).

OPINIONS OF THE ATTORNEY GENERAL

Credit union cannot legally function as dues collection agent for labor union. - Legislature did not intend to grant credit unions any powers that were not necessary for or incidental to performing traditional credit union functions. Collection of dues on behalf of a labor union is not necessary for or incidental to performing traditional credit union functions; therefore, a credit union cannot legally function as a dues collection agent for a labor union. 1976 Op. Att'y Gen. No. 76-119.

Loan to nonmember may constitute investment in authorized obligation. - Former Code 1933, § 41A-3101 implied that a credit union may invest in authorized obligations irrespective of whether the obligation constitutes a loan to a nonmember. 1976 Op. Att'y Gen. No. 76-12.

Guaranteed portion of small business administration loans are legal investments. - Guaranteed portion of small business administration loans are obligations upon which payment of principal and interest is fully guaranteed by the United States and are therefore legal investments under former Code 1933, § 41A-3101. 1976 Op. Att'y Gen. No. 76-12.

Former Code 1933, § 41A-3101 prevented a credit union from investing in United States government guaranteed participation in small business administration loans. 1976 Op. Att'y Gen. No. 76-12.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 5 et seq., 189.

C.J.S. - 12 C.J.S., Building and Loan Associations, Savings and Loan Associations, and Credit Unions, § 89 et seq.

ALR. - Power of savings bank or similar institution to provide checking facilities or negotiable orders of withdrawal (NOW) to customers, 64 A.L.R.3d 1314.

7-1-651. Membership; shares.

  1. The membership of the credit union shall consist of the initial subscribers and such other persons within the field of membership as may have subscribed to one share, which has been paid by a person or the credit union, together with the required entrance fee and complied with all other requirements contained in the bylaws. No subscriber or other member shall hold more than one share out of any class of shares. The bylaws may provide for separate classes of shares for borrowers and depositors and for the par value of each share for each class, but in no event shall the par value be less than $1.00.
  2. Societies, associations, partnerships, and corporations composed of persons who are eligible for membership or headquartered within the field of membership may be admitted to membership in the same manner and under the same conditions as such persons.
  3. A person or corporation who leaves the field of membership may be permitted to retain his membership in the credit union at the discretion of the board of directors.

    (Ga. L. 1925, p. 165, §§ 1, 9; Code 1933, §§ 25-101, 25-108; Code 1933, § 41A-3102, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1985, p. 823, § 1; Ga. L. 2009, p. 86, § 7/HB 141; Ga. L. 2015, p. 344, § 20/HB 184; Ga. L. 2017, p. 193, § 18/HB 143.)

The 2015 amendment, effective July 1, 2015, in subsection (a), substituted "one share, which has been paid by a person or the credit union, together" for "one share and have paid for same together" in the middle of the first sentence, and inserted a comma following "each class" in the last sentence.

The 2017 amendment, effective June 1, 2017, inserted "or headquartered within the field of membership" in the middle of subsection (b).

OPINIONS OF THE ATTORNEY GENERAL

Former Code 1933, §§ 25-101, 25-108, and 25-109 (see now O.C.G.A. §§ 7-1-630 , 7-1-651 , and 7-1-653 ) indicate that each credit union has complete control over membership, and that eight persons could form a credit union and limit membership to the original eight incorporators. 1948-49 Op. Att'y Gen. p. 434.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 5 et seq., 189.

C.J.S. - 12 C.J.S., Building and Loan Associations, Savings and Loan Associations, and Credit Unions, §§ 57 et seq., 83. 12A C.J.S. Building and Loan Associations, Savings and Loan Associations, and Credit Unions, §§ 170, 171.

7-1-652. Joint, minor, and trust shares and deposits; preferred capital base shares.

  1. A share may be issued and deposits received jointly in the names of a member and a nonmember with right of survivorship, but no joint tenant shall be permitted to vote, obtain loans, or hold office unless he is within the field of membership and is a qualified member.
    1. A minor shall be allowed to have deposits in a credit union in his own name, and the deposits made by the minor shall not be subject to the control of his parent, guardian, or trustee. A minor may have third-party payment accounts. A receipt or acquittance signed by such a minor depositor shall be a valid and sufficient release and discharge of such credit union for any payment of any deposit to such minor. In the transactions involving payments to third parties out of the minor's account, the payment of an order of the minor shall be a valid and sufficient release and discharge of the credit union for any payment of such funds from the minor's account. This subsection shall continue to include, without limitation:
      1. Deposits in such credit unions by a minor with one or more adults or other minors, as party to and with the same effect as a multiple-party account under Article 8 of this chapter;
      2. The rental to a minor by said credit unions of a safe-deposit box or other receptacle for the safe deposit of property from such minor (and the receipt of any such property), individually or jointly with one or more adults; and
      3. The dealing with a minor by said credit unions with respect to such a deposit account, third-party payment account, or safe-deposit agreement without the consent of a parent or guardian and with the same effect as though the minor were an adult.
    2. Any action of the minor with respect to such deposit account, third-party payment account, or safe-deposit agreement shall be binding on the minor with the same effect as though the minor were an adult.
  2. In addition to its regular shares, a credit union may offer to its members "preferred capital base" shares when permitted by its bylaws. Such shares may be held without limit, shall be subject to the following restrictions, and may entitle the holder to the following rights and preferences:
    1. Such shares shall have no par value;
    2. Such shares shall be redeemed only at a stated maturity of not less than one year or within ten days of such maturity;
    3. Such shares shall be transferable on the books of the credit union so long as the acquiring person is a member of the credit union;
    4. Such shares may have a preference on the payment of dividends and interest up to 2 percent over the dividend rate paid to members on regular shares and deposits or such higher rates as approved by the credit union members and the department. Any such preference shall be fixed at the time of issuance of the shares; and
    5. Such shares shall be subordinate to claims of depositors and other creditors in the event of liquidation of the credit union but shall rank ahead of the claims of regular shares.

      (Ga. L. 1925, p. 165, § 17; Code 1933, § 25-111; Code 1933, § 41A-3103, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1244, § 5; Ga. L. 1985, p. 823, § 2; Ga. L. 1986, p. 458, § 9; Ga. L. 2003, p. 843, § 8.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 2003, "and" was added following the semicolon at the end of paragraph (c)(4).

Cross references. - Multiple-party accounts, § 7-1-810 et seq.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 5 et seq., 189.

C.J.S. - 12 C.J.S., Building and Loan Associations, Savings and Loan Associations, and Credit Unions, § 84.

7-1-653. Expulsions and withdrawals; disposition of deposits, interest, shares, or dividends; reinstatement.

  1. At any regular or called meeting of the members, by a two-thirds' vote of those present, the members may expel from the credit union any member thereof. A member may withdraw from a credit union and a nonmember may withdraw deposits as provided in this Code section by filing a written notice of such intention. All deposits of an expelled or withdrawing member or nonmember with any interest accrued shall be paid to such member or nonmember, subject to 60 days' notice, after deducting any amounts due to the credit union by such member or nonmember. A credit union, upon the resignation or expulsion of a member, shall cancel the share, deposits, or dividends or interest due thereon and may apply the withdrawal value of such funds toward the liquidation of such member's indebtedness. Said expelled or withdrawing member or nonmember shall have no further right in said credit union or to any of its benefits, but such expulsion or withdrawal shall not operate to relieve said member or nonmember from any remaining liability to the credit union.
  2. A member may be expelled for reasons defined in the bylaws by a two-thirds' vote of the board of directors.  An expelled member may obtain reinstatement by an affirmative vote of the majority of the members voting at the next annual meeting of the credit union.

    (Ga. L. 1925, p. 165, §§ 16, 21; Code 1933, §§ 25-109, 25-110; Code 1933, §§ 41A-3104, 41A-3105, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1244, § 6; Ga. L. 1982, p. 3, § 7; Ga. L. 2005, p. 826, § 18/SB 82; Ga. L. 2010, p. 878, § 7/HB 1387.)

OPINIONS OF THE ATTORNEY GENERAL

Credit unions have complete control over membership. - Former Code 1933, §§ 25-101, 25-108, and 25-109 (see now O.C.G.A. §§ 7-1-630 , 7-1-651 , and 7-1-653 indicate that each credit union has complete control over membership, and that eight persons could form a credit union and limit membership to original eight incorporators. 1948-49 Op. Att'y Gen. p. 434.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 5 et seq., 189.

C.J.S. - 12 C.J.S., Building and Loan Associations, Savings and Loan Associations, and Credit Unions, § 85 et seq.

7-1-654. Capital; right to offset loans, dues, and fines.

The capital of the credit union shall consist of the payments that have been made to it by the members on their qualifying shares. A credit union shall have a lien on a member's share and deposits and on dividends or interest payable thereon for and to the extent of any loan made by it to such member and of any dues and fines payable to it by such member.

(Ga. L. 1925, p. 165, § 16; Code 1933, § 25-110; Code 1933, § 41A-3105, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

C.J.S. - 12 C.J.S., .Building and Loan Associations, Savings and Loan Associations, and Credit Unions, §§ 74, 75.

7-1-655. Boards of directors; credit and supervisory committees; officers; oaths of officials; removal from office; suspension of member; filling of vacancies; notification to department of change in president or chief executive officer.

  1. At the first annual meeting, the members shall elect from among their number a board of directors of no less than five nor more than 25 and at each annual meeting thereafter shall elect successors to the members of the board of directors whose terms of office expire at such annual meeting.
  2. Except as this Code section permits the bylaws of a credit union to provide otherwise, members of the board of directors elected at the first annual meeting shall serve until the next annual meeting and until their successors are elected and qualified. A credit union may in its bylaws provide for staggered elections for members of the board of directors; but in that event the bylaws shall provide that as nearly as possible one-third of the board shall be elected at each annual meeting.
  3. At the organizational meeting and at its first meeting after each annual meeting of the members, the board of directors shall appoint a supervisory committee, credit committee, chairperson, president, secretary, and such other officers consistent with the bylaws as the board deems desirable. No member of the supervisory committee may serve as a member of the credit committee or as an officer, unless the board of directors functions as the credit committee as provided for in subsection (f) of Code Section 7-1-658.
  4. The chairman of the credit and supervisory committees shall be appointed by the board from among its number. Both the credit and supervisory committees shall be accountable to the board and members of such committees may be removed by the board.
  5. Officers and the committee members elected or appointed at the organizational meeting shall serve until the first annual meeting. Thereafter, the terms of such persons shall be until their successors are chosen or have duly qualified. An officer elected or appointed to fill an unexpired term shall be elected or appointed for the balance of that term.
  6. All members of the board and all officers and committee members shall be sworn to perform faithfully the duties of their several offices in accordance with this chapter and the bylaws or as otherwise lawfully established. The oaths shall be subscribed in writing and a copy thereof shall be retained in the minutes of the meetings of the board. The oaths shall not modify in any manner the legal duties of or the standard of care for members and officers in the exercise of such duties.
  7. The entire board of directors or an individual director may be removed from office without cause by the vote of a quorum of members at a properly called meeting.
  8. The board may remove a director from office if:
    1. The director is adjudicated an incompetent by a court or is convicted of a felony;
    2. The director does not, within 60 days of his or her election or such longer time as may be specified in the bylaws, accept the office in writing or by attendance at a meeting and fulfill other requirements for holding the office;
    3. The director fails to attend regular meetings of the board for six successive meetings without having been excused by the board;
    4. The director was an employee or duly elected officer of the credit union and was discharged or resigned at the request of the board for reasons relating to performance of duties as an employee or officer of the credit union; or
    5. For any reason set forth in the bylaws of the credit union.
  9. The board of directors, by a two-thirds' vote of a quorum of the board, may suspend any member of the credit union's board of directors, for cause, until the next membership meeting, which shall be held not less than seven nor more than 60 days after such suspension. The suspended person will be notified of the details of his or her suspension, and shall have the right to request a meeting with the board to reconsider his or her suspension prior to the membership meeting. Any suspended member of the board of directors may be removed by a majority vote of a quorum of members at a properly called meeting. At such meeting of the membership, the suspended person shall have the right to make a presentation to the members and the suspension shall be acted upon by the members at such meeting and the person shall be removed from, or restored to, the board.
  10. Vacancies in the board of directors, whether caused by removal or otherwise and including vacancies resulting from an increase in the number of directors, may be filled by the remaining members of the board, even though less than a quorum.
  11. The credit union shall immediately notify the department upon a change in president or chief executive officer.

    (Ga. L. 1925, p. 165, § 12; Code 1933, § 25-112; Ga. L. 1962, p. 74, § 1; Code 1933, § 41A-3106, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1976, p. 1681, § 3; Ga. L. 1981, p. 1244, § 7; Ga. L. 1989, p. 1211, § 13; Ga. L. 2011, p. 518, § 4/HB 239; Ga. L. 2015, p. 344, § 21/HB 184; Ga. L. 2016, p. 390, § 3-3/HB 811; Ga. L. 2018, p. 214, § 14/HB 780.)

The 2015 amendment, effective July 1, 2015, in subsection (a), inserted a comma after "first annual meeting" near the beginning, and inserted "of no less than five nor more than 25" in the middle.

The 2016 amendment, effective July 1, 2016, substituted the present provisions of subsection (g) for the former provisions, which read: "Directors may be removed from office as provided in Code Section 7-1-485"; and added subsections (h) through (k).

The 2018 amendment, effective May 3, 2018, added the last sentence of subsection (f). See Editor's notes for applicability.

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

7-1-656. Duties of directors; meetings; prohibited activities; eligibility to vote; applicability of Code Section 7-1-490; appointment of honorary director or director emeritus.

  1. The board of directors shall be responsible for the affairs, funds, and records of the credit union and shall meet as often as necessary, but at least once during ten different months of each calendar year. Unless the bylaws specifically reserve any or all of the duties to the members, it shall be the special duty of the directors:
    1. To act upon all applications for membership or approve the actions of an officer without loan granting authority, designated by the board of directors to approve applications for membership;
    2. To determine from time to time rates of interest and dividends which shall be allowed on deposits and charged on loans consistent with this article and other applicable laws and to authorize any interest refunds on such classes of loans and under such conditions as the board prescribes;
    3. To fix the amount of the fidelity bond which shall be required of all officers, employees, agents, or members having custody of funds, properties, or records; provided, however, that the amount of such fidelity bond shall not be less than such minimum requirements as shall be prescribed by regulation of the department and shall be in such form as may from time to time be approved by the department;
    4. To fix within the restrictions imposed by statute the maximum amount of deposits which may be made by and the maximum amount that may be loaned to any one member;
    5. To fill vacancies on the board of directors, credit committee, and supervisory committee until the election and qualification of a successor;
    6. To have charge of the investment of funds of the credit union other than loans to members within the restrictions imposed by statute or delegate investment authority to a qualified committee or officer as designated by the board of directors;
    7. To appoint any committees deemed necessary; and
    8. To perform such other duties as the members may from time to time authorize.
  2. Unless otherwise provided in the articles or bylaws of a credit union:
    1. A majority of all directors shall constitute a quorum for the transaction of business and actions of a majority of those present at a meeting at which a quorum is present shall be deemed as actions of the board of directors;
    2. The board of directors may designate three or more of its number to constitute a credit committee, supervisory committee, or other committees which, to the extent provided in a resolution, shall have and exercise the authority of the board of directors with regard to the business of a credit union; and
    3. Any action authorized to be taken at a meeting of the board of directors or a credit, supervisory, or other committee may be taken without a meeting if the action is set forth in writing and approved and signed by all directors or all members of the credit, supervisory, or other committee entitled to vote with respect to the underlying subject matter.
  3. No director, officer, or committee member of a credit union shall:
    1. Receive anything of value for procuring or attempting to procure any loan from or investment by such credit union;
    2. Purchase, or directly or indirectly be interested in purchasing, from the credit union a promissory note or other evidence of indebtedness issued by the credit union for less than face value; or
    3. Purchase or sell any other asset to the credit union except:
      1. Upon terms not less than favorable to the credit union than those offered other persons or corporations; and
      2. With prior approval of the board of directors or a committee thereof authorized to act for the board, unless the transaction is made in the regular course of business.
  4. No director shall be eligible to vote concerning any purchase or sale when such director is or would be a party to the transaction.
  5. The provisions of Code Section 7-1-490 relative to the responsibilities of directors and officers and the delegation of investment decisions shall be applicable to the duties of directors, credit and supervisory committee members, and officers of credit unions.
  6. The board of directors may appoint an individual as an honorary director or director emeritus or member of an advisory board. An individual so appointed may be compensated but shall not vote at any meeting of the board of directors or be counted in determining a quorum and shall not have any responsibility for or be subject to any liability imposed upon a director or otherwise be deemed a director.

    (Ga. L. 1925, p. 165, § 13; Code 1933, § 25-113; Ga. L. 1956, p. 742, § 2; Ga. L. 1968, p. 465, § 6; Code 1933, § 41A-3107, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 32; Ga. L. 1981, p. 1244, § 8; Ga. L. 1989, p. 1211, § 14; Ga. L. 2002, p. 1220, § 6; Ga. L. 2005, p. 826, § 19/SB 82; Ga. L. 2015, p. 344, § 22/HB 184; Ga. L. 2018, p. 214, § 15/HB 780.)

The 2015 amendment, effective July 1, 2015, in subsection (a), deleted "and" at the end of paragraph (a)(6), added paragraph (a)(7), and redesignated former paragraph (a)(7) as present paragraph (a)(8); added subsections (b) - (d); and redesignated former subsection (b) as present subsection (e).

The 2018 amendment, effective May 3, 2018, added subsection (f). See Editor's notes for applicability.

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

RESEARCH REFERENCES

C.J.S. - 12 C.J.S., Building and Loan Associations, Savings and Loan Associations, and Credit Unions, § 51 et seq.

7-1-657. Duties of supervisory committee; inspections; comprehensive annual audits; use of independent accountants.

  1. The supervisory committee shall be responsible for securing a comprehensive audit of the credit union at least once each year unless such time period is modified pursuant to the rules and regulations of the department. Except as provided for in subsection (c) of this Code section, the committee shall employ the services of a licensed, independent certified public accountant or firm of such accountants to make such comprehensive audit. The results of the audit shall be submitted to the board, and the committee shall present a summary of the results of the audit to the membership. The committee shall make recommendations to the board for the correction of any deficiencies disclosed by the audit. The annual audit shall include a confirmation of the share, deposit, and loan accounts of the members and such other procedures as the department might require. The annual audit shall be preserved with the records of the credit union, and a copy of such audit shall be filed with the department upon request by the department.
  2. The supervisory committee, from time to time, may conduct or cause to be conducted other audit functions or reviews of operations or may make or cause to be made an inspection of the assets and the liabilities of the credit union. The committee shall report the results of any such reviews to the board of directors and shall be responsible for making specific recommendations to the board regarding any unsafe, unsound, or unauthorized activities discovered.
  3. Based upon the total assets of a credit union, the complexity of a credit union, or other factors, the department may enact rules and regulations authorizing certain credit unions to obtain the required comprehensive audit from an individual or entity that is not a licensed, independent certified public accountant or firm of such accountants so long as the individual or entity is independent or otherwise qualified.

    (Ga. L. 1925, p. 165, § 15; Code 1933, § 25-114; Code 1933, § 41A-3108, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1244, § 9; Ga. L. 2002, p. 1220, § 7; Ga. L. 2015, p. 344, § 23/HB 184; Ga. L. 2017, p. 193, § 19/HB 143.)

The 2015 amendment, effective July 1, 2015, in subsection (a), substituted the present second sentence for the former second sentence, which read: "The committee may employ the services of an independent accountant or firm of such accountants or the internal auditors of any sponsoring group, concern, or association of credit unions to make such comprehensive audit.", inserted a comma in the third sentence, and, in the last sentence, inserted a comma and inserted "of such audit"; and added subsection (c).

The 2017 amendment, effective June 1, 2017, in subsection (a), added "unless such time period is modified pursuant to the rules and regulations of the department" immediately preceding the period at the end of the first sentence, inserted "certified" in the middle of the second sentence, and added "upon request by the department" immediately preceding the period at the end of the last sentence; and substituted the present provisions of subsection (c) for the former provisions, which read: "If a credit union has assets of less than $15 million, the supervisory committee may employ the services of any independent accountant or firm of such accountants or the internal auditors of any sponsoring group, concern, or association of credit unions approved by the department to conduct the audit mandated by subsection (a) of this Code section.".

7-1-658. Loans.

  1. Credit unions may lend money to their members at reasonable rates of interest, which shall not exceed 1 1/4 percent each month on the unpaid balance, or such greater rates as shall be authorized for other financial institutions for such purposes as may be approved by the credit committee.
  2. Loans shall be supervised as follows:
    1. The credit committee shall have the general supervision of all loans to members. The credit committee shall hold such meetings as the business of the credit union may require and not less frequently than once each quarter to consider applications for loans. Reasonable notice of such meetings shall be given to all members of the committee. Actions of the credit committee shall be reported to the board in such form as the board shall prescribe at each regular meeting of the board. No loan shall be made unless it is approved by a majority of the entire committee, except as provided in this Code section;
    2. The credit committee may appoint one or more employees to be loan officers and delegate to such persons the power to approve or disapprove loans subject to such limitations or conditions as the credit committee prescribes. Records of loans approved shall be maintained in such form as the credit committee shall prescribe and shall be made available to the credit committee upon request. All loans in excess of 50 percent of a credit union's maximum loan limitation or such lower limit as the credit committee shall establish shall be acted upon by the credit committee. The credit committee may not appoint more than one of its members to be a loan officer. No person shall have the authority to disburse funds of the credit union for any loan which has been approved by such person;
    3. In lieu of a credit committee, the board of directors may appoint one or more loan officers and delegate to such persons the power to approve or disapprove loans subject to such limitations or conditions as the board prescribes. All other duties of the credit committee as described in this article shall become the duties of the board of directors. Records of loans approved shall be maintained by the loan officers in such form as the board shall prescribe and a listing of all loans made, including the name of the borrower and the amount of the loan, shall be submitted to the board at each meeting; and
    4. Members may appeal a credit decision made by a loan officer to the credit committee or to the board if denied by the credit committee. Where there is no credit committee, appeal shall be made to the board.
  3. Loans may be made to officers, directors, and committee members of the credit union under the same general terms and conditions as to other members of the credit union; provided, however, that no officer, director, committee member, or employee shall participate in approving any loan in which he or she has a direct or indirect financial interest. The approval of all loans to officers, directors, and committee members of the credit union shall be reported to the board of directors at its next meeting.
  4. No credit union shall be authorized to lend to any individual borrower on an unsecured loan more than 1 percent of the first $100,000.00 of its deposits and shares plus one-fourth of 1 percent of its deposits and shares over $100,000.00. No credit union shall be authorized to lend to any individual borrower on a secured loan more than 10 percent of the first $100,000.00 of its deposits and shares plus 4 percent of the next $1 million of its deposits and shares plus 2 percent of its deposits and shares over $1.1 million. Deposits and shares reflected in the statement of condition on the last calendar day of the preceding quarter, to the nearest $100,000.00, shall be used to establish loan limits for the subsequent calendar quarter, provided that where a credit union has less than $1 million in total shares and deposits, the nearest $1,000.00 shall be used to establish these limits. Any credit union may make loans up to $200.00 regardless of the amount of its shares and deposits. The amount loaned to any one borrower on an unsecured basis when added to the amount loaned to any one borrower on a secured basis shall not exceed the limitation set forth in this subsection for secured loans, such limitation being the maximum loan limit of the credit union.
  5. For purposes of subsection (d) of this Code section:
    1. "Borrower" means the member who actually received the proceeds from a loan and shall not include any obligation which he may incur by being an endorser, guarantor, comaker, or similar obligor for another borrower;
    2. "Secured loan" means a loan for which adequate collateral is given. A secured loan may include a loan for which there is an endorser, guarantor, comaker, or similar obligor.
  6. Approval of loans by the credit committee shall be evidenced, prior to disbursement of the loan proceeds, by a writing signed by a committee member stating that the committee has approved the loan. If the board appoints loan officers in lieu of a credit committee, it shall establish policies for approval of loans by those loan officers.

    (Ga. L. 1925, p. 165, §§ 14, 18; Code 1933, §§ 25-115, 25-116; Ga. L. 1962, p. 74, § 2; Ga. L. 1968, p. 465, §§ 4, 5; Code 1933, § 41A-3109, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1976, p. 1681, §§ 4, 5; Ga. L. 1981, p. 1244, § 10; Ga. L. 1994, p. 1780, § 2; Ga. L. 2004, p. 458, § 5; Ga. L. 2018, p. 214, § 16/HB 780.)

The 2018 amendment, effective May 3, 2018, substituted "directors, and committee members" for "directors, committee members, and employees" in the last sentence of subsection (c). See Editor's notes for applicability.

Code Commission notes. - Pursuant to Code Section 28-9-5, in 2004, "$1 million" was substituted for "$1,000,000.00" and "$1.1 million" was substituted for "$1,100,000.00" in two places in subsection (d).

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

Law reviews. - For article discussing methods of computation of finance charges in Georgia consumer credit contracts, see 30 Mercer L. Rev. 281 (1978).

OPINIONS OF THE ATTORNEY GENERAL

Credit unions may make loans to members only. - Credit unions may make loans to and exact interest rate permitted by former Code 1933, § 41A-3109 from members only. 1975 Op. Att'y Gen. No. 75-2.

Loans by banks. - Authority contained in former Code 1933, § 41A-3109 (see now O.C.G.A. § 7-1-658 ) was limited to a designated type of loan, a loan by a credit union to a member, or shareholder; thus if a bank possesses any authority under former Code 1933, § 41A-1313 (see now O.C.G.A. § 7-1-292 ) similar to that of credit unions under this section, the authority extends only to loans to shareholders of the bank. 1975 Op. Att'y Gen. No. 75-2.

Loans exceeding unsecured debt limit must be secured; secured debt limit may not be exceeded. - All amounts loaned by credit unions in excess of unsecured debt limits established by subsection (d) of former Code 1933, § 41A-3109 must be secured by adequate collateral and in no event may that secured debt limit be exceeded. 1975 Op. Att'y Gen. No. 75-67.

Subsection (a) of former Code 1933, § 41A-3109 was not violated by investment in small business administration guaranteed participations. 1976 Op. Att'y Gen. No. 76-12.

Neither former Code 1933, § 41A-3109 (see now O.C.G.A. § 7-1-658 ) nor former Code 1933, § 41A-3101 (see now O.C.G.A. § 7-1-650 ) prevented a credit union from investing in United States government guaranteed participations in small business administration loans. 1976 Op. Att'y Gen. No. 76-12.

Section does not give authority to banks. - Former Code 1933, § 41A-1313 (see now O.C.G.A. § 7-1-658 ) did not permit banks to charge rates of interest authorized to other organizations by virtue of a special charter, including authority under former Code 1933, § 41A-1309 (see now O.C.G.A. § 7-1-658 ) establishing an interest rate which credit unions were authorized to exact. 1975 Op. Att'y Gen. No. 75-2.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 5 et seq., 189.

C.J.S. - 12A C.J.S., Building and Loan Associations, Savings and Loan Associations, and Credit Unions, §§ 134 et seq., 146 et seq., 159, 160.

ALR. - Enforceability of provision in loan commitment agreement authorizing lender to charge standby fee, commitment fee, or similar deposit, 93 A.L.R.3d 1156.

7-1-659. Entrance fees; reserves; exclusion of state and federal credit union reserves from tax calculations.

  1. A credit union may charge entrance fees as provided in the bylaws. All such fees shall, after payment of organizational expense, be known as reserve income and shall be added to the regular reserve of the credit union.
  2. Immediately before the payment of each dividend, the gross earnings of the credit union shall be determined. There shall be set aside from that amount as an allowance for loan and lease losses, sums adequate to cover such anticipated losses, based on the risk characteristics of the loan portfolio.
  3. All credit unions shall be subject to the capital and reserve requirements of Part 702 of the Rules and Regulations of the National Credit Union Administration, known as Prompt Corrective Action. Credit unions that are less than ten years old shall operate according to a business plan which shall contain requirements for reserves and which shall be approved by the department. The department shall have the discretion to require additional capital and reserves to assure the safety and soundness of any credit union.
  4. In addition to regular reserves, special reserves to protect the interest of members shall be established when found necessary in any special case by the board of directors of the credit union or by the department.
  5. All reserves of credit unions or federal credit unions established in accord with generally accepted accounting principles or upon the specific direction of the department or any federal regulatory body or for the purpose of complying with any conditions lawfully imposed by the department or any federal regulatory body shall not be considered as surplus or undivided profits of any credit union for tax purposes.

    (Ga. L. 1925, p. 165, § 19; Code 1933, § 25-117; Ga. L. 1956, p. 742, § 3; Code 1933, § 41A-3110, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2002, p. 1220, § 8.)

RESEARCH REFERENCES

C.J.S. - 12 C.J.S., Building and Loan Associations, Savings and Loan Associations, and Credit Unions, §§ 60, 61.

7-1-660. Dividends; interest.

At such intervals and for such periods as the board of directors may authorize, dividends and interest from retained earnings may be declared at such rates as are determined by the board, provided that such dividends and interest shall not be paid until provision for the transfer to the allowance for loan losses has been made. Dividends or interest in excess of 100 percent of a credit union's net earnings before dividends shall be approved in writing by the department prior to payment, provided that an application from a credit union with net worth equal to or in excess of the requirements for a well-capitalized credit union, as defined by the National Credit Union Administration rules and regulations, shall be deemed to be approved five business days after the receipt of the dividend approval form by the department unless the department notifies the credit union that the dividend is not approved within this period. The proposed dividend or interest may be paid after approval by the department upon its determination that such payment would be in the continued best interest of the credit union, would promote its stability, and would not impair its ability to repay its creditors other than its shareholders and depositors.

(Ga. L. 1925, p. 165, § 13; Code 1933, § 25-113; Ga. L. 1956, p. 742, § 2; Ga. L. 1968, p. 465, § 6; Code 1933, § 41A-3111, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 33; Ga. L. 1981, p. 1244, § 11; Ga. L. 2005, p. 826, § 20/SB 82; Ga. L. 2006, p. 72, § 7/SB 465; Ga. L. 2010, p. 878, § 7/HB 1387.)

RESEARCH REFERENCES

Am. Jur. 2d. - 19 Am. Jur. 2d, Corporations, §§ 836, 837.

C.J.S. - 12 C.J.S., Building and Loan Associations, Savings and Loan Associations, and Credit Unions, §§ 69, 70.

7-1-661. Fiscal year; special meetings of members; voting and proxies.

The credit union fiscal year shall end at the close of business on December 31. Special meetings of the members may be held by order of the directors or on written request of 10 percent of the members. At all meetings a member shall have but one vote. No member may vote by proxy; but a society, association, partnership, or corporation having membership in the credit union may be represented by one person duly authorized by said society, association, partnership, or corporation to represent it. At any meeting the members may decide on any matter of interest to the credit union and may overrule the board of directors, provided the notice of the meeting shall have stated the question to be considered.

(Ga. L. 1925, p. 165, § 11; Code 1933, § 25-121; Code 1933, § 41A-3112, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1244, § 12.)

RESEARCH REFERENCES

C.J.S. - 12 C.J.S., Building and Loan Associations, Savings and Loan Associations, and Credit Unions, § 67.

7-1-662. Taxes to which subject.

Credit unions shall not be subject to any tax except the ad valorem tax upon property imposed by the Constitution of this state unless made subject thereto by express provision of the law specifically naming credit unions and making them subject thereto. All ad valorem taxes against credit unions shall be assessed upon the value of their shares, including surplus and undivided profits, and not upon their assets, other than real estate; and the rate of taxation shall not exceed the rate of taxation imposed on banking corporations, provided that, so long as federal credit unions are exempt from the payment of the tax imposed under this Code section, state credit unions shall likewise be exempt.

(Ga. L. 1925, p. 165, § 24; Code 1933, § 25-123; Ga. L. 1943, p. 279, § 2; Code 1933, § 41A-3113, enacted by Ga. L. 1974, p. 705, § 1.)

Editor's notes. - In light of the similarity of the statutory provisions, annotations decided under former Code 1933, §§ 25-101 and 25-123 are included in the annotations for this Code section.

Law reviews. - For comment, "If It Quacks Like a Duck: In Light of Today's Financial Environment, Should Credit Unions Continue to Enjoy Tax Exemptions?," see 28 Ga. St. U.L. Rev. 1367 (2012).

OPINIONS OF THE ATTORNEY GENERAL

Credit unions are exempt from Corporate Franchise Tax Act. - State and federal credit unions are exempt under present laws from taxes imposed under the Corporate Franchise Tax Act. 1965-66 Op. Att'y Gen. No. 66-92 (decided under former Code 1933, §§ 25-101 and 25-123).

Credit union purchases exempt from Sales and Use Tax Act. - Former Code 1933, § 41A-3113 (see now O.C.G.A. § 7-1-662 ) being later in time than the Sales and Use Tax Act contained in former Code 1933, Ch. 92-34A (see now O.C.G.A. Art. 1, Ch. 8, T. 48) will exempt purchases of credit unions from taxes imposed by the Sales and Use Tax Act. 1974 Op. Att'y Gen. No. 74-136.

7-1-663. Rules and regulations of department.

Without limitation on the authority conferred by Article 1 of this chapter, the department is authorized to make such rules and regulations not inconsistent with this article and other applicable statutes governing the operation of credit unions as it may consider reasonable and proper for the protection of all funds invested. The department shall solicit comments from credit unions at least annually for recommended changes to the department's rules and regulations.

(Code 1933, § 25-123.1, enacted by Ga. L. 1968, p. 465, § 1; Code 1933, § 41A-3114, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2005, p. 826, § 21/SB 82.)

7-1-664. Payment of deposits of deceased depositors in state and federal credit unions.

Reserved. Repealed by Ga. L. 1983, p. 661, § 2, effective July 1, 1983.

Editor's notes. - The former Code section was based on Ga. L. 1967, p. 595, § 6; Code 1933, § 41A-3115, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 34; Ga. L. 1976, p. 1388, § 4.

7-1-665. Subsidiary offices.

A credit union shall not be prohibited from maintaining offices at locations other than its principal offices if the maintenance of such offices shall be reasonably necessary to furnish service to its membership. The establishment of additional offices shall be subject to the prior approval of the department upon application to it in such form as it may prescribe by regulation. Participation in shared branching networks does not constitute the establishment of additional offices under this Code section.

(Code 1933, § 41A-3116, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2005, p. 826, § 22/SB 82.)

7-1-666. Deposit insurance requirements; public notices when deposits not properly insured.

  1. Every credit union shall be required to obtain deposit insurance satisfactory to the department before it may conduct business and accept deposits, except that credit unions which have had their deposit insurance coverage withdrawn or canceled may, in the discretion of the department, continue to accept deposits, provided that, within six months after withdrawal or cancellation of insurance, such credit unions shall obtain deposit insurance written by an insurance company authorized to transact business in this state and acceptable to the department or by the National Credit Union Administration. The department may, in its discretion, for cause shown, extend the time limitation in which deposit insurance must be obtained.
  2. Deposit insurance required to be obtained in subsection (a) of this Code section need not be in excess of amounts insured by the National Credit Union Administration at the time the insurance is obtained; but, whenever the insurance coverage is, in the opinion of the department, less than amounts insured by the National Credit Union Administration, the credit union shall be required to post a sign in boldface print, in letters at least four inches high, at a conspicuous place near the entrance of such credit union, which states "Deposits Not Insured" or "Deposits Insured Up To (insert amount of deposit insurance)." Such wording shall also follow the name of the credit union wherever it is written or printed and shall be posted in writing which is easily legible in letters at least one inch high at each window or desk receiving deposits.

    (Code 1933, § 41A-3117, enacted by Ga. L. 1974, p. 705, § 1.)

Cross references. - For similar provisions relating to deposit insurance requirements for banks, § 7-1-244 .

7-1-667. Mergers.

  1. A credit union may, with the approval of the department and in accordance with such uniform rules and regulations as it shall make and promulgate, be merged with another credit union under the articles of such credit union. Such merger may occur regardless of whether the credit unions serve the same field of membership, so long as there is adopted a plan agreed upon by the majority of the board of each credit union joining the merger and approved by not less than a majority of the members of the credit union being acquired present and eligible to vote at the meeting called for that purpose. The department may allow waiver of the member vote if, in its judgment, the merger is necessary to protect the safety and soundness of either or both credit unions. All property, property rights, and interests of the merging credit union shall, upon merger, be transferred to and vested in the continuing credit union without deed, endorsement, or other instrument of transfer; and the debts and obligations of the merging credit union shall be deemed to have been assumed by the continuing credit union; and thereafter the articles of the merging credit union shall be void.
  2. The provisions of Article 8 of Chapter 4 of Title 14, relating to merger and consolidation, shall no longer be applicable to credit unions.
  3. For purposes of this Code section, the term "credit union" shall include a federal credit union.
  4. When a credit union merges with another credit union, one shall be designated as the continuing credit union by the credit unions participating in the merger. The participating credit union that is not the continuing credit union shall be designated as the merging credit union.
  5. The department may disapprove of a merger if it finds the merger would not be consistent with safe and sound practices.
  6. The department shall, in its discretion, approve or disapprove a merger on the basis of its investigation and the criteria set forth in subsections (a) and (e) of this Code section. The department shall give written notice to:
    1. The Secretary of State of its approval of a merger along with a copy of the notice of merger; and
    2. The parties to the plan of its decision and, in the event of disapproval, a statement in general of the reasons for its decision.
  7. The rights and privileges of the members of each merging credit union shall remain intact, provided that, if any person is a member of more than one of the participating credit unions, such person shall only be entitled to one set of membership rights in the continuing credit union.

    (Code 1933, § 41A-3118, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1980, p. 972, § 7; Ga. L. 2005, p. 826, § 23/SB 82; Ga. L. 2015, p. 344, § 24/HB 184; Ga. L. 2017, p. 193, § 20/HB 143.)

The 2015 amendment, effective July 1, 2015, rewrote subsection (a) and added subsections (d) through (g).

The 2017 amendment, effective June 1, 2017, substituted "members of the credit union being acquired present and eligible to vote at the meeting" for "members of each credit union present and eligible to vote at meetings" in the second sentence of subsection (a).

OPINIONS OF THE ATTORNEY GENERAL

Credit unions in existence prior to April 1, 1975. - Current statutory provisions governing mergers of state-chartered credit unions allow the field of membership of a pre-1975 credit union to be included in a plan of merger and assumed by the surviving credit union. 2004 Op. Att'y Gen. No. 2004-6.

RESEARCH REFERENCES

C.J.S. - 12A C.J.S., Building and Loan Associations, Savings and Loan Associations, and Credit Unions, § 280 et seq.

7-1-668. Conversion of state and federal credit unions.

  1. Any credit union operating in this state may convert into a federal chartered credit union, and any federal credit union may convert into a credit union organized under this chapter upon approval of the authority under whose supervision the converted credit union will operate and upon compliance with applicable federal laws as to a converted federal credit union and upon compliance with applicable state laws as to a converted credit union. In the case of a federal credit union converting to a state credit union, such converting credit union may keep its existing members at the time of conversion, but after conversion eligibility for membership in the converted credit union must comply with state law. If there are other areas of noncompliance with state law, the credit union must provide the department with a plan to bring those areas into compliance with Georgia law within a reasonable period, to be determined by the department.
  2. The procedure for obtaining such approval and effecting the conversions in the case of a credit union shall be as follows:
    1. A meeting of the board of directors, either regular or special, shall be called for the purpose of voting on converting from a federal credit union to a credit union or from a credit union to a federal credit union. A majority of the board of directors shall adopt a resolution approving the contemplated conversion;
    2. A meeting, either regular or special, of the members shall then be called for voting on the proposed conversion. Notice of said meeting shall be given in the manner prescribed in Code Section 7-1-6 and shall include a statement indicating that the proposed conversion will be considered at the meeting. Proof of giving of the notice shall be by the affidavit of the president of the credit union. A majority of the members present at this meeting shall then approve the proposed conversion; and
    3. Within ten days after such approval of the conversion, the president or vice-president and treasurer shall file a verified copy of the resolution adopted by the board of directors with the state or federal authority under whose supervision the converting credit union is to operate.
  3. Upon the written approval of the department for conversions to credit unions and with the written approval of the National Credit Union Administration for conversions to federal credit unions, the converting credit union shall then become a credit union under the laws of this state or the United States, as the case may be; and thereupon all assets shall become the property of the new credit union or federal credit union, as the case may be, subject to all existing liabilities, and every person who was a member of the converting credit union shall be a member in the new credit union or federal credit union.
    1. Conversions by state chartered credit unions to financial institutions other than credit unions or financial institutions other than credit unions to state chartered credit unions shall be effected by approval of the department and compliance with any other applicable law. The department may prescribe other requirements in order to protect the rights of members or the funds invested.
    2. In conversions by state chartered credit unions to financial institutions other than credit unions, procedures provided in subsection (b) of this Code section shall be followed for obtaining approval from the department and effecting such conversions, provided that two-thirds of the members voting shall be required to approve a proposed conversion.
    3. In conversions by financial institutions other than credit unions to state chartered credit unions, the department shall prescribe procedures for financial institutions to seek approval from the department to convert to a credit union. Such procedures shall include:
      1. The procedures provided in subsection (b) of this Code section;
      2. The submission of a conversion plan by the converting financial institution. A conversion plan shall include the following, where applicable:
        1. How the converting financial institution will comply with credit union membership requirements;
        2. Plans for the divestment of its board of directors of stock options;
        3. Plans for the divestment of capital stock;
        4. Plans for the phase out of all impermissible investments;
        5. Plans for compliance with credit union business loan limitations; and
        6. Any other such information as required by the department; and
      3. The converting financial institution shall perform a complete policy review to address appraisal restrictions, lending restrictions, investment restrictions, corporate structure restrictions, and power structure in order to ensure compliance with this article and regulations of the department.
    4. The department may authorize a credit union resulting from a charter conversion under this Code section to do the following:
      1. Complete any activities that the converting financial institution legally engaged in at the effective time of the charter conversion but that otherwise are not permitted for credit unions, provided that the transitional period during which such activities are carried out does not exceed five years after the effective date of the charter conversion; and
      2. Retain for the transitional period any assets that the converting financial institution legally held at the effective time of the charter conversion that otherwise may not be held by credit unions, provided that such transitional period during which such assets are retained does not exceed five years after the effective date of the charter conversion.

        (Code 1933, § 41A-3119, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2005, p. 826, § 24/SB 82; Ga. L. 2015, p. 5, § 7/HB 90; Ga. L. 2015, p. 344, § 25/HB 184; Ga. L. 2017, p. 193, § 21/HB 143.)

The 2015 amendments. The first 2015 amendment, effective March 13, 2015, part of an Act to revise, modernize, and correct the Code, added "and" at the end of paragraph (b)(2). The second 2015 amendment, effective July 1, 2015, in subsection (d), designated the existing provisions as paragraph (d)(1), in paragraph (d)(1), inserted "or financial institutions other than credit unions to state chartered credit unions" in the first sentence and deleted the former second sentence, which read: "Procedures provided in subsection (b) of this Code section shall be followed for obtaining approval and effecting such conversions, provided that two-thirds of the members voting shall be required to approve a proposed conversion.", and added paragraphs (d)(2) through (d)(4).

The 2017 amendment, effective June 1, 2017, substituted "members" for "shareholders" in the first sentence of paragraph (b)(2).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 235 et seq.

C.J.S. - 12 C.J.S., Building and Loan Associations, Savings and Loan Associations, and Credit Unions, §§ 278, 279.

7-1-669. Central credit union.

  1. A "central credit union" means a credit union which is organized to serve a field of membership which consists primarily of other credit unions operating pursuant to this chapter, any other state credit union law, or the Federal Credit Union Act.  A central credit union may be organized and operated under this chapter and subject to all provisions of this chapter which are not inconsistent with this Code section.  Such credit union shall use the word "central" in its name.
  2. The field of membership of a central credit union shall include credit unions organized and operating under this chapter, any other state credit union law, or under the Federal Credit Union Act. In addition, the field of membership may include:
    1. Members of credit unions which are members of the central credit union;
    2. Officials and employees of any organization or association of credit unions and of the central credit union;
    3. Except as limited in Article 1 of this chapter, employees of the department or of the National Credit Union Administration;
    4. Organizations and associations of persons or credit unions included in the foregoing;
    5. Persons who are:
      1. Members of a credit union that has entered into voluntary or involuntary dissolution; or
      2. Indebted to a credit union which has entered into voluntary or involuntary dissolution; or
      3. Nonmember depositors of a credit union which has entered into voluntary or involuntary dissolution; and
    6. Groups within a common bond which are determined by the commissioner to lack the potential membership required for approval of their own credit union.
  3. The central credit union may make loans to individuals who are members pursuant to paragraph (1) of subsection (b) of this Code section only upon approval of the credit committee of the member credit union of which the individual is a member and to individuals who are members pursuant to paragraph (3) of subsection (b) of this Code section only upon reporting such loan to the appropriate supervisory authority.
  4. The commissioner may, in his discretion, approve greater borrowings than provided in this chapter when required to enable the credit union to meet its obligations to its members and otherwise assist its members during any emergency or hardship.
  5. A central credit union may:
    1. Make loans to other credit unions, but loans to any one credit union shall not exceed:
      1. For unsecured loans and lines of credit, excluding pass-through and guaranteed loans from the Central Liquidity Fund and the National Credit Union Share Insurance Fund, more than 50 percent of capital; or
      2. For secured loans and lines of credit, excluding those secured by shares or marketable securities and member reverse repurchase transactions, more than 100 percent of capital.

        For the purposes of this paragraph, the definition of capital shall be consistent with federal law and regulations. The department may utilize other definitions found in the National Credit Union Administration rules and regulations in interpreting this subsection;

    2. Make loans to other members as specified in Code Section 7-1-658;
    3. Purchase shares of and make deposits in other credit unions;
    4. Obtain or acquire the assets and liabilities of any credit union which enters into liquidation;
    5. Invest in and grant loans to associations of credit unions and to organizations chartered to provide service to credit unions; and
    6. Borrow money and accept deposits from any source.
  6. The commissioner may issue such special regulations as he or she may deem prudent or necessary to allow a central credit union to promote effectively the liquidity and sound financial management of its member credit unions without unduly endangering its own liquidity and sound financial condition. Such special regulations need not be applicable to all credit unions but may be applicable only to the central credit union. The central credit union shall maintain an adequate allowance for loan and lease losses in accordance with generally accepted accounting principles and such other reserves as may be required by the rules and regulations of the department.
  7. A central credit union shall have all the rights and powers of any other credit union organized under this chapter and the additional rights and powers specified in this Code section.

    (Code 1933, § 41A-3120, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2002, p. 1220, § 9; Ga. L. 2005, p. 826, § 25/SB 82; Ga. L. 2010, p. 878, § 7/HB 1387; Ga. L. 2016, p. 390, § 3-4/HB 811.)

The 2016 amendment, effective July 1, 2016, inserted ", any other state credit union law," in the first sentence of subsection (b).

Code Commission notes. - Pursuant to Code Section 28-9-5, in 2005, "no" was deleted preceding "more than" in subparagraphs (e)(1)(A) and (e)(1)(B).

U.S. Code. - The Federal Credit Union Act, referred to in subsections (a) and (b) of this Code section, is codified as 12 U.S.C. § 1751 et seq.

RESEARCH REFERENCES

ALR. - Construction and application of Federal Credit Union Act of 1934 (FCUA) (12 U.S.C.A. §§ 1751 to 1795k), 89 A.L.R. Fed. 2d 357.

7-1-670. Third-party payment services.

  1. Any credit union may apply to the department for permission to offer third-party payment services to its members. The department shall exercise its discretion in determining whether to approve such request but shall not grant its approval until it is satisfied that:
    1. The convenience and need of the membership will be served by the proposed change;
    2. There is reasonable promise of adequate support of the program in light of:
      1. The competition offered by existing financial institutions;
      2. The financial history of the credit union and its membership; and
      3. The opportunities for profitable employment of depositors' funds as indicated by the average demand for credit, the number of potential depositors, the volume of transactions, and stability of the common bond;
    3. The managerial resources, internal controls, and operating procedures of the credit union are sufficient to administer the program in a safe and sound manner; and
    4. The capital and reserves of the credit union are adequate in light of current economic conditions and asset quality of the credit union.
  2. A credit union meeting certain financial and managerial criteria specified by department rule, regulation, or policy shall be exempt from the need for prior approval. Prior notice of intent to offer third-party payment services will be provided to the department.
  3. Upon the commencement of third-party payment services, a credit union shall be subject to Code Sections 7-1-287, pertaining to investment securities; 7-1-288, pertaining to corporate stock and securities; 7-1-371, pertaining to legal reserve requirements; and rules and regulations of the department relating to the foregoing Code sections of law and shall not pay a greater rate of interest on third-party payment accounts than is allowed to be paid by commercial banks.
  4. A credit union that is approved to offer third-party payment services may apply to the department to offer other services, such as check-cashing services, sale of payment instruments, or international remittances, which services are determined by the department to be safe, sound, convenient, and necessary and responsive to those consumers eligible for membership. The department may impose restrictions on these services if approved.
  5. Authority to offer third-party payment services may be suspended or revoked in accordance with Code Section 7-1-91.

    (Code 1933, § 41A-3121, enacted by Ga. L. 1979, p. 417, § 2; Ga. L. 1983, p. 602, § 19; Ga. L. 2001, p. 970, § 9; Ga. L. 2005, p. 826, § 26/SB 82; Ga. L. 2007, p. 502, § 16/SB 70; Ga. L. 2016, p. 390, § 3-5/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted "payment instruments" for "money orders" in the middle of the first sentence of subsection (d).

7-1-671. "Federal power" defined; construction with federal law; notifications; objections; authority; construction.

  1. For purposes of this Code section, the term "federal power" means any banking or corporate power, right, benefit, privilege, or immunity of a federal credit union, the deposits of which are federally insured, that may be exercised by a federal credit union doing business in this state pursuant to the Federal Credit Union Act, 12 U.S.C. Section 1751, et seq.; any other federal statute; or any regulation, ruling, circular, bulletin, order, or interpretation issued by the National Credit Union Administration. Such term shall include only the provisions set forth above which were effective on January 1, 2018.
  2. Notwithstanding any other provisions of law, a credit union may exercise any federal power while a federal credit union may also exercise such power subject to the same limitations and restrictions as are applicable to federal credit unions, provided that the requirements of subsection (d) of this Code section have been satisfied. Nothing in this subsection shall be construed as authorizing a credit union incorporated or organized in this state to exercise a federal power prior to compliance with subsection (d) of this Code section.
  3. Notwithstanding any other provisions of law, to the extent the Federal Credit Union Act, 12 U.S.C. Section 1751, et seq., or any other federal law or regulation in effect on January 1, 2018, precludes or preempts or has been determined to preclude or preempt the application of any provision of law, rule, or regulation of this state as to any federal credit union doing business in this state, a credit union may also exercise such power authorized by the preclusion or preemption subject to the same limitations and restrictions as are applicable to a federal credit union, provided that the requirements of subsection (d) of this Code section have been satisfied. Nothing in this subsection shall be construed as authorizing a credit union incorporated or organized in this state to exercise a federal power prior to compliance with subsection (d) of this Code section.
  4. In furtherance of the commissioner's statutory duties to regulate, supervise, and examine, a credit union shall notify the commissioner in writing by certified or registered mail that, pursuant to subsection (b) or (c) of this Code section, it intends to exercise a federal power or to avail itself of any federal preclusion or preemption of any provision of law, rule, or regulation of this state. Such notice shall include the specific federal authorization of the activity to be utilized, the proposed action to be undertaken by the credit union, documentation indicating that the credit union satisfies the prescribed federal standards, if any, to engage in the activity, and such other information as may be required by the department. Upon receipt of such notice, the commissioner shall determine whether the exercise of any federal power or the availing of any federal preclusion or preemption, or any part thereof, by the credit union is inconsistent with the purposes of this chapter or presents undue risk to the safety and soundness of the banking system. In making such a determination, the commissioner shall consider the financial condition of the credit union, the regulatory safety and soundness ratings of the credit union, the ability of credit union management to administer and supervise the activity, and the overall impact on the safety and soundness to all other state chartered credit unions. Based on such a determination, the commissioner may object to the exercise of the federal power, in whole or in part, or to the federal preclusion or preemption of the law, rule, or regulation of this state, in whole or in part, including objecting to a level or quantity above which a credit union may be seeking to exercise a federal power or availing itself of any federal preclusion or preemption of law, rule, or regulation of this state. If the commissioner so objects, the commissioner shall deliver such objection in writing by certified or registered mail to the credit union within 45 days of receipt of the notice; provided, however, that the commissioner may extend such period of review for an additional 45 days by providing the credit union with written notice of such extension prior to the expiration of the initial notice period. If the commissioner sends such an objection, the federal power, preclusion, or preemption, or the part thereof, objected to by the commissioner shall not be exercised by the credit union pursuant to subsections (b) and (c) of this Code section. The objection by the commissioner of a credit union's intent to exercise a federal power or avail itself of any federal preclusion or preemption shall not preclude such credit union from providing notice to the department of its intent to exercise the same federal power or to avail itself of the same federal preclusion or preemption at a later date; provided, however, that the requirements of this subsection shall be applicable for any such additional notice. Further, in the event a credit union determines, after satisfying the notice provisions of this subsection, that it no longer wishes to exercise a federal power or avail itself of any federal preclusion or preemption, then such credit union shall provide written notice of such fact to the commissioner by certified or registered mail.
  5. Notwithstanding the provisions of Code Section 7-1-70, the department shall publish information stating the federal powers that are being exercised or federal preclusions or preemptions that are being utilized by each credit union. All other information related to the notices or objections provided under subsection (d) of this Code section are governed by Code Section 7-1-70.
  6. Notwithstanding any other provisions of law, a credit union may exercise any power that was granted through an order or ruling declared by the commissioner on or before January 1, 2018, pursuant to the current or former provisions of Code Section 7-1-61, 7-1-61.1, or 7-6A-12 and which has not been rescinded or withdrawn.
  7. Any federal power or activity authorized and exercised or conducted pursuant to this Code section shall be independent from, and in addition to, any other powers granted to credit unions under applicable laws of this state or rules or regulations promulgated thereunder. The express and incidental powers granted to credit unions under the Official Code of Georgia Annotated are not limited or otherwise restricted by this Code section.
  8. Nothing in this Code section shall be construed as limiting the commissioner's authority conferred by this chapter, including the powers granted under Code Sections 7-1-61 and 7-1-61.1.
  9. Nothing in this Code section shall be construed as authorizing the imposition of interest rates by a credit union in excess of those authorized by Chapter 4 of this title nor shall any provision of this Code section be construed as permitting a credit union to make loans in violation of Chapter 17 of Title 16. (Code 1981, § 7-1-671 , enacted by Ga. L. 2018, p. 214, § 17/HB 780.)

Effective date. - This Code section became effective May 3, 2018. See Editor's notes for applicability.

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

ARTICLE 4 SALE OF PAYMENT INSTRUMENTS

Effective date. - This article became effective July 1, 2014.

Editor's notes. - In light of the similarity of the statutory provisions, opinions decided under former Ga. L. 1965, p. 81 are included in the annotations for this Code section.

Ga. L. 2014, p. 251, § 1/HB 982, effective July 1, 2014, repealed the Code sections formerly codified at this article and enacted the current article. The former article consisted of Code Section 7-1-680 through 7-1-684, 7-1-684.1, 7-1-685 through 7-1-687, 7-1-687.1, 7-1-688, 7-1-689, 7-1-689.1, 7-1-689.2, 7-1-690 through 7-1-692, relating to sale of checks or money orders, and was based on Ga. L. 1965, p. 81, § 2-17; Code 1933, §§ 41A-3201 - 41A-3213, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, §§ 35-36; Ga. L. 1978, p. 1717, §§ 8-9; Ga. L. 1984, p. 22, § 7; Ga. L. 1985, p. 1131, § 1; Ga. L. 1986, p. 458, § 10; Ga. L. 1990, p. 362, § 1; Ga. L. 1994, p. 1780, § 3; Ga. L. 1997, p. 143, § 7; Ga. L. 1995, p. 673, §§ 26-28; Ga. L. 2000, p. 174, § 18; Ga. L. 2000, p. 1589, § 3; Ga. L. 2003, p. 843, §§ 10-15; Ga. L. 2004, p. 458, §§ 6-7; Ga. L. 2005, p. 826, § 27/SB 82; Ga. L. 2007, p. 502, §§ 17/SB 70 - 24/SB 70; Ga. L. 2009, p. 86, §§ 8/HB 141 - 141/HB 141; Ga. L. 2010, p. 878, § 7/HB 1387; Ga. L. 2013, p. 30, § 2/SB 139.

Administrative Rules and Regulations. - Sale of money orders at nonbanking outlets, Official Compilation of Rules and Regulations of State of Georgia, Rules of Department of Banking and Finance, Chapter 80-3-1.

OPINIONS OF THE ATTORNEY GENERAL

Intent of provisions on sale of checks or money orders is to protect innocent members of public from financial injury resulting from default of check-issuing companies. 1977 Op. Att'y Gen. No. 77-12.

Definition of check includes traveler's checks. - While Ga. L. 1965, p. 81 (see now O.C.G.A. Art. 4, Ch. 1, T. 7) makes no specific mention of traveler's checks, the definition of "check" would clearly include any arrangement such as traveler's checks. 1972 Op. Att'y Gen. No. 72-23 (decided under former Ga. L. 1965, p. 81).

Bank holding company wishing to issue traveler's checks in Georgia must comply with Ga. L. 1965, p. 81 (see now O.C.G.A. Art. 4, Ch. 1, T. 7). 1972 Op. Att'y Gen. No. 72-23 (decided under former Ga. L. 1965, p. 81).

Money transfer companies not subject to article absent issuance of check or instrument to fund recipient. - Money transfer companies are not subject to Sale of Checks Act unless there is issuance of a check or other instrument to recipient of funds disbursed; mere transmission of an instrument by the money transfer company to its agent is not "issuance of check" within meaning of former Code 1933, § 41A-3202 (see now O.C.G.A. § 7-1-681 ). 1975 Op. Att'y Gen. No. 75-102.

Georgia cannot restrict sales by federal credit unions of checks and money orders. - Since federal credit unions are authorized by Congress, and their federal regulatory agency, the National Credit Union Administration, to sell negotiable checks and money orders to their members, it follows that Georgia may not restrict federal credit unions in their exercise of this power. 1978 Op. Att'y Gen. No. 78-56.

RESEARCH REFERENCES

ALR. - Discharge of drawer or endorser of check by holder's acceptance therefor of something other than money, 87 A.L.R. 442 .

Lost or stolen travelers' checks, 110 A.L.R. 976 .

7-1-680. Definitions.

As used in this article, the term:

  1. "Authorized agent" means a person designated by a licensee pursuant to Code Section 7-1-683.1 to engage in money transmission, the sale of payment instruments, or the issuance of payment instruments.
  2. "Check" means any check, money order, draft, or negotiable demand instrument.
  3. "Closed-loop transaction" means a transaction where the value or credit is primarily intended to be redeemed for a limited universe of goods, intangibles, services, or other items provided by the issuer of the payment instrument, its affiliates or agents, or others involved in the transaction functionally related to the issuer or its affiliates or agents.
  4. "Commissioner" means the commissioner of banking and finance.
  5. "Control," "controlling," "controlled by," or "under common control with" means the direct or indirect possession of power to direct or cause the direction of the management and policies of a person.
  6. "Covered employee" means any employee of a licensee or an authorized agent engaged in any function related to the selling of payment instruments or money transmission.
  7. "Department" means the Department of Banking and Finance.
  8. "Executive officer" means the chief executive officer, president, chief financial officer, chief operating officer, each vice president with responsibility involving policy-making functions for a significant aspect of a person's business, secretary, treasurer, or any other person performing similar managerial or supervisory functions with respect to any organization, whether incorporated or unincorporated.
  9. "Individual" means a natural person.
  10. "Licensee" means a person, including, but not limited to, a money transmitter and a payment instrument seller, duly licensed by the department pursuant to this article.
  11. "Misrepresent" means to make a false statement of a substantive fact. The term may also mean to engage in any conduct which leads to a false belief which is material to the transaction.
  12. "Monetary value" means a medium of exchange, whether or not redeemable in money.
  13. "Money transmission," "transmit money," or "transmission of money" means engaging in the business of receiving money or monetary value for transmission or transmitting money or monetary value within the United States or to locations abroad by any and all means, including, but not limited to, an order, wire, facsimile, or electronic transfer. The term does not include closed-loop transactions.
  14. "Money transmitter" means a person licensed under this article to transmit money.
  15. "Nation-wide Multistate Licensing System and Registry" means a licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for the licensing and registration of certain persons engaged in nondepository activities.
  16. "Open-loop transaction" means a transaction using a payment instrument with stored value to redeem for goods or services at any location that accepts such payment instrument.
  17. "Payment instrument" means any instrument, order, or device for the payment or transmission of money or monetary value, whether or not it is a negotiable instrument under the terms of Article 3 of Title 11, relating to negotiable instruments. The term includes, but is not limited to, checks, money orders, drafts, stored value cards, and open-loop transactions. The term does not include closed-loop transactions, credit card vouchers, letters of credit, or any instrument that is redeemable by the issuer only in specific goods or services of the issuer.
  18. "Payment instrument holder" means a person that has purchased a payment instrument from a payment instrument seller or who has had monetary value transmitted by a money transmitter.
  19. "Payment instrument issuer" or "payment instrument seller" means a person licensed under this article to engage in the issuance or sales of payment instruments.
  20. "Person" means any individual, sole proprietorship, corporation, limited liability company, partnership, trust, or any other group of individuals, however organized.
  21. "Sale" and "selling" mean the passing of title from the payment instrument seller or the payment instrument seller's agent to a payment instrument holder or remitter or an agreement to transfer money or monetary value.
  22. "Sale of payment instruments," "selling of payment instruments," or "issuance of payment instruments" means the creation, issuance, or sale of a payment instrument that is redeemable in cash or monetary value.
  23. "Signed" shall have the same meaning as provided in Code Section 11-1-201.
  24. "Ultimate equitable owner" means a person that:
    1. Owns, directly or indirectly, a 10 percent or more interest in a corporation or any other form of business organization;
    2. Owns, directly or indirectly, 10 percent or more of the voting shares of any corporation or any other form of business organization; or
    3. Exerts control, directly or indirectly, over a corporation or any other form of business organization, regardless of whether such person owns or controls such interest through one or more natural persons or one or more proxies, powers of attorney, nominees, corporations, associations, limited liability companies, partnerships, trusts, joint stock companies, other entities or devices, or any combination thereof.
  25. "Unique identifier" means a number or other identifier assigned by protocols established by the Nation-wide Multistate Licensing System and Registry.
  26. "Virtual currency" means a digital representation of monetary value that does not have legal tender status as recognized by the United States government. The term does not include the software or protocols governing the transfer of the digital representation of monetary value. The term also does not include units of value that are issued in an affinity or rewards program and that cannot be redeemed for money or virtual currencies. Neither does the term include an affinity or rewards program tied to a credit, debit, or prepaid card that awards points for purchases or other transactions, which points can be redeemed for dollar denominated credit to a checking, credit card, or prepaid account, or for a gift card, goods, travel, or services. (Code 1981, § 7-1-680 , enacted by Ga. L. 2014, p. 251, § 1/HB 982; Ga. L. 2015, p. 996, § 3C-2/SB 65; Ga. L. 2016, p. 390, § 1-6/HB 811.)

The 2015 amendment, effective January 1, 2016, deleted "paragraph (39) of" following "provided in" in paragraph (23).

The 2016 amendment, effective July 1, 2016, added paragraph (26).

Editor's notes. - Ga. L. 2015, p. 996, § 1-1/SB 65, not codified by the General Assembly, provides:

"(a) This Act shall be known and may be cited as the 'Debtor Creditor Uniform Law Modernization Act of 2015.'

"(b) To promote consistency among the states, it is the intent of the General Assembly to modernize certain existing uniform laws promulgated by the Uniform Law Commission affecting debtor and creditor rights, responsibilities, and relationships and other federally recognized laws affecting such rights, responsibilities, and relationships."

7-1-681. Licensing requirements; engagement in sale of payment instruments or money transmission defined; liabilities.

  1. Pursuant to this article, the department may license a person to engage in the sale of payment instruments or the transmission of money.
  2. A license for the sale of payment instruments authorizes the licensee to sell payment instruments and to transmit money.
  3. A license for the transmission of money authorizes the licensee to transmit money.
  4. No person, regardless of the location of such person, its facilities, or its agents, shall engage in the sale of payment instruments or money transmission without having first obtained a license authorizing such activity under this article. This prohibition applies whether or not a person utilizes a branch, subsidiary, affiliate, or agent in this state. A person is deemed to be engaged in the sale of payment instruments or money transmission if the person advertises any of those services, provides any of those services with or without compensation, solicits to provide any of those services, or holds itself out as providing any of those services to or from this state, even if the person has no physical presence in this state.
  5. Every person that directly or indirectly controls another that violates subsection (d) of this Code section, including but not limited to each general partner, executive officer, joint venture, ultimate equitable owner, or director of such person, and every person occupying a similar status or performing similar functions as such person violates with and to the same extent as such person. Any person that directly or indirectly controls a person that violates subsection (d) of this Code section may avoid liability if such person sustains the burden of proof that the person did not know and, in the exercise of reasonable care, could not have known of the existence of the facts by reason of which the original violation is alleged to exist. (Code 1981, § 7-1-681 , enacted by Ga. L. 2014, p. 251, § 1/HB 982.)

7-1-682. Exemption from licensing requirements.

The requirement for licensure set forth in this article shall not apply to:

  1. Any state or federally chartered bank, trust company, credit union, savings and loan association, or savings bank with deposits that are federally insured;
  2. Any authorized agent of a licensee;
  3. The United States Postal Service;
  4. A state or federal governmental department, agency, authority, or instrumentality and its authorized agents;
  5. Any foreign bank that establishes a federal branch pursuant to the International Bank Act, 12 U.S.C. Section 3102; or
  6. An individual employed by a licensee or any person exempted from the licensing requirements of this article when acting within the scope of employment and under the supervision of the licensee or exempted person as an employee and not as an independent contractor. (Code 1981, § 7-1-682 , enacted by Ga. L. 2014, p. 251, § 1/HB 982.)

7-1-683. Requirements for licensure; fees; rules and regulations.

  1. Each applicant for a license under this article shall:
    1. Submit an application in writing, which is made under oath and in such form as the department may prescribe;
    2. Furnish to the Nation-wide Multistate Licensing System and Registry the following information:
      1. The legal name and principal office address of the person applying for the license;
      2. The name, residence, and business address of each director, ultimate equitable owner, and executive officer;
      3. If the applicant has one or more branches or other locations, including but not limited to locations operated by an authorized agent, at or through which the applicant proposes to engage in the sale of payment instruments or money transmission within this state, the complete address of each such location; and
      4. The location where its initial registered office will be located in this state, if any; and
    3. Submit such other data, financial statements, and pertinent information as the department may require with respect to the applicant, its directors, trustees, officers, members, ultimate equitable owners, subsidiaries, affiliates, or agents.
  2. The application for license shall be filed together with:
    1. An investigation and supervision fee established by the department through rule or regulation which shall not be refundable but which, if the license is granted, shall satisfy the fee requirement for the first licensed year or the remaining part thereof;
    2. Items required by other provisions of this article, including but not limited to Code Sections 7-1-683.2 and 7-1-684; and
    3. Other information as may be required by the department.
  3. Where a person engages only in the sale of payment instruments issued by another person which is primarily obligated for payment of the payment instrument and the seller is a wholly owned subsidiary of or is wholly owned by the sole shareholder of the issuer, the department may grant a single license naming both the seller and issuer as joint licensees. In such cases, only a single license fee shall be collected and only one corporate surety bond, pursuant to Code Section 7-1-683.2, shall be required where such bond names both the seller and issuer.
  4. The department shall pay all fees received from licensees and applicants related to applications, licenses, and renewals to the Office of the State Treasurer; provided, however, that the department may net such fees to recover the cost of participation in the Nation-wide Multistate Licensing System and Registry.
  5. The department shall enact rules and regulations regarding the time frame by which all persons must submit an original or renewal application for licensure through the Nation-wide Multistate Licensing System and Registry. (Code 1981, § 7-1-683 , enacted by Ga. L. 2014, p. 251, § 1/HB 982.)

7-1-683.1. Locations for conduct of business; contracting with authorized agent; requirements of agent.

  1. As authorized by this Code section, a licensee may conduct its business through designated authorized agents at one or more locations in this state, so long as such locations have been included in the licensee's application and reports as required by Code Section 7-1-683 and subsection (d) of Code Section 7-1-686. The department may refuse within 30 days after application, for cause, to approve a licensee's designation of an authorized agent. In such cases the authorized agent shall have the same procedural rights as are provided in this article for the denial of an application for a license. No additional license other than that obtained by the licensee shall be required of any authorized agent of a licensee. An authorized agent of a licensee shall sell payment instruments or transmit money only at the location designated in the written notice provided to the department.
  2. Licensees desiring to conduct licensed activities through authorized agents shall enter into a written contract with the authorized agent. The contract shall authorize the agent to operate only pursuant to the terms of the contract and shall specifically designate the authorized activities that the agent may engage in on behalf of the licensee. Upon request of the department, a licensee shall provide the department with a copy of the executed written contract between the licensee and its authorized agent.
  3. Upon the department receiving written notice from the licensee designating an authorized agent, the authorized agent shall be:
    1. Required to operate in full compliance with this article, the rules and regulations promulgated under this article, and any applicable order issued by the commissioner;
    2. Required to timely remit all money legally due to the licensee in accordance with the terms of the written contract between the licensee and the authorized agent;
    3. Prohibited from utilizing subagents to carry out its responsibilities;
    4. Subject to examination and investigation by the department as set forth in this article, including, but not limited to, the requirements of Code Section 7-1-689 ;
    5. Subject to administrative actions, including, but not limited to, the revocation or suspension of its authorization to act as an authorized agent, a cease and desist order, and the imposition of fines; and
    6. Required to comply with applicable state and federal law. (Code 1981, § 7-1-683.1 , enacted by Ga. L. 2014, p. 251, § 1/HB 982; Ga. L. 2015, p. 5, § 7/HB 90.)

The 2015 amendment, effective March 13, 2015, part of an Act to revise, modernize, and correct the Code, substituted "but not limited to," for "but not limited," in paragraph (c)(5).

7-1-683.2. Bonding.

  1. An applicant shall provide with its application a corporate surety bond issued by a bonding company or insurance company authorized to do business in this state and approved by the department. The bond for payment instrument sellers shall be in the principal sum of $250,000.00. The bond for money transmitters shall be in the principal sum of $100,000.00.
  2. Notwithstanding subsection (a) of this Code section, the department may require an applicant or a licensee to provide additional coverage for the adequate protection of payment instrument holders if the average daily outstanding balances for payment instrument sellers exceed the current bond amount, the average daily outstanding orders to transmit not yet paid for money transmitters exceed the current bond amount, or the department determines that additional coverage is necessary in order to satisfy the department that the provisions of subsection (a) of Code Section 7-1-684 are fulfilled. A licensee's level of outstandings shall be determined by the portion of the licensee's financial reports dealing with transactions originating in Georgia which shall be submitted to the department as set forth in its rules and regulations. However, under no circumstances shall the additional bond coverage required by the department exceed $2,000,000.00.
  3. The bond shall be in a form satisfactory to the department and shall run to the State of Georgia for the benefit of the department or any payment instrument holders against the licensee or its agents. The condition of the bond shall require the licensee to pay any and all moneys for the benefit of any person damaged by noncompliance of a licensee or its agent with this article, with the rules and regulations enacted pursuant to this article, or with any condition of the bond or to pay any and all moneys that may become due and owing any creditor of or claimant against the licensee arising out of the licensee's sale of payment instruments or money transmission in this state, whether through its own acts or the acts of an agent. Damage payments due under the bond include moneys owed to the department for fees, fines, or penalties. In no event shall the aggregate liability of the surety exceed the principal sum of the face amount of the bond. Claimants against the licensee may bring an action directly on the surety bond. (Code 1981, § 7-1-683.2 , enacted by Ga. L. 2014, p. 251, § 1/HB 982.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 344 et seq.

7-1-683.3. Authority of department.

  1. The department is authorized to:
    1. Participate in the Nation-wide Multistate Licensing System and Registry in order to facilitate the sharing of information and standardization of the licensing and application processes for persons subject to this article;
    2. Enter into operating agreements, information sharing agreements, interstate cooperative agreements, and other contracts necessary for the department's participation in the Nation-wide Multistate Licensing System and Registry;
    3. Disclose or cause to be disclosed without liability, via the Nation-wide Multistate Licensing System and Registry, applicant and licensee information, including, but not limited to, violations of this article and enforcement actions, to facilitate regulatory oversight across state jurisdictional lines;
    4. Request that the Nation-wide Multistate Licensing System and Registry adopt an appropriate privacy, data security, and security breach notification policy that is in full compliance with existing state and federal law; and
    5. Establish and adopt, by rule or regulation, requirements for participation by applicants and licensees in the Nation-wide Multistate Licensing System and Registry upon the department's determination that each requirement is consistent with both the public interest and the purposes of this article.
  2. The department shall enact rules and regulations establishing a process whereby licensees may challenge information entered by the department on the Nation-wide Multistate Licensing System and Registry.
  3. Irrespective of its participation in the Nation-wide Multistate Licensing System and Registry, the department shall retain full and exclusive authority over determinations of whether to grant, renew, suspend, or revoke licenses issued under this article. Nothing in this Code section shall be construed to reduce or otherwise limit such authority.
  4. Information disclosed through the Nation-wide Multistate Licensing System and Registry is deemed to be disclosed directly to the department and subject to Code Section 7-1-70 . Such information shall not be disclosed to the public and shall remain privileged and confidential pursuant to Code Section 7-1-70 . (Code 1981, § 7-1-683.3 , enacted by Ga. L. 2014, p. 251, § 1/HB 982.)

7-1-684. Investigation of applicants for licensure; background checks on employees and others.

  1. The department shall conduct an investigation of every applicant for licensure to determine the financial responsibility, experience, character, and general fitness of such applicant. The department may issue the applicant a license to transmit money or sell payment instruments if the department determines to its general satisfaction that:
    1. The applicant is financially sound and responsible and able to transmit money or sell payment instruments in an honest, fair, and efficient manner and with the confidence and trust of the community; and
    2. All conditions for licensure set forth in this article or the rules and regulations of the department have been satisfied.
  2. The department shall not issue a license or may revoke a license if it finds that the applicant, licensee, or authorized agent; any person who is a director, officer, partner, covered employee, or ultimate equitable owner of the applicant, licensee, or authorized agent; or any individual who directs the affairs of or controls or establishes policy for the applicant, licensee, or authorized agent has been convicted of a felony in any jurisdiction or of a crime which, if committed within this state, would constitute a felony under the laws of this state. For the purposes of this article, a person shall be deemed to have been convicted of a crime if such person shall have pleaded guilty or nolo contendere to a charge thereof before a court or federal magistrate or shall have been found guilty thereof by the decision or judgment of a court or federal magistrate or by the verdict of a jury, irrespective of the pronouncement of sentence or the suspension thereof and regardless of whether first offender treatment without adjudication of guilt pursuant to the charge was entered or an adjudication or sentence was otherwise withheld or not entered on that charge, unless and until such plea of guilty or such decision, judgment, or verdict shall have been set aside, reversed, or otherwise abrogated by lawful judicial process or until probation, sentence, or both probation and sentence of a first offender have been successfully completed and documented or unless the person convicted of the crime shall have received a pardon therefor from the President of the United States or the governor or other pardoning authority in the jurisdiction where the conviction occurred or shall have received an official certification of pardon granted by the state's pardoning body where the conviction occurred which removes the legal disabilities resulting from such conviction and restores civil and political rights.
  3. The department shall be authorized to obtain conviction data with respect to any applicant, licensee, or authorized agent, any person who is a director, officer, partner, covered employee, or ultimate equitable owner of the applicant, licensee, or authorized agent, or any individual who directs the affairs of or controls or establishes policy for the applicant, licensee, or authorized agent. The department may submit directly to the Georgia Crime Information Center two complete sets of fingerprints of such person, together with the required records search fees and such other information as may be required. Fees for background checks that the department administers shall be sent to the department by applicants, licensees, and authorized agents together with the fingerprints.
  4. Upon request by the department, each applicant, licensee, or authorized agent, any person who is a director, officer, partner, covered employee, or ultimate equitable owner of the applicant, licensee, or authorized agent, or any individual who directs the affairs of or controls or establishes policy for the applicant, licensee, or authorized agent shall submit to the department two complete sets of fingerprints, the required records search fees, and such other information as may be required. Fees for background checks that the department administers shall be submitted to the department by applicants, licensees, and authorized agents together with two complete sets of fingerprints, and the department is authorized to net such fees to recover any costs incurred by the department related to running the background checks. Upon receipt of fingerprints, fees, and other required information, the Georgia Crime Information Center shall promptly transmit one set of fingerprints to the Federal Bureau of Investigation for a search of bureau records and an appropriate report and shall retain the other set and promptly conduct a search of its own records and records to which it has access. The Georgia Crime Information Center shall notify the department in writing of any derogatory finding, including, but not limited to, any conviction data regarding the fingerprint records check, or if there is no such finding. All conviction data received by the department or by the applicant, licensee, or authorized agent shall be used by the party requesting such data for the exclusive purpose of carrying out the responsibilities of this article, shall not be a public record, shall be confidential, and shall not be disclosed to any other person or agency except to any person or agency which otherwise has a legal right to inspect such data. All such records shall be maintained by the department and the applicant, licensee, or authorized agent pursuant to laws regarding such records and the rules and regulations of the Federal Bureau of Investigation and the Georgia Crime Information Center, as applicable. As used in this Code section, "conviction data" means a record of a finding, verdict, or plea of guilty or plea of nolo contendere with regard to any crime, regardless of whether an appeal of the conviction has been sought.
  5. Every applicant and licensee shall be authorized and required to obtain and maintain the results of background checks on covered employees. Such background checks shall be handled by the Georgia Crime Information Center pursuant to Code Section 35-3-34 and the rules and regulations of the Georgia Crime Information Center. Applicants and licensees shall be responsible for any applicable fees charged by the Georgia Crime Information Center. An applicant or licensee may only employ a person whose background data has been checked and has been found to be in compliance with all lawful requirements prior to the initial date of hire. This provision does not apply to directors, officers, partners, or ultimate equitable owners of applicants or licensees or to persons who direct the affairs of or control or establish policy for applicants or licensees, whose background shall have been investigated through the department before taking office, beginning employment, or securing ownership. Upon receipt of information from the Georgia Crime Information Center that is incomplete or that indicates a covered employee has a criminal record in any state other than Georgia, the employer shall submit to the department two complete sets of fingerprint cards for such person, together with the applicable fees and any other required information. The department shall submit such fingerprints as provided in subsection (d) of this Code section.
  6. Upon request by the department, an applicant, licensee, or authorized agent shall take all steps necessary to have an international criminal history background check performed on any directors, officers, partners, covered employees, or ultimate equitable owners of applicants, licensees, or authorized agents or persons who direct the affairs of or control or establish policy for applicants, licensees, or authorized agents. The results of such international criminal history background check shall be provided to the department.
  7. Applicants and licensees shall have the primary responsibility for obtaining background checks on covered employees. The department shall be entitled to review the files of any applicant or licensee to determine whether the required background checks have been run and whether all covered employees are qualified. The department shall be authorized to discuss the status of employee background checks with applicants, licensees, and authorized agents. Notwithstanding any other provisions in this article, the department shall retain the right to obtain conviction data on covered employees of applicants, licensees, and authorized agents. (Code 1981, § 7-1-684 , enacted by Ga. L. 2014, p. 251, § 1/HB 982; Ga. L. 2015, p. 344, § 26/HB 184.)

The 2015 amendment, effective July 1, 2015, deleted former subsection (h), which read: "The department may use the Nation-wide Multistate Licensing System and Registry as a channeling agent for requesting information from and distributing information to the United States Department of Justice, any governmental agency, or any source so directed by the department."

7-1-684.1. Reporting to Nation-wide Multistate Licensing System and Registry.

Each licensee shall submit to the Nation-wide Multistate Licensing System and Registry timely reports of condition, which shall be in such form and contain such information as the department and the Nation-wide Multistate Licensing System and Registry may require.

(Code 1981, § 7-1-684.1 , enacted by Ga. L. 2014, p. 251, § 1/HB 982.)

7-1-684.2. Use of unique identifier of licensee.

The unique identifier of any licensee shall be clearly labeled on all advertisements and any other documents required by rule or regulation of the department.

(Code 1981, § 7-1-684.2 , enacted by Ga. L. 2014, p. 251 § 1/HB 982.)

7-1-685. Expiration and renewal of licenses.

Except as otherwise specifically provided in this article, all licenses issued pursuant to this article shall expire on December 31 of each year, and each application for renewal shall be made annually on or before December 1 of each year. A license may be renewed by the filing of an application substantially conforming to the requirements of Code Section 7-1-683 as specifically modified in the department's rules and regulations. No investigation fee shall be payable in connection with such renewal application. However, an annual license fee established by rule or regulation of the department to defray the cost of supervision shall be paid with each renewal application and shall not be refunded or prorated.

(Code 1981, § 7-1-685 , enacted by Ga. L. 2014, p. 251, § 1/HB 982; Ga. L. 2015, p. 5, § 7/HB 90.)

The 2015 amendment, effective March 13, 2015, part of an Act to revise, modernize, and correct the Code, substituted "regulations" for "regulation" at the end of the second sentence.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 177 et seq. 11 Am. Jur. 2d, Banks and Financial Institutions, § 1196.

7-1-686. Display of license; license nontransferable and nonassignable; notification of additional locations.

  1. A license issued pursuant to this article shall be kept conspicuously posted in the place of business of the licensee. If the licensee has no physical location in this state, then a copy of such license and the licensee's unique identifier shall be clearly posted and accessible through whichever medium the licensee engages in the sale of payment instruments or money transmission in this state.
  2. Such license shall not be transferable or assignable.
  3. No licensee shall engage in the sale of payment instruments or money transmissions under any name or names other than those authorized by the department in writing.
  4. A licensee shall give written notice to the department of its intent to operate any new or additional locations, including, but not limited to, locations operated by an authorized agent, not reported in either its original or renewal application. The required notice shall be in such form and contain such information as required by the department. (Code 1981, § 7-1-686 , enacted by Ga. L. 2014, p. 251, § 1/HB 982; Ga. L. 2015, p. 344, § 27/HB 184.)

The 2015 amendment, effective July 1, 2015, substituted "in such form and contain such information as required by the department" for "provided to the department no later than 30 days after the licensee or authorized agent engages in the sale of payment instruments or money transmission at any new or additional locations" in the last sentence of subsection (d).

7-1-687. Notice of action against licensee by creditor or claimant; other notification requirements.

  1. A licensee shall give written notice to the department by registered or certified mail of any action which may be brought against it by any creditor or claimant where such action relates to the activities authorized under this article or involves a claim against the bond filed with the department under Code Section 7-1-683.2. The notice shall provide details sufficient to identify the action and shall be sent within 30 days after the commencement of any such action. The licensee shall also give notice to the department by registered or certified mail within 30 days of the entry of any judgment entered against the licensee.
  2. The corporate surety shall, within ten days after it pays any claim to any creditor or claimant, give notice to the department by registered or certified mail of such payment with details sufficient to identify the claimant or creditor and the claim or judgment so paid. Whenever the principal sum of such bond is reduced by one or more recoveries or payments thereon, the licensee shall furnish a new or additional bond so that the total or aggregate principal sum of such bond or bonds shall equal the sum required under Code Section 7-1-683.2 or shall furnish an endorsement duly executed by the corporate surety reinstating the bond to the required principal sum thereof.
  3. A bond filed with the department for the purpose of compliance with Code Section 7-1-683.2 shall not be canceled by either the licensee or the corporate surety except upon notice to the department by registered or certified mail, statutory overnight delivery with return receipt requested, or electronically through the Nationwide Multistate Licensing System and Registry, and such cancellation shall be effective no sooner than 30 days after receipt by the department of such notice and only with respect to any breach of condition occurring after the effective date of such cancellation.
  4. A licensee shall give written notice to the department by registered or certified mail within ten days of the following:
    1. Any knowledge or discovery of an act prohibited by Code Section 7-1-684 or 7-1-691 or subsection (a) of Code Section 7-1-692;
    2. The discharge of any employee for actual or suspected misrepresentations, dishonest acts, or fraudulent acts;
    3. Any knowledge or discovery of the discharge of a covered employee or an authorized agent for actual or suspected misrepresentations, dishonest acts, or fraudulent acts;
    4. Any knowledge or discovery of an administrative, civil, or criminal action initiated by any government entity against the licensee or an authorized agent, any director, officer, partner, or ultimate equitable owner of the licensee or authorized agent, or any individual who directs the affairs of or controls or establishes policy for the licensee or authorized agent; or
    5. The filing of a petition by or against the licensee under the United States Bankruptcy Code, 11 U.S.C. Sections 101 through 110, for bankruptcy reorganization or the filing of a petition by or against the licensee for receivership or the making of a general assignment for the benefit of its creditors.
  5. Unless prior approval of a change in executive officer is required under Code Section 7-1-688 and notwithstanding subsection (e) of Code Section 7-1-684 requiring a criminal background check prior to the initial date of hire, a licensee shall notify the department in writing of any change of executive officer in such a manner that the notice is received by the department no later than ten business days after the effective date of the change. In the event of such change, the licensee shall initiate a criminal background check no later than ten business days after the effective date of the change. (Code 1981, § 7-1-687 , enacted by Ga. L. 2014, p. 251, § 1/HB 982; Ga. L. 2017, p. 193, § 22/HB 143; Ga. L. 2018, p. 214, § 18/HB 780.)

The 2017 amendment, effective June 1, 2017, in subsection (c), substituted "mail, statutory overnight delivery with" for "mail or statutory overnight delivery," and inserted "or electronically through the Nationwide Multistate Licensing System and Registry," in the middle.

The 2018 amendment, effective May 3, 2018, deleted "which may be" following "any judgment" in the last sentence of subsection (a); and added subsection (e). See Editor's notes for applicability.

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

7-1-688. Approval required of new ultimate equitable owner, other change of control, or executive officer of licensee; denial of application.

  1. Except as provided in this Code section, no person shall become an ultimate equitable owner of any licensee through acquisition or other change in control or become an executive officer of a licensee as a result of such acquisition or other change in control unless the person has first received written approval for such acquisition, change in control, or designation as an executive officer from the department. In order to obtain such approval, such person shall:
    1. File an application with the department in such form as the department may prescribe from time to time;
    2. Provide such other information as the department may require concerning the financial responsibility, background, experience, and activities of the applicant, its directors and executive officers, if a corporation, and its members, if applicable, and of any proposed new directors, executive officers, members, or ultimate equitable owners of the licensee; and
    3. Pay such application fee as the department may prescribe.
  2. The department may prescribe additional requirements for approval of such acquisition, change in control, or designation as an executive officer as a result of such acquisition or other change in control through rules and regulations.
  3. If the application is denied, the department shall notify the applicant of the denial and the reasons for the denial. (Code 1981, § 7-1-688 , enacted by Ga. L. 2014, p. 251, § 1/HB 982; Ga. L. 2018, p. 214, § 19/HB 780.)

The 2018 amendment, effective May 3, 2018, inserted "as a result of such acquisition or other change in control" in the first sentence of the introductory paragraph of subsection (a) and in subsection (b). See Editor's notes for applicability.

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

7-1-689. Record keeping; investigations and examinations by department; subpoenas; confidentiality; limitations on civil liability.

  1. Each licensee shall make, keep, and use in its business such books, accounts, and records as the department may require to enforce the provisions of this article and the rules and regulations promulgated under it. Each licensee shall preserve such books, accounts, and records for five years or such greater period of time as prescribed in the department's rules and regulations.
  2. Records required to be made, kept, and preserved pursuant to subsection (a) of this Code section may be maintained in a photographic, electronic, or other similar form.
  3. Records required to be made, kept, and preserved pursuant to subsection (a) of this Code section may be maintained at a location outside of this state so long as such records are produced to the commissioner at the department's main office within ten days of the date of a written request by the department to the licensee.
  4. The department shall investigate and examine the affairs, business, premises, and records of any licensee or authorized agent pertaining to the sale of payment instruments or money transmission. The department may conduct such investigations or examinations at least once every 24 months. The department may accept examination reports performed and produced by other state or federal agencies in satisfaction of this requirement unless the department determines that the examinations are not available or do not provide information necessary to fulfill the responsibilities of the department under this article.
  5. Notwithstanding subsection (d) of this Code section, the department may alter the frequency or scope of investigations or examinations through rules or regulations prescribed by the department. In addition, if the department determines that based on the records submitted to the department and past history of operations of the licensee in the state such investigations or examinations are unnecessary, then the department may waive such investigations and examinations.
  6. In addition to any other authority set forth under this article, the department shall be authorized to conduct investigations and examinations of applicants, licensees, and authorized agents as follows:
    1. The department shall have the authority to access, receive, and use any books, accounts, records, files, documents, information, or evidence, including, but not limited to:
      1. Criminal, civil, and administrative history information, including nonconviction data;
      2. Personal history and experience information, including, but not limited to, independent credit reports obtained from a consumer reporting agency described in the federal Fair Credit Reporting Act, 15 U.S.C. Section 1681a; and
      3. Any other documents, information, or evidence the department deems relevant to the inquiry, examination, or investigation regardless of the location, possession, control, or custody of such documents, information, or evidence;
    2. The department may review, investigate, or examine any licensee or person subject to this article as often as necessary in order to carry out the purposes of this article;
    3. Each licensee or person subject to this article shall make available to the department, upon request, any books and records relating to the activities of selling payment instruments or the transmission of money;
    4. No licensee or person subject to investigation or examination under this article shall knowingly withhold, abstract, remove, mutilate, destroy, or secrete any books, records, documents, files, computer records, evidence or other information; and
    5. In order to carry out the purposes of this Code section, the department may:
      1. Enter into agreements or relationships with other government officials or regulatory associations in order to improve efficiencies and reduce regulatory burden by sharing resources, documents, records, information, or evidence or by utilizing standardized or uniform methods or procedures;
      2. Accept and rely on examination or investigation reports made by other government officials within or outside this state; and
      3. Accept audit reports or portions of audit reports made by an independent certified public accountant on behalf of the licensee or person subject to this article covering the same general subject matter as the audit and may incorporate the audit report in the report of examination, report of investigation, or other writing of the department.
  7. Each licensee shall pay an examination fee as established by the rules and regulations of the department to cover the cost of an examination or investigation.
  8. The department, in its discretion, may:
    1. Make such public or private examination or investigation within or outside of this state as it deems necessary to determine whether any person has violated this article, any rule or regulation, or order issued under this article, to aid in the enforcement of this article, or to assist in the prescribing of rules and regulations pursuant to this article;
    2. Require or permit any person to file a statement in writing, under oath or otherwise, as to all the facts and circumstances concerning the matter to be investigated;
    3. Request any financial data from an applicant or licensee; and
    4. Conduct an on-site examination of a licensee or authorized agent at any location of the licensee or authorized agent without prior notice to the licensee or authorized agent. The licensee shall pay all reasonably incurred costs of the examination when the department examines the operations of its authorized agent. The department is authorized to net its out-of-state travel expenses incurred as a result of an examination or investigation of a licensee or authorized agent against the payment from the licensee.
  9. For the purpose of conducting any examination or investigation as provided in this Code section, the department shall have the power to administer oaths, to call any party to testify under oath in the course of such examinations or investigations, to require the attendance of witnesses, to require the production of books, accounts, records, documents, and papers, and to take the depositions of witnesses; and for such purposes the department is authorized to issue a subpoena for any witness or for the production of documentary evidence. Such subpoenas may be served by certified mail or statutory overnight delivery, return receipt requested, to the addressee's business mailing address or by examiners appointed by the department or shall be directed for service to the sheriff of the county where such witness resides or is found or where the person in custody of any books, accounts, records, documents, or papers resides or is found.
  10. The department may issue and apply to enforce subpoenas in this state at the request of any government agency, department, organization, or entity regulating the sale of payment instruments or money transmission in another state if the activities constituting the alleged violation for which the information is sought would be a violation of this article if the alleged activities had occurred in this state.
  11. In case of refusal to obey a subpoena issued under this article to any person, a superior court of appropriate jurisdiction, upon application by the department, may issue to the person an order requiring him or her to appear before the court to show cause why he or she should not be held in contempt for refusal to obey the subpoena. Failure to obey a subpoena may be punished as contempt by the court.
  12. Examinations and investigations conducted under this article and information obtained by the department in the course of its duties under this article are confidential, except as provided in this subsection, pursuant to the provisions of Code Section 7-1-70. In addition to the exceptions set forth in subsection (b) of Code Section 7-1-70, the department is authorized to share information obtained under this article with other state and federal regulatory agencies or law enforcement authorities. In the case of such sharing, the safeguards to confidentiality already in place within such agencies or authorities shall be deemed adequate. The commissioner or an examiner specifically designated may disclose such information as is necessary to conduct a civil or administrative investigation or proceeding. Information contained in the records of the department that is not confidential and may be made available to the public either on the department's website, upon receipt by the department of a written request, or in the Nation-wide Multistate Licensing System and Registry shall include:
    1. The name, business address, and telephone, facsimile, and license numbers of a licensee;
    2. The names and titles of the principal officers;
    3. The name of the owner or owners thereof;
    4. The business address of a licensee's registered agent for service;
    5. The name, business address, telephone number, and facsimile number of all locations of a licensee;
    6. The name, business address, telephone number, and facsimile number of all authorized agents;
    7. The terms of or a copy of any bond filed by a licensee;
    8. Information concerning any violation of this article, any rule or regulation, or order issued under this article, provided that the information is derived from a final order of the department; and
    9. Imposition of an administrative fine or penalty under this article.
  13. The authority to conduct an examination or investigation as provided for in this Code section shall remain in effect whether such licensee or person acts or claims to act under any licensing or registration law of this state or claims to act without such authority.
  14. In the absence of malice, fraud, or bad faith, a person is not subject to civil liability arising out of furnishing the department with information required by this article or required by the department under the authority granted in this article. No civil cause of action of any nature shall arise against such person:
    1. For any information relating to suspected prohibited conduct furnished to or received from law enforcement officials, their agents, or employees or to or from other regulatory or licensing authorities;
    2. For any such information furnished to or received from other persons subject to the provisions of this article; or
    3. For any information furnished in complaints filed with the department.
  15. The commissioner or any employee or agent of the department shall not be subject to civil liability, and no civil cause of action of any nature shall exist against such persons arising out of the performance of activities or duties under this article or by publication of any report of activities under this Code section. (Code 1981, § 7-1-689 , enacted by Ga. L. 2014, p. 251, § 1/HB 982; Ga. L. 2015, p. 5, § 7/HB 90; Ga. L. 2018, p. 214, § 20/HB 780.)

The 2015 amendment, effective March 13, 2015, part of an Act to revise, modernize, and correct the Code, substituted "facsimile" for "fax" in paragraphs (l)(1), (l)(5), and (l)(6).

The 2018 amendment, effective May 3, 2018, in the last sentence of the introductory paragraph of subsection (l), substituted "website, upon" for "website or upon" and inserted ", or in the Nation-wide Multistate Licensing System and Registry" near the end. See Editor's notes for applicability.

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 443 et seq.

7-1-690. Enforcement; enactment of rules and regulations.

  1. Without limiting the power conferred by Article 1 of this chapter, the department may make reasonable rules and regulations, not inconsistent with law, for the interpretation and enforcement of this article.
  2. The department is authorized to enact rules and regulations that apply solely to persons engaged in money transmission or the sale of payment instruments involving virtual currency. The department shall enact such rules and regulations it finds necessary to:
    1. Foster the growth of businesses engaged in money transmission or the sale of payment instruments involving virtual currency in Georgia and spur state economic development;
    2. Ensure the continued solvency, safety, soundness, and prudent conduct of persons engaged in money transmission or the sale of payment instruments involving virtual currency;
    3. Ensure fair, timely, and equitable fulfillment of the financial obligations of such persons;
    4. Protect customers of businesses engaged in money transmission or the sale of payment instruments involving virtual currency from financially impaired or insolvent providers of such services;
    5. Encourage high standards of honesty, transparency, fair business practices, and public responsibility;
    6. Eliminate financial fraud, other criminal abuse, and unethical conduct in the industry; and
    7. Ensure businesses engaged in money transmission or the sale of payment instruments involving virtual currency provide customers with timely and understandable information in order that customers may make informed decisions about virtual currency products and services. (Code 1981, § 7-1-690 , enacted by Ga. L. 2014, p. 251, § 1/HB 982; Ga. L. 2016, p. 390, § 1-7/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted the present provisions of this Code section for the former provisions, which read: "Without limiting the power conferred by Article 1 of this chapter, the department may make reasonable rules and regulations, not inconsistent with law, for the interpretation and enforcement of this article."

7-1-691. Prohibited activities while engaged in sale of checks or money transmission.

It shall be prohibited for any person engaged in the sale of checks or money transmission in this state, including any person required to be licensed under this article, to:

  1. Sell payment instruments as an agent of a principal seller who is not exempt from the licensure requirements under Code Section 7-1-682 and has not obtained a license hereunder, and any person who does so shall be deemed to be the principal seller thereof and not merely an agent and shall be liable to the payment instrument holder or remitter as the principal seller;
  2. Receive, transmit, or handle monetary value on behalf of another or issue a payment instrument and not be exempt from licensure under Code Section 7-1-682, and any person who does so shall be liable to the payment instrument holder for the payment thereof to the same extent as a drawer of a negotiable instrument, whether or not the payment instrument is a negotiable instrument under Article 3 of Title 11;
  3. Fail to transmit moneys received within five business days of receiving such moneys; or
  4. Engage in any activity that would subject a licensee to suspension or revocation of its license under this article or any activity that the department may prohibit pursuant to rule or regulation, whether or not the person has a license. (Code 1981, § 7-1-691 , enacted by Ga. L. 2014, p. 251, § 1/HB 982.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 872 et seq.

7-1-692. Suspension or revocation of license; failure to issue license; grounds; administrative review.

  1. The department may suspend or revoke an original or renewal license issued pursuant to this article or rescind the authorization to act as an authorized agent of a licensee if it finds that any ground or grounds exist which would require or warrant the refusal of an application for the issuance or renewal of a license or the authorization to act as an authorized agent of a licensee if such an application or notification were then before it. The department may also deny an application, suspend or revoke an original or renewal license issued pursuant to this article, or rescind the authorization to act as an authorized agent of a licensee if it finds that the licensee or the authorized agent has:
    1. Committed any fraud, engaged in any dishonest activities, or made any misrepresentation;
    2. Violated any provisions of this article, any rule or regulation issued pursuant thereto, any order issued by the department, or any other law in the course of its dealings as a licensee or authorized agent;
    3. Made a false statement in an original or renewal application for licensure or failed to give a true reply to a question in an original or renewal application;
    4. Demonstrated incompetency or untrustworthiness to act as a licensee or authorized agent;
    5. Failed to pay, within 30 days after it becomes final, a judgment recovered in any court by a claimant or creditor in an action arising out of the licensee's business in this state of engaging in the sale of payment instruments or money transmission;
    6. Purposely withheld, deleted, destroyed, or altered information requested by an examiner of the department or made false statements or misrepresentations to the department; or
    7. Operated in an unsafe or unsound manner.
  2. The department shall not issue a license to an applicant, may rescind the authorization to act as an authorized agent of a licensee, and may revoke a license if such applicant, licensee, or authorized agent is subject to or employs any person subject to a final cease and desist order that has been issued within the preceding five years if such order was based on a violation of this article. Each applicant or licensee shall, before hiring a covered employee, examine the department's public records to determine that such covered employee is not subject to a cease and desist order.
  3. The department shall not issue a license to an applicant, may rescind the authorization to act as an authorized agent of a licensee, and may revoke a license if such applicant, licensee, or authorized agent is subject to or employs any person whose license issued pursuant to this article was revoked within the preceding five years. Each applicant or licensee shall, before hiring a covered employee, examine the department's public records to determine that such covered employee's license was not revoked.
  4. The department shall not issue a license to an applicant, may rescind the authorization to act as an authorized agent of a licensee, and may revoke a license if it finds that any person who is a director, officer, partner, ultimate equitable owner of the applicant, licensee, or authorized agent or any individual who directs the affairs of or controls or establishes policy for the applicant, licensee, or authorized agent has been in one or more of those roles as a licensee whose application has been denied or license revoked or suspended within five years of the date of the application.
  5. Notice of the department's intention to enter an order denying an application for a license, rescinding the authorization to act as an authorized agent of a licensee, or suspending or revoking a license shall be given to the applicant, authorized agent, or licensee in writing, sent by registered or certified mail or statutory overnight delivery addressed to the principal place of business of such applicant, authorized agent, or licensee. If a person refuses to accept service of the notice by registered or certified mail or statutory overnight delivery, the notice or order shall be served by the commissioner or the commissioner's authorized representative under any other method of lawful service, and the person shall be personally liable to the commissioner for a sum equal to the actual costs incurred to serve the notice or order. This liability shall be paid upon notice and demand by the commissioner or the commissioner's representative and shall be assessed and collected in the same manner as other fees or fines administered by the commissioner. Within 20 days of the date of the notice of intention to enter an order of denial, suspension, revocation, or rescission under this article, the applicant, authorized agent, or licensee may request in writing a hearing to contest the order. If a hearing is not requested in writing within 20 days of the date of such notice of intention, the department shall enter a final order regarding the denial, suspension, or revocation. Any final order of the department denying an application, suspending or revoking a license, or rescinding authorization to act as an authorized agent shall state the grounds upon which it is based and shall be effective on the date of issuance. A copy thereof shall be forwarded promptly by mail addressed to the principal place of business of such applicant, authorized agent, or licensee.
  6. A decision by the department denying an application for license or of an order suspending or revoking a license shall be subject to review in accordance with Chapter 13 of Title 50, the "Georgia Administrative Procedure Act."
  7. Whenever the department initiates an administrative action against a current licensee or an applicant, the department may pursue such action to its conclusion despite the fact that a licensee may withdraw or fail to renew its license or an applicant may withdraw its application.
  8. The suspension or revocation of a license under this Code section does not alter, ameliorate, or void a licensee's duties or liabilities under any existing contract entered into by the licensee prior to such suspension or revocation.
  9. The provisions of this Code section shall not apply when an application for a license is denied or a license is suspended as provided in Code Section 7-1-693 . (Code 1981, § 7-1-692 , enacted by Ga. L. 2014, p. 251, § 1/HB 982.)

7-1-693. Applicant or licensee as borrower in default; failure to pay child support prohibits licensure.

  1. Where an applicant or licensee has been found to be a borrower in default, as defined in Code Section 20-3-295, such action shall be sufficient grounds for refusal of a license or suspension of a license. In such actions, the hearing and appeal procedures provided for in said Code section shall be the only procedures required under this article. The department shall be permitted to share, without liability, information on its applications or other forms with appropriate state agencies to assist them in collecting outstanding student loan debt.
  2. Where an applicant or licensee has been found not in compliance with an order for child support as provided in Code Section 19-6-28.1 or 19-11-9.3 , such action shall be sufficient grounds for refusal of a license or suspension of a license. In such actions, the hearing and appeal procedures provided for in Code Section 19-6-28.1 or 19-11-9.3 shall be the only such procedures required under this article. The department shall be permitted to share, without liability, information on its applications or other forms with appropriate state agencies to assist them in recovering child support when required by law. (Code 1981, § 7-1-693 , enacted by Ga. L. 2014, p. 251, § 1/HB 982.)

7-1-694. Cease and desist orders from unauthorized activities; civil penalties for violations; judicial review; administrative fines.

  1. The department may issue an order requiring a person to cease and desist immediately from unauthorized activities whenever it shall appear to the department that:
    1. Except as provided in paragraphs (2) and (3) of this subsection, a person has violated any law of this state or any order or regulation of the department, and such cease and desist order shall be final 20 days after it is issued unless the person to whom it is issued makes a written request within such 20 day period for a hearing;
    2. A person not licensed under this article is engaging in or has engaged in activities requiring licensure under this article, which such cease and desist order shall be final 30 days from the date of issuance, and there shall be no opportunity for an administrative hearing. If the proper license or evidence of exemption is obtained within the 30 day period, the order shall be rescinded by the department; or
    3. A person licensed under this article has received a notice of bond cancellation under Code Section 7-1-687, which such cease and desist order shall be final 30 days from the date of issuance, and there shall be no opportunity for an administrative hearing. In the event the cease and desist order becomes final, the license shall expire, and if a new license is desired, the licensee shall be required to make a new application for a license and pay all applicable fees as if it had never been licensed. If the required surety bond is reinstated or replaced and such documentation is delivered to the department within the 30 day period following the date of issuance of the order, the order shall be rescinded.
  2. The cease and desist order shall be in writing, sent by registered or certified mail or statutory overnight delivery, and addressed to the person's business address and, if the person is an individual, to the individual's personal address. Any cease and desist order sent to a person at its business address and, if an individual, his or her personal address that is returned to the department as "refused" or "unclaimed" shall be deemed as received and lawfully served.
  3. Any hearing authorized under paragraph (1) of subsection (a) of this Code section shall be conducted in accordance with Chapter 13 of Title 50, the "Georgia Administrative Procedure Act."
  4. Whenever a person shall fail to comply with the terms of a final order or decision of the department issued pursuant to this article, the department may, through the Attorney General and upon notice of three days to such person, petition the principal court for an order directing such person to obey the order of the department within the period of time as shall be fixed by the court. Upon the filing of such petition, the court shall allow a motion to show cause why it should not be granted. After a hearing upon the merits or after failure of such person to appear when ordered, the court shall grant the petition of the department upon a finding that the order of the department was properly issued.
  5. Any person who violates the terms of any final order or decision issued pursuant to this article shall be liable for a civil penalty not to exceed $1,000.00. Each day the violation continues shall constitute a separate offense. In determining the amount of penalty, the department shall take into account the appropriateness of the penalty relative to the size of the financial resources of such person, the good faith efforts of such person to comply with the order, the gravity of the violation, the history of previous violations by such person, and such other factors or circumstances as shall have contributed to the violation. The department may at its discretion compromise, modify, or refund any penalty which is subject to imposition or has been imposed pursuant to this Code section. Any person assessed as provided in this subsection shall have the right to request a hearing into the matter within ten days after notification of the assessment has been served upon the licensee involved; otherwise, such penalty shall be final except as to judicial review as provided in Code Section 7-1-90.
  6. Judicial review of any final order or decision of the department entered pursuant to this article shall be available solely in the superior court of the county of domicile of the department.
  7. In addition to any other administrative penalties authorized by this article, the department may, by rule or regulation, prescribe administrative fines for violations of this article and any rules and regulations promulgated by the department pursuant to this article. (Code 1981, § 7-1-694 , enacted by Ga. L. 2014, p. 251, § 1/HB 982.)

7-1-695. Liability for payment.

Every payment instrument issued in the conduct of the business regulated by this article shall be signed by the licensee or its authorized agent, and the licensee shall be liable for the payment thereof to the same extent as a drawer of a negotiable instrument, whether or not the payment instrument is a negotiable instrument under Article 3 of Title 11.

(Code 1981, § 7-1-695 , enacted by Ga. L. 2014, p. 251, § 1/HB 982.)

7-1-696. Penalties for violations.

Any person, partnership, association, or corporation and the several members, officers, directors, agents, ultimate equitable owners, and employees thereof that shall violate any of the provisions of this article shall be guilty of a misdemeanor, which shall be punishable by imprisonment for not more than one year or by a fine of not more than $500.00, or by both such fine and imprisonment.

(Code 1981, § 7-1-696 , enacted by Ga. L. 2014, p. 251, § 1/HB 982.)

OPINIONS OF THE ATTORNEY GENERAL

Updating of crimes and offenses for which Georgia Crime Information Center is authorized to collect and file fingerprints. - Pursuant to authority granted to the Attorney General in O.C.G.A. § 35-3-33(a)(1)(A)(v), any misdemeanor offenses arising under O.C.G.A. § 7-1-696 and O.C.G.A. § 7-1-709 , are NOT at this time designated as ones for which those charged are to be fingerprinted. 2014 Op. Att'y Gen. No. 2014-2.

7-1-697. No limitation on common law liability or state prosecution.

Nothing in this article shall limit any statutory or common law right of any person to bring any action in any court for any act involved in the transmission of money or selling of payment instruments or the right of the state to punish any person for any violation of any law.

(Code 1981, § 7-1-697 , enacted by Ga. L. 2014, p. 251, § 1/HB 982; Ga. L. 2015, p. 344, § 28/HB 184.)

The 2015 amendment, effective July 1, 2015, substituted "in the transmission of money or selling of" for "in the cashing of" in the middle of this Code section.

7-1-698. Continuing effectiveness of existing licenses.

Every license in force and effect under the former provisions of this article, relating to sale of checks and money orders, on July 1, 2014, shall remain in full force and effect on July 1, 2014, and all such existing licensees shall be required to renew their licenses pursuant to Code Section 7-1-685.

(Code 1981, § 7-1-698 , enacted by Ga. L. 2014, p. 251, § 1/HB 982; Ga. L. 2015, p. 5, § 7/HB 90.)

The 2015 amendment, effective March 13, 2015, part of an Act to revise, modernize, and correct the Code, substituted "the former provisions of this article" for "Article 4 of Chapter 1 of this title" near the beginning of this Code section.

Code Commission notes. - Pursuant to Code Section 28-9-5, in 2014, "July 1, 2014" was substituted for "the date of enactment of this article" and "July 1, 2014" was substituted for "the effective date of this article" in this Code section.

ARTICLE 4A CASHING OF PAYMENT INSTRUMENTS

Effective date. - This article became effective July 1, 2014.

Editor's notes. - Ga. L. 2014, p. 251, § 1/HB 982, effective July 1, 2014, repealed the Code sections formerly codified at this article and enacted the current article. The former article consisted of Code Section 7-1-700 through 7-1-707, 7-1-707.1 through 7-1-707.3, 7-1-708 through 7-1-709, relating to cashing checks, drafts, or money orders for consideration, and was based on Ga. L. 1990, p. 739, § 1; Ga. L. 1991, p. 94, § 7; Ga. L. 1991, p. 720, § 1; Ga. L. 1991, p. 784, § 1; Ga. L. 1994, p. 1780, §§ 4-5; Ga. L. 1995, p. 673, §§ 29-30; Ga. L. 1997, p. 485, §§ 25-27; Ga. L. 1998, p. 1094, §§ 2-3; Ga. L. 1999, p. 674, § 27; Ga. L. 2000, p. 174, §§ 19-21; Ga. L. 2000, p. 1589, § 3; Ga. L. 2002, p. 1220, § 10; Ga. L. 2003, p. 643, § 1; Ga. L. 2004, p. 458, § 8; Ga. L. 2007, p. 502, § 25/SB 70 - 32/SB 70; Ga. L. 2009, p. 86, §§ 15/HB 141 - 17/HB 141; Ga. L. 2010, p. 878, § 7/HB 1387.

7-1-700. Definitions.

As used in this article, the term:

  1. "Cash payment instruments" or "cashing payment instruments" means to accept a payment instrument from a person in exchange for monetary value less a fee.
  2. "Check" means any check, money order, draft, or negotiable demand instrument.
  3. "Check casher" means an individual, partnership, association, or corporation engaged in cashing payment instruments for a fee.
  4. "Closed-loop transaction" means a transaction where the value or credit is primarily intended to be redeemed for a limited universe of goods, intangibles, services, or other items provided by the issuer of the payment instrument, its affiliates or agents, or others involved in the transaction functionally related to the issuer or its affiliates or agents.
  5. "Commissioner" means the commissioner of banking and finance.
  6. "Control," "controlling," "controlled by," and "under common control with" means the direct or indirect possession of power to direct or cause the direction of management and policies of a person.
  7. "Covered employee" means any employee of a licensee engaged in any function related to cashing payment instruments.
  8. "Department" means the Department of Banking and Finance.
  9. "Executive officer" means the chief executive officer, president, chief financial officer, chief operating officer, each vice president with responsibility involving policy-making functions for a significant aspect of a person's business, secretary, treasurer, or any other person performing similar managerial or supervisory functions with respect to any organization, whether incorporated or unincorporated.
  10. "Fee" means a service charge, benefit, or other consideration, which includes, but is not limited to, cash, the exchange of value in excess of regular retail value, mandatory purchase of goods or services by patrons, or the purchase of catalogue items or coupons or other items indicating the ability to receive goods, services, or catalogue items.
  11. "Individual" means a natural person.
  12. "Licensee" means a person, including, but not limited to, a check casher, duly licensed under this article to accept payment instruments and exchange them for monetary value for a fee.
  13. "Misrepresent" means to make a false statement of a substantive fact. The term may also mean to engage in any conduct which leads to a false belief which is material to the transaction.
  14. "Monetary value" means a medium of exchange, whether or not redeemable in money.
  15. "Nation-wide Multistate Licensing System and Registry" means a licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for the licensing and registration of certain persons engaged in nondepository activities.
  16. "Open-loop transaction" means a transaction using a payment instrument with stored value to redeem for goods or services at any location that accepts such payment instrument.
  17. "Payment instrument" means any instrument, order, or device for the payment or transmission of money or monetary value, whether or not it is a negotiable instrument under the terms of Article 3 of Title 11, relating to negotiable instruments. The term includes, but is not limited to, checks, money orders, drafts, stored value cards, and open-loop transactions. The term does not include closed-loop transactions, credit card vouchers, letters of credit, or any instrument that is redeemable by the issuer only in specific goods or services of the issuer.
  18. "Person" means any individual, sole proprietorship, corporation, limited liability company, partnership, trust, or any other group of individuals, however organized.
  19. "Stored value" means monetary value that is evidenced by an electronic record.
  20. "Ultimate equitable owner" means a person that:
    1. Owns, directly or indirectly, a 10 percent or more interest in a corporation or any other form of business organization;
    2. Owns, directly or indirectly, 10 percent or more of the voting shares of any corporation or any other form of business organization; or
    3. Exerts control, directly or indirectly, over a corporation or any other form of business organization, regardless of whether such person owns or controls such interest through one or more natural persons or one or more proxies, powers of attorney, nominees, corporations, associations, limited liability companies, partnerships, trusts, joint stock companies, other entities or devices, or any combination thereof.
  21. "Unique identifier" means a number or other identifier assigned by protocols established by the Nation-wide Multistate Licensing System and Registry. (Code 1981, § 7-1-700 , enacted by Ga. L. 2014, p. 251, § 2/HB 982.)

7-1-701. Licensing for cash payment instruments.

  1. Pursuant to this article, the department may license a person to cash payment instruments.
  2. No person shall cash payment instruments without first obtaining a license under this article.
  3. Every person that directly or indirectly controls another person that violates subsection (b) of this Code section, each general partner, executive officer, joint venture, ultimate equitable owner, or director of such person, and every person occupying a similar status or performing similar functions as such person violates with and to the same extent as such person. Any person who directly or indirectly controls a person who violates subsection (b) of this Code section may avoid liability if such person sustains the burden of proof that the person did not know and, in the exercise of reasonable care, could not have known of the existence of the facts by reason of which the original violation is alleged to exist. (Code 1981, § 7-1-701 , enacted by Ga. L. 2014, p. 251, § 2/HB 982.)

7-1-701.1. Exemption from licensing requirements.

The requirement for licensure set forth in this article shall not apply to:

  1. Any state or federally chartered bank, trust company, credit union, savings and loan association, or savings bank with deposits that are federally insured;
  2. The United States Postal Service;
  3. A state or federal governmental department, agency, authority, or instrumentality and its agents;
  4. Any foreign bank that establishes a federal branch pursuant to the International Bank Act, 12 U.S.C. Section 3102;
  5. Any person who accepts a payment instrument from a person in exchange for monetary value but does not charge a fee; or
  6. An individual employed by a licensee or any person exempted from the licensing requirements of this article when acting within the scope of employment and under the supervision of the licensee or exempted person as an employee and not as an independent contractor. (Code 1981, § 7-1-701.1 , enacted by Ga. L. 2014, p. 251, § 2/HB 982.)

7-1-702. Requirements for licensure.

  1. Each applicant for a license under this article shall:
    1. Submit an application in writing, which is made under oath and in such form as the department may prescribe;
    2. Furnish to the Nation-wide Multistate Licensing System and Registry the following information:
      1. The legal name and principal office address of the person applying for the license;
      2. The name, residence, and business address of each director, ultimate equitable owner, and executive officer;
      3. If the applicant has one or more branches or other locations at or through which the applicant proposes to cash payment instruments within this state, the complete address of each such location; and
      4. The location where the initial registered office will be located in this state; and
    3. Submit such other data, financial statements, and pertinent information as the department may require with respect to the applicant, its directors, trustees, officers, members, ultimate equitable owners, or agents.
  2. The application for license shall be filed together with:
    1. An investigation and supervision fee established by rule or regulation which shall not be refundable but which, if the license is granted, shall satisfy the fee requirement for the first licensed year or the remaining part thereof;
    2. Items required by other provisions of this article, including but not limited to Code Section 7-1-703 and subsection (c) of Code Section 7-1-707; and
    3. Other information as may be required by the department.
  3. The department shall pay all fees received from licensees and applicants related to applications, licenses, and renewals to the Office of the State Treasurer; provided, however, that the department may net such fees to recover the cost of participation in the Nation-wide Multistate Licensing System and Registry.
  4. The department shall enact rules and regulations regarding the time frame by which all persons must submit an original or renewal application for licensure through the Nation-wide Multistate Licensing System and Registry. (Code 1981, § 7-1-702 , enacted by Ga. L. 2014, p. 251, § 2/HB 982.)

7-1-702.1. Operation of mobile payment instrument cashing facility.

A mobile payment instrument cashing facility operated by a licensee shall be treated as a branch location and the operations of the facility shall be conducted in accordance with the rules and regulations of the department.

(Code 1981, § 7-1-702.1 , enacted by Ga. L. 2014, p. 251, § 2/HB 982.)

7-1-702.2. Authority of department.

  1. The department is authorized to:
    1. Participate in the Nation-wide Multistate Licensing System and Registry in order to facilitate the sharing of information and standardization of the licensing and application processes for persons subject to this article;
    2. Enter into operating agreements, information sharing agreements, interstate cooperative agreements, and other contracts necessary for the department's participation in the Nation-wide Multistate Licensing System and Registry;
    3. Disclose or cause to be disclosed without liability, via the Nation-wide Multistate Licensing System and Registry, applicant and licensee information, including, but not limited to, violations of this article and enforcement actions, to facilitate regulatory oversight;
    4. Request that the Nation-wide Multistate Licensing System and Registry adopt an appropriate privacy, data security, and security breach notification policy that is in full compliance with existing state and federal law; and
    5. Establish and adopt, by rule and regulation, requirements for participation by applicants and licensees in the Nation-wide Multistate Licensing System and Registry, upon the department's determination that each requirement is consistent with both the public interest and purposes of this article.
  2. The department shall enact rules and regulations establishing a process whereby licensees may challenge information entered by the department into the Nation-wide Multistate Licensing System and Registry.
  3. Irrespective of its participation in the Nation-wide Multistate Licensing System and Registry, the department shall retain full and exclusive authority over determinations of whether to grant, renew, suspend, or revoke licenses issued under this article. Nothing in this Code section shall be construed to reduce or otherwise limit such authority.
  4. Information disclosed through the Nation-wide Multistate Licensing System and Registry is deemed to be disclosed directly to the department and subject to Code Section 7-1-70 . Such information shall not be disclosed to the public and shall remain privileged and confidential pursuant to Code Section 7-1-70 . (Code 1981, § 7-1-702.2 , enacted by Ga. L. 2014, p. 251, § 2/HB 982.)

7-1-703. Investigation of applicants; background checks of employees.

  1. The department shall conduct an investigation of every applicant for licensure to determine the financial responsibility, experience, character, and general fitness of such applicant. The department may issue the applicant a license to cash payment instruments if the department determines to its general satisfaction that:
    1. The applicant is financially sound and responsible and able to cash payment instruments in an honest, fair, and efficient manner and with the confidence and trust of the community; and
    2. All conditions for licensure set forth in this article or the rules and regulations of the department have been satisfied.
  2. The department shall not issue a license or may revoke a license if it finds that the applicant or licensee, any person who is a director, officer, partner, agent, covered employee, or ultimate equitable owner of the applicant or licensee, or any individual who directs the affairs of or controls or establishes policy for the applicant or licensee has been convicted of a felony in any jurisdiction or of a crime which, if committed within this state, would constitute a felony under the laws of this state. For the purposes of this article, a person shall be deemed to have been convicted of a crime if such person shall have pleaded guilty or nolo contendere to a charge thereof before a court or federal magistrate or shall have been found guilty thereof by the decision or judgment of a court or federal magistrate or by the verdict of a jury, irrespective of the pronouncement of sentence or the suspension thereof and regardless of whether first offender treatment without adjudication of guilt pursuant to the charge was entered or an adjudication or sentence was otherwise withheld or not entered on that charge, unless and until such plea of guilty or such decision, judgment, or verdict shall have been set aside, reversed, or otherwise abrogated by lawful judicial process or until probation, sentence, or both probation and sentence of a first offender have been successfully completed and documented or unless the person convicted of the crime shall have received a pardon therefor from the President of the United States or the governor or other pardoning authority in the jurisdiction where the conviction occurred or shall have received an official certification of pardon granted by the state's pardoning body where the conviction occurred which removes the legal disabilities resulting from such conviction and restores civil and political rights.
  3. The department shall be authorized to obtain conviction data with respect to any applicant or licensee, any person who is a director, officer, partner, agent, covered employee, or ultimate equitable owner of the applicant or licensee, or any individual who directs the affairs of or controls or establishes policy for the applicant or licensee. The department may submit directly to the Georgia Crime Information Center two complete sets of fingerprints of such person, together with the required records search fees and such other information as may be required. Fees for background checks that the department administers shall be sent to the department by applicants and licensees together with the fingerprints.
  4. Upon request by the department, each applicant, licensee, any person who is a director, officer, partner, agent, covered employee, or ultimate equitable owner of the applicant or licensee, or any individual who directs the affairs of or controls or establishes policy for the applicant or licensee shall submit to the department two complete sets of fingerprints, the required records search fees, and such other information as may be required. Fees for background checks that the department administers shall be submitted to the department by applicants or licensees together with two complete sets of fingerprints, and the department is authorized to net such fees to recover any costs incurred by the department related to running the background checks. Upon receipt of fingerprints, fees, and other required information, the Georgia Crime Information Center shall promptly transmit one set of fingerprints to the Federal Bureau of Investigation for a search of bureau records and an appropriate report and shall retain the other set and promptly conduct a search of its own records and records to which it has access. The Georgia Crime Information Center shall notify the department in writing of any derogatory finding, including, but not limited to, any conviction data regarding the fingerprint records check, or if there is no such finding. All conviction data received by the department or by the applicant or licensee shall be used by the party requesting such data for the exclusive purpose of carrying out the responsibilities of this article, shall not be a public record, shall be confidential, and shall not be disclosed to any other person or agency except to any person or agency which otherwise has a legal right to inspect such data. All such records shall be maintained by the department and the applicant or licensee pursuant to laws regarding such records and the rules and regulations of the Federal Bureau of Investigation and the Georgia Crime Information Center, as applicable. As used in this Code section, "conviction data" means a record of a finding, verdict, or plea of guilty or plea of nolo contendere with regard to any crime, regardless of whether an appeal of the conviction has been sought.
  5. Every applicant and licensee shall be authorized and required to obtain and maintain the results of background checks on covered employees. Such background checks shall be handled by the Georgia Crime Information Center pursuant to Code Section 35-3-34 and the rules and regulations of the Georgia Crime Information Center. Applicants and licensees shall be responsible for any applicable fees charged by the Georgia Crime Information Center. An applicant or licensee may only employ a person whose background data has been checked and has been found to be in compliance with all lawful requirements prior to the initial date of hire. This provision does not apply to directors, officers, partners, or ultimate equitable owners of applicants or licensees or to persons who direct the affairs of or control or establish policy for applicants or licensees, whose background shall have been investigated through the department before taking office, beginning employment, or securing ownership. Upon receipt of information from the Georgia Crime Information Center that is incomplete or that indicates a covered employee has a criminal record in any state other than Georgia, the employer shall submit to the department two complete sets of fingerprint cards for such person, together with the applicable fees and any other required information. The department shall submit such fingerprints as provided in subsection (d) of this Code section.
  6. Applicants and licensees shall have the primary responsibility for obtaining background checks on covered employees. The department shall be entitled to review the files of any applicant or licensee to determine whether the required background checks have been run and whether all covered employees are qualified. The department shall be authorized to discuss the status of employee background checks with applicants and licensees. Notwithstanding any other provisions in this article, the department shall retain the right to obtain conviction data on covered employees of applicants and licensees. (Code 1981, § 7-1-703 , enacted by Ga. L. 2014, p. 251, § 2/HB 982; Ga. L. 2015, p. 344, § 29/HB 184.)

The 2015 amendment, effective July 1, 2015, deleted former subsection (g), which read: "The department may use the Nation-wide Multistate Licensing System and Registry as a channeling agent for requesting information from and distributing information to the United States Department of Justice, any governmental agency, or any source so directed by the department."

7-1-703.1. Reporting on condition to Nation-wide Multistate Licensing System and Registry.

Each licensee shall submit to the Nation-wide Multistate Licensing System and Registry timely reports of condition, which shall be in such form and shall contain such information as the department and the Nation-wide Multistate Licensing System and Registry may require.

(Code 1981, § 7-1-703.1 , enacted by Ga. L. 2014, p. 251, § 2/HB 982.)

7-1-703.2. Use of unique identifier of licensee.

The unique identifier of any licensee shall be clearly labeled on all advertisements and any other documents required by rule or regulation of the department.

(Code 1981, § 7-1-703.2 , enacted by Ga. L. 2014, p. 251, § 2/HB 982.)

7-1-704. Renewal of licenses.

Except as otherwise specifically provided in this article, all licenses issued pursuant to this article shall expire on December 31 of each year, and each application for renewal shall be made annually on or before December 1 of each year. A license may be renewed by the filing of an application substantially conforming to the requirements of Code Section 7-1-702 and the department's rules and regulations. No investigation fee shall be payable in connection with such renewal application. However, an annual license fee established by rule or regulation of the department to defray the cost of supervision shall be paid with each renewal application and shall not be refunded or prorated.

(Code 1981, § 7-1-704 , enacted by Ga. L. 2014, p. 251, § 2/HB 982.)

7-1-704.1. Posting of license; license is nontransferable and nonassignable; notification of new facilities.

  1. A license issued pursuant to this article shall be kept conspicuously posted in the place of business of the licensee.
  2. Such license shall not be transferable or assignable.
  3. No licensee shall cash payment instruments under any name or names other than those authorized by the department in writing.
  4. A licensee shall give written notice to the department prior to the operation of any new or additional locations not reported in either its original or renewal application which notice shall be in such form and contain such information as required by the department. (Code 1981, § 7-1-704.1 , enacted by Ga. L. 2014, p. 251, § 2/HB 982; Ga. L. 2015, p. 344, § 30/HB 184.)

The 2015 amendment, effective July 1, 2015, substituted the present provisions of subsection (d) for the former provisions, which read: "A licensee shall give written notice to the department of its intent to operate any new or additional locations not reported in either its original or renewal application. The required notice shall be provided to the department no later than 30 days after the licensee first cashed a payment instrument at any new or additional location.".

7-1-705. Written notice of claims against licensee, judgments, or other misconduct by employees, directors, or others; written notice of change of executive officer.

  1. A licensee shall give written notice to the department by registered or certified mail of any action which may be brought against it by any creditor or claimant where such action relates to activities authorized under this article or involves a claim against the bond filed with the department under subsection (c) of Code Section 7-1-707. The notice shall provide details sufficient to identify the action and shall be sent within 30 days after the commencement of any such action. The licensee shall also give notice to the department by registered or certified mail within 30 days of the entry of any judgment against the licensee.
  2. A licensee shall give written notice to the department by registered or certified mail within ten days of the following:
    1. Any knowledge or discovery of an act prohibited by Code Section 7-1-703 or 7-1-707 or subsection (a) of Code Section 7-1-708;
    2. The discharge of any employee for actual or suspected misrepresentations, dishonest acts, or fraudulent acts; or
    3. Any knowledge or discovery of an administrative, civil, or criminal action initiated by any government entity against the licensee, any of the licensee's directors, officers, partners, ultimate equitable owners, or any individual who directs the affairs of or controls or establishes policy for the licensee.
  3. Unless prior approval of a change in executive officer is required under Code Section 7-1-705.1 and notwithstanding subsection (e) of Code Section 7-1-703 requiring a criminal background check prior to the initial date of hire, a licensee shall notify the department in writing of any change of executive officer in such a manner that the notice is received by the department no later than ten business days after the effective date of the change. In the event of such change, the licensee shall initiate a criminal background check no later than ten business days after the effective date of the change. (Code 1981, § 7-1-705 , enacted by Ga. L. 2014, p. 251, § 2/HB 982; Ga. L. 2018, p. 214, § 21/HB 780.)

The 2018 amendment, effective May 3, 2018, added subsection (c). See Editor's notes for applicability.

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

7-1-705.1. Approval required for change of control or ultimate equitable owner; additional requirements; denial and notification of reasons.

  1. Except as provided in this Code section, no person shall become an ultimate equitable owner of any licensee through acquisition or other change in control or become an executive officer of a licensee as a result of such acquisition or other change in control unless the person has first received written approval for such acquisition, change in control, or designation as an executive officer from the department. In order to obtain such approval, such person shall:
    1. File an application with the department in such form as the department may prescribe from time to time;
    2. Provide such other information as the department may require concerning the financial responsibility, background, experience, and activities of the applicant, its directors and executive officers, if a corporation, and its members, if applicable, and of any proposed new directors, executive officers, members, or ultimate equitable owners of the licensee; and
    3. Pay such application fee as the department may prescribe.
  2. The department may prescribe additional requirements for approval of such acquisition, change in control, or designation as an executive officer as a result of such acquisition or other change in control through rules and regulations.
  3. If the application is denied, the department shall notify the applicant of the denial and the reasons for the denial. (Code 1981, § 7-1-705.1 , enacted by Ga. L. 2014, p. 251, § 2/HB 982; Ga. L. 2018, p. 214, § 22/HB 780.)

The 2018 amendment, effective May 3, 2018, inserted "as a result of such acquisition or other change in control" in the middle of the introductory paragraph of subsection (a) and in subsection (b). See Editor's notes for applicability.

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

7-1-706. Record keeping obligations; investigations and examinations by the department; examination fees; administration of oaths and issuing of subpoenas; confidentiality; civil liability.

  1. Each licensee shall make, keep, and use in its business such books, accounts, and records as the department may require to enforce the provisions of this article and the rules and regulations promulgated under it. Each licensee shall preserve such books, accounts, and records for five years or such greater period of time as prescribed in the department's rules and regulations.
  2. Records required to be made, kept, and preserved pursuant to subsection (a) of this Code section may be maintained in a photographic, electronic, or other similar form.
  3. Records required to be made, kept, and preserved pursuant to subsection (a) of this Code section may be maintained at a location outside of this state so long as such records are produced to the commissioner at the department's main office within ten days of the date of a written request by the department to the licensee.
  4. The department shall investigate and examine the affairs, business, premises, and records of any licensee pertaining to cashing payment instruments. The department may conduct such investigations or examinations at least once every 24 months. The department may accept examination reports performed and produced by other state or federal agencies in satisfaction of this requirement unless the department determines that the examinations are not available or do not provide information necessary to fulfill the responsibilities of the department under this article.
  5. Notwithstanding subsection (d) of this Code section, the department may alter the frequency or scope of investigations or examinations through rules or regulations prescribed by the department. In addition, if the department determines that based on the records submitted to the department and past history of operations of the licensee in the state such investigations or examinations are unnecessary, then the department may waive such investigations and examinations.
  6. In addition to any other authority set forth under this article, the department shall be authorized to conduct investigations and examinations of applicants and licensees as follows:
    1. The department shall have the authority to access, receive, and use any books, accounts, records, files, documents, information, or evidence, including, but not limited to:
      1. Criminal, civil, and administrative history information, including nonconviction data;
      2. Personal history and experience information, including, but not limited to, independent credit reports obtained from a consumer reporting agency described in the federal Fair Credit Reporting Act, 15 U.S.C. Section 1681a; and
      3. Any other documents, information, or evidence the department deems relevant to the inquiry, examination, or investigation regardless of the location, possession, control, or custody of such documents, information, or evidence;
    2. The department may review, investigate, or examine any licensee or person subject to this article as often as necessary in order to carry out the purposes of this article;
    3. Each licensee or person subject to this article shall make available to the department, upon request, any books and records relating to the activities of cashing payment instruments;
    4. No licensee or person subject to investigation or examination under this article shall knowingly withhold, abstract, remove, mutilate, destroy, or secrete any books, records, documents, files, computer records, evidence, or other information; and
    5. In order to carry out the purposes of this Code section, the department may:
      1. Enter into agreements or relationships with other government officials or regulatory associations in order to improve efficiencies and reduce regulatory burden by sharing resources, documents, records, information, or evidence or by utilizing standardized or uniform methods or procedures;
      2. Accept and rely on examination or investigation reports made by other government officials within or outside this state; and
      3. Accept audit reports or portions of audit reports made by an independent certified public accountant on behalf of the licensee or person subject to this article covering the same general subject matter as the audit and may incorporate the audit report in the report of examination, report of investigation, or other writing of the department.
  7. Each licensee shall pay an examination fee as established by the rules and regulations of the department to cover the cost of an examination or investigation.
  8. The department, in its discretion, may:
    1. Make such public or private examination or investigation within or outside of this state as it deems necessary to determine whether any person has violated this article, any rule or regulation, or order issued under this article, to aid in the enforcement of this article, or to assist in the prescribing of rules and regulations pursuant to this article;
    2. Require or permit any person to file a statement in writing, under oath or otherwise, as to all the facts and circumstances concerning the matter to be investigated;
    3. Request any financial data from an applicant or licensee; and
    4. Conduct an on-site examination of a licensee at any location of the licensee without prior notice to the licensee.
  9. For the purpose of conducting any examination or investigation as provided in this Code section, the department shall have the power to administer oaths, to call any party to testify under oath in the course of such examinations or investigations, to require the attendance of witnesses, to require the production of books, accounts, records, documents, and papers, and to take the depositions of witnesses; and for such purposes the department is authorized to issue a subpoena for any witness or for the production of documentary evidence. Such subpoenas may be served by certified mail or statutory overnight delivery, return receipt requested, to the addressee's business mailing address or by examiners appointed by the department or shall be directed for service to the sheriff of the county where such witness resides or is found or where the person in custody of any books, accounts, records, documents, or papers resides or is found.
  10. The department may issue and apply to enforce subpoenas in this state at the request of any government agency, department, organization, or entity regulating cashing payment instruments in another state if the activities constituting the alleged violation for which the information is sought would be a violation of this article if the alleged activities had occurred in this state.
  11. In case of refusal to obey a subpoena issued under this article to any person, a superior court of appropriate jurisdiction, upon application by the department, may issue to the person an order requiring him or her to appear before the court to show cause why he or she should not be held in contempt for refusal to obey the subpoena. Failure to obey a subpoena may be punished as contempt by the court.
  12. Examinations and investigations conducted under this article and information obtained by the department in the course of its duties under this article are confidential, except as provided in this subsection, pursuant to the provisions of Code Section 7-1-70. In addition to the exceptions set forth in subsection (b) of Code Section 7-1-70, the department is authorized to share information obtained under this article with other state and federal regulatory agencies or law enforcement authorities. In the case of such sharing, the safeguards to confidentiality already in place within such agencies or authorities shall be deemed adequate. The commissioner or an examiner specifically designated may disclose such information as is necessary to conduct a civil or administrative investigation or proceeding. Information contained in the records of the department that is not confidential and may be made available to the public either on the department's website, upon receipt by the department of a written request, or in the Nation-wide Multistate Licensing System and Registry shall include:
    1. The name, business address, and telephone, facsimile, and license numbers of a licensee;
    2. The names and titles of the principal officers;
    3. The name of the owner or owners thereof;
    4. The business address of a licensee's registered agent for service;
    5. The name, business address, telephone number, and facsimile number of all locations of a licensee;
    6. The terms of or a copy of any bond filed by a licensee;
    7. Information concerning any violation of this article, any rule or regulation, or order issued under this article, provided that the information is derived from a final order of the department; and
    8. Imposition of an administrative fine or penalty under this article.
  13. The authority to conduct an examination or investigation as provided for in this Code section shall remain in effect whether such licensee or person acts or claims to act under any licensing or registration law of this state or claims to act without such authority.
  14. In the absence of malice, fraud, or bad faith, a person is not subject to civil liability arising out of furnishing the department with information required by this article or required by the department under the authority granted in this article. No civil cause of action of any nature shall arise against such person:
    1. For any information relating to suspected prohibited conduct furnished to or received from law enforcement officials, their agents, or employees or to or from other regulatory or licensing authorities;
    2. For any such information furnished to or received from other persons subject to the provisions of this article; or
    3. For any information furnished in complaints filed with the department.
  15. The commissioner or any employee or agent of the department shall not be subject to civil liability, and no civil cause of action of any nature shall exist against such persons arising out of the performance of activities or duties under this article or by publication of any report of activities under this Code section. (Code 1981, § 7-1-706 , enacted by Ga. L. 2014, p. 251, § 2/HB 982; Ga. L. 2015, p. 5, § 7/HB 90; Ga. L. 2018, p. 214, § 23/HB 780.)

The 2015 amendment, effective March 13, 2015, part of an Act to revise, modernize, and correct the Code, substituted "facsimile" for "fax" in paragraphs (l)(1) and (l)(5).

The 2018 amendment, effective May 3, 2018, in the last sentence of the introductory paragraph of subsection (l), substituted "website, upon" for "website or upon" and inserted ", or in the Nation-wide Multistate Licensing System and Registry" near the end. See Editor's notes for applicability.

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

7-1-706.1. Regulatory interpretation and enforcement.

Without limiting the power conferred by Article 1 of this chapter, the department may make reasonable rules and regulations, not inconsistent with law, for the interpretation and enforcement of this article.

(Code 1981, § 7-1-706.1 , enacted by Ga. L. 2014, p. 251, § 2/HB 982.)

7-1-707. Required endorsement by licensee; immediate payments; deferment of payment; identification requirements; acceptable fee for services.

  1. No licensee shall deposit with any financial institution a payment instrument it has accepted and exchanged for monetary value unless such payment instrument is endorsed by the licensee.
  2. No licensee shall receive any payment instrument with payment deferred pending collection. Payment shall be made immediately in cash for every payment instrument accepted by the licensee and exchanged for monetary value for a fee.
  3. Notwithstanding the provisions of subsection (b) of this Code section, checks may be accepted for collection with payment deferred where the licensee has posted a surety bond in the same manner as prescribed for licensed money transmitters or licensed payment instrument sellers under Code Section 7-1-683.2 and under the same conditions as set forth under Code Section 7-1-687. The surety bond shall be in the aggregate amount of $10,000.00 for each location operated by the licensee, if the licensee operates three or fewer locations, plus $5,000.00 per location for the fourth and fifth locations operated by the licensee, plus $1,000.00 for each location operated by the licensee in excess of the fifth location. The bond shall be in a form satisfactory to the department and shall run to the State of Georgia for the benefit of any claimant against the licensee arising out of the licensee's business of cashing payment instruments with payment deferred in this state. The bond shall not be canceled by either the licensee or the corporate surety except upon notice to the department by registered or certified mail, statutory overnight delivery with return receipt requested, or electronically through the Nationwide Multistate Licensing System and Registry, and such cancellation shall be effective no sooner than 30 days after receipt by the department of such notice. In no event shall payment of a check be deferred past the time the licensee has collected on the check. Upon collection, payment shall be made immediately to the party from whom the licensee accepted the check.
  4. No licensee shall cash payment instruments made payable to a payee other than an individual unless such licensee has previously obtained appropriate documentation from the authorized executive officer of such payee clearly indicating the authority of the individual to cash the payment instrument on behalf of the payee.
  5. No licensee shall cash payment instruments without identification of the bearer of such instrument, and any person seeking to cash payment instruments shall be required to submit such reasonable identification as shall be prescribed by the department; provided, however, that the provisions of this subsection shall not prohibit a licensee from cashing payment instruments simultaneously with the verification and establishment of the identity of the presenter by means other than the presentation of identification.
  6. No licensee shall:
    1. Charge a fee for cashing payment instruments in excess of 5 percent of the face amount of the payment instrument or $5.00, whichever is greater;
    2. Charge a fee for cashing payment instruments in excess of 3 percent of the face amount of the payment instrument or $5.00, whichever is greater, if such payment instrument is state public assistance or a federal social security benefit made payable to the bearer of such payment instrument; or
    3. Charge a fee for cashing payment instruments in excess of 10 percent of the face amount of the payment instrument or $5.00, whichever is greater, if such payment instrument is a personal check or money order. For purposes of this subsection, "personal check or money order" means a payment instrument drawn against the account of an individual.
  7. No licensee shall engage in any activity that would subject the licensee to suspension or revocation of its license pursuant to this article or any activity that the department may prohibit by rule or regulation. (Code 1981, § 7-1-707 , enacted by Ga. L. 2014, p. 251, § 2/HB 982; Ga. L. 2017, p. 193, § 23/HB 143.)

The 2017 amendment, effective June 1, 2017, in the fourth sentence of subsection (c), substituted "mail, statutory overnight delivery with" for "mail or statutory overnight delivery," and inserted "or electronically through the Nationwide Multistate Licensing System and Registry,".

7-1-707.1. Posting of fees for cashing payment instruments.

In every location operated by a licensee, there shall be conspicuously posted and at all times displayed a notice stating the charges for cashing payment instruments.

(Code 1981, § 7-1-707.1 , enacted by Ga. L. 2014, p. 251, § 2/HB 982.)

7-1-708. Grounds for suspension or revocation of license; employment of individuals subject to cease and desist order; administrative review.

  1. The department may suspend or revoke an original or renewal license issued pursuant to this article if it finds that any ground or grounds exist which would require or warrant the refusal of an application for the issuance or renewal of a license if such an application were then before it. The department may also deny an application or suspend or revoke an original or renewal license issued pursuant to this article if it finds that the licensee has:
    1. Committed any fraud, engaged in any dishonest activities, or made any misrepresentation;
    2. Violated any provisions of this article, any rule or regulation issued pursuant thereto, any order issued by the department, or any other law in the course of its dealings as a licensee;
    3. Made a false statement in an original or renewal application for licensure or failed to give a true reply to a question in an original or renewal application;
    4. Demonstrated incompetency or untrustworthiness to act as a licensee;
    5. Failed to pay, within 30 days after it becomes final, a judgment recovered in any court by a claimant or creditor in an action arising out of the licensee's business of cashing payment instruments;
    6. Purposely withheld, deleted, destroyed, or altered information requested by an examiner of the department or made false statements or misrepresentations to the department; or
    7. Operated in an unsafe or unsound manner.
  2. The department shall not issue a license to an applicant and may revoke a license if such applicant or licensee is subject to or employs any person subject to a final cease and desist order that has been issued within the preceding five years if such order was based on a violation of this article. Each applicant or licensee shall, before hiring a covered employee, examine the department's public records to determine that such covered employee is not subject to a cease and desist order.
  3. The department shall not issue a license to an applicant and may revoke a license if such applicant or licensee is subject to or employs any person whose license issued pursuant to this article was revoked within the preceding five years. Each applicant or licensee shall, before hiring a covered employee, examine the department's public records to determine that such covered employee's license was not revoked.
  4. The department shall not issue a license to an applicant and may revoke a license if it finds that any person who is a director, officer, partner, ultimate equitable owner of the applicant or licensee or any individual who directs the affairs of or controls or establishes policy for the applicant or licensee has been in one or more of those roles as a licensee whose application has been denied or license revoked or suspended within five years of the date of the application.
  5. Notice of the department's intention to enter an order denying an application for a license or suspending or revoking a license shall be given to the applicant or licensee in writing, sent by registered or certified mail or statutory overnight delivery addressed to the principal place of business of such applicant or licensee. If a person refuses to accept service of the notice by registered or certified mail or statutory overnight delivery, the notice or order shall be served by the commissioner or the commissioner's authorized representative under any other method of lawful service, and the person shall be personally liable to the commissioner for a sum equal to the actual costs incurred to serve the notice or order. This liability shall be paid upon notice and demand by the commissioner or the commissioner's representative and shall be assessed and collected in the same manner as other fees or fines administered by the commissioner. Within 20 days of the date of the notice of intention to enter an order of denial, suspension, or revocation under this article, the applicant or licensee may request in writing a hearing to contest the order. If a hearing is not requested in writing within 20 days of the date of such notice of intention, the department shall enter a final order regarding the denial, suspension, or revocation. Any final order of the department denying, suspending, or revoking a license shall state the grounds upon which it is based and shall be effective on the date of issuance. A copy thereof shall be forwarded promptly by mail addressed to the principal place of business of such applicant or licensee.
  6. A decision by the department denying an application for license or of an order suspending or revoking a license shall be subject to review in accordance with Chapter 13 of Title 50, the "Georgia Administrative Procedure Act."
  7. Whenever the department initiates an administrative action against a current licensee or an applicant, the department may pursue such action to its conclusion despite the fact that a licensee may withdraw or fail to renew its license or an applicant may withdraw its application.
  8. The suspension or revocation of a license under this Code section does not alter, ameliorate, or void a licensee's duties or liabilities under any existing contract entered into by the licensee prior to such suspension or revocation.
  9. The provisions of this Code section shall not apply when an application for a license is denied or a license is suspended as provided in Code Section 7-1-708 .1. (Code 1981, § 7-1-708 , enacted by Ga. L. 2014, p. 251, § 2/HB 982.)

7-1-708.1. Denial or suspension of license for student borrowers in default or for failing to comply with child support requirements.

  1. Where an applicant or licensee has been found to be a borrower in default, as defined in Code Section 20-3-295, such action shall be sufficient grounds for denial of an application or suspension of a license. In such actions, the hearing and appeal procedures provided for in said Code section shall be the only procedures required under this article. The department shall be permitted to share, without liability, information on its applications or other forms with appropriate state agencies to assist them in collecting outstanding student loan debt.
  2. Where an applicant or licensee has been found not in compliance with an order for child support as provided in Code Section 19-6-28.1 or 19-11-9.3 , such action shall be sufficient grounds for denial of an application or suspension of a license. In such actions, the hearing and appeal procedures provided for in Code Section 19-6-28.1 or 19-11-9.3 shall be the only such procedures required under this article. The department shall be permitted to share, without liability, information on its applications or other forms with appropriate state agencies to assist them in recovering child support. (Code 1981, § 7-1-708.1 , enacted by Ga. L. 2014, p. 251, § 2/HB 982.)

7-1-708.2. Issuance of cease and desist orders; administrative and judicial enforcement; penalty for noncompliance.

  1. The department may issue an order requiring a person to cease and desist immediately from unauthorized activities whenever it shall appear to the department that:
    1. Except as provided in paragraph (2) of this subsection, a person has violated any law of this state or any order or regulation of the department, and such cease and desist order shall be final 20 days after it is issued unless the person to whom it is issued makes a written request within such 20 day period for a hearing; or
    2. A person not licensed under this article is engaging in or has engaged in activities requiring licensure under this article, which such cease and desist order shall be final 30 days from the date of issuance, and there shall be no opportunity for an administrative hearing. If the proper license or evidence of exemption is obtained within the 30 day period, the order shall be rescinded by the department.
  2. The cease and desist order shall be in writing, sent by registered or certified mail or statutory overnight delivery and addressed to the person's business address and, if the person is an individual, to the individual's personal address. Any cease and desist order sent to a person at its business address and, if an individual, his or her personal address that is returned to the department as "refused" or "unclaimed" shall be deemed as received and lawfully served.
  3. Any hearing authorized under paragraph (1) of subsection (a) of this Code section shall be conducted in accordance with Chapter 13 of Title 50, the "Georgia Administrative Procedure Act."
  4. Whenever a person shall fail to comply with the terms of a final order or decision of the department issued pursuant to this article, the department may, through the Attorney General and upon notice of three days to such person, petition the principal court for an order directing such person to obey the order of the department within the period of time as shall be fixed by the court. Upon the filing of such petition, the court shall allow a motion to show cause why it should not be granted. After a hearing upon the merits or after failure of such person to appear when ordered, the court shall grant the petition of the department upon a finding that the order of the department was properly issued.
  5. Any person who violates the terms of any final order or decision issued pursuant to this article shall be liable for a civil penalty not to exceed $1,000.00. Each day the violation continues shall constitute a separate offense. In determining the amount of penalty, the department shall take into account the appropriateness of the penalty relative to the size of the financial resources of such person, the good faith efforts of such person to comply with the order, the gravity of the violation, the history of previous violations by such person, and such other factors or circumstances as shall have contributed to the violation. The department may at its discretion compromise, modify, or refund any penalty which is subject to imposition or has been imposed pursuant to this Code section. Any person assessed as provided in this subsection shall have the right to request a hearing into the matter within ten days after notification of the assessment has been served upon the licensee involved; otherwise, such penalty shall be final except as to judicial review as provided in Code Section 7-1-90.
  6. Judicial review of any final order or decision of the department entered pursuant to this article shall be available solely in the superior court of the county of domicile of the department.
  7. In addition to any other administrative penalties authorized by this article, the department may, by rule or regulation, prescribe administrative fines for violations of this article and any rules and regulations promulgated by the department pursuant to this article. (Code 1981, § 7-1-708.2 , enacted by Ga. L. 2014, p. 251, § 2/HB 982.)

7-1-709. Penalty for violation of article.

Any person, partnership, association, or corporation and the several members, officers, directors, agents, ultimate equitable owners, and employees thereof that shall violate any of the provisions of this article shall be guilty of a misdemeanor, which shall be punishable by imprisonment for not more than one year or by a fine of not more than $500.00, or by both such fine and imprisonment.

(Code 1981, § 7-1-709 , enacted by Ga. L. 2014, p. 251, § 2/HB 982.)

OPINIONS OF THE ATTORNEY GENERAL

O.C.G.A. § 35-3-33 Updating of crimes and offenses for which Georgia Crime Information Center is authorized to collect and file fingerprints. - Pursuant to authority granted to the Attorney General in O.C.G.A. § 35-3-33 (a)(1)(A)(v), any misdemeanor offenses arising under O.C.G.A. § 7-1-696 and O.C.G.A. § 7-1-709 , are not at this time designated as ones for which those charged are to be fingerprinted. 2014 Op. Att'y Gen. No. 2014-2.

7-1-709.1. No limitation on common law liability or state prosecution.

Nothing in this article shall limit any statutory or common law right of any person to bring any action in any court for any act involved in cashing payment instruments or the right of the state to punish any person for any violation of any law.

(Code 1981, § 7-1-709.1 , enacted by Ga. L. 2014, p. 251, § 2/HB 982.)

7-1-709.2. Continuing effectiveness of existing licenses.

Every license in force and effect under the former provisions of this article, relating to cashing checks, drafts, or money orders for consideration, on July 1, 2014, shall remain in full force and effect on July 1, 2014, and all such existing licensees shall be required to renew their licenses pursuant to Code Section 7-1-704.

(Code 1981, § 7-1-709.2 , enacted by Ga. L. 2014, p. 251, § 2/HB 982; Ga. L. 2015, p. 5, § 7/HB 90; Ga. L. 2016, p. 864, § 7/HB 737.)

The 2015 amendment, effective March 13, 2015, part of an Act to revise, modernize, and correct the Code, substituted "the former provisions of this article" for "Article 4A of Chapter 1 of of this title" near the beginning of this Code section.

The 2016 amendment, effective May 3, 2016, part of an Act to revise, modernize, and correct the Code, revised capitalization in this Code section.

Code Commission notes. - Pursuant to Code Section 28-9-5, in 2014, "July 1, 2014," was substituted for "the date of enactment of this article" and "July 1, 2014" was substituted for "the effective date of this article" in this Code section.

Editor's notes. - Ga. L. 2015, p. 5, § 7/HB 90, incorrectly referenced the language near the beginning of this Code section as "Article 4 of Chapter 1 of this title."

ARTICLE 5 INTERNATIONAL BANKING CORPORATIONS AND BANK AGENCIES

Law reviews. - For article discussing limitations on the establishment and transaction of international banking in Georgia, see 27 Mercer L. Rev. 629 (1976). For note discussing the interrelationship between the International Banking Act, the provisions of the Financial Institutions Code relating to domestic banking, and the Foreign Corporations Chapter of the Corporation Code in the regulation of international banking in Georgia and comparing Georgia provisions with those of New York and California, see 27 Mercer L. Rev. 827 (1976).

OPINIONS OF THE ATTORNEY GENERAL

Determination of whether international banking corporation is a bank for tax purposes. - Determination of whether an international banking corporation which plans to open an agency office in state is a bank for tax purposes should be based upon operation and legal powers of proposed agency office. 1976 Op. Att'y Gen. No. 76-105.

International banking corporation whose sole contact with Georgia is the corporation's operation of an agency office licensed under the statutes (see O.C.G.A. Art. 5, Ch. 1, T. 7) is not a bank for purposes of Georgia revenue statutes. 1976 Op. Att'y Gen. No. 76-105.

7-1-710. Definitions.

As used in this article, the term:

  1. "International bank agency" means the international banking corporation with respect to all business or activities conducted in this state or through an office located in this state.
  2. "International banking corporation" means a banking corporation organized and licensed under the laws of some foreign country or a political subdivision thereof, other than the United States of America or any of the states within the United States of America. For purposes of this article, a foreign country shall include any territories or possessions of the United States.

    (Ga. L. 1972, p. 1140, § 1; Code 1933, § 41A-3301, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1211, § 15.)

RESEARCH REFERENCES

C.J.S. - 19 C.J.S., Corporations, § 968.

7-1-711. Application of this chapter.

International bank agencies shall be subject to all the provisions of Articles 1 and 2 of this chapter, except where it may appear, from the context or otherwise, that such provisions are clearly applicable only to banks or trust companies organized under the laws of this state or the United States. An international bank agency shall have no greater right under or by virtue of this article and amendments thereto than is granted to banks organized under the laws of this state. Legal and financial terms used herein shall be deemed to refer to equivalent terms used by the country in which the international banking corporation is organized.

(Ga. L. 1972, p. 1140, § 2; Code 1933, § 41A-3302, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

ALR. - Power of savings bank or similar institution to provide checking facilities or negotiable orders of withdrawal (NOW) to customers, 64 A.L.R.3d 1314.

7-1-712. Application of Article 15 of Chapter 2 of Title 14.

Notwithstanding the definition of the term "foreign corporation" appearing in paragraph (13) of Code Section 14-2-140, all of the provisions of Article 15 of Chapter 2 of Title 14, relating to foreign corporations, shall apply to all international bank agencies doing business in this state, except that references therein to the Secretary of State should be construed as references to the department.

(Ga. L. 1972, p. 1140, § 3; Code 1933, § 41A-3303, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 946, § 70; Ga. L. 1989, p. 1257, § 24; Ga. L. 2004, p. 508, § 70.)

7-1-713. Requirements for carrying on banking business.

  1. No international banking corporation shall transact a banking business or maintain in this state any office for carrying on such business or any part thereof unless such corporation shall have:
    1. Been authorized by its articles to carry on such business and shall have complied with the laws of the country under which it is chartered;
    2. Furnished to the department such proof as to the nature and character of its business and as to its financial condition as the department may require;
    3. Filed with the department:
      1. A duly executed instrument in writing, by its terms of indefinite duration and irrevocable, appointing the department its true and lawful attorney upon whom all process in any action against it may be served with the same force and effect as if it were a domestic corporation and had been lawfully served with process within the state; and
      2. A written certificate of designation, which may be changed from time to time thereafter by the filing of a new certificate of designation, specifying the name and address of the officer, agent, or other person to whom such process shall be forwarded by the department;
    4. Paid to the department the fee established by regulation of the department to defray the cost of investigation and supervision; and
    5. Received a license duly issued to it by the department.
  2. The department shall not issue a license to an international banking corporation unless it is chartered in a country which permits banks chartered in the United States of America or any of its states to establish similar facilities therein.

    (Ga. L. 1972, p. 1140, § 4; Code 1933, § 41A-3304, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 674 et seq.

7-1-714. Actions against international banking corporations.

  1. An action against an international banking corporation doing business in this state may be maintained by a resident of this state for any cause of action. For purposes of this subsection, the term "resident of this state" shall include any corporation formed under the laws of this state.
  2. An action against an international banking corporation doing business in this state may be maintained by another international banking corporation or by a nonresident of this state in the following cases only:
    1. Where the action is brought to recover damages for the breach of a contract made or to be performed within this state or relating to property situated within this state at the time of the making of the contract;
    2. Where the subject matter of the litigation is situated within this state;
    3. Where the cause of action arose within this state, except where the object of the action is to affect the title of real property situated outside this state; or
    4. Where the action is based on a liability for acts done within this state by an international banking corporation or its international bank agency.

      (Ga. L. 1972, p. 1140, § 5; Code 1933, § 41A-3305, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-715. Application for license.

  1. Every international banking corporation, before being licensed by the department to transact a banking business in this state or before maintaining in this state any office to carry on such business or any part thereof, shall subscribe and acknowledge and submit to the department at its office a separate application which shall state:
    1. The name of such international banking corporation;
    2. The location by street and post office address and county where its business is to be transacted in this state and the name of the person who shall be in charge of the business and affairs of the international bank agency;
    3. The location where its initial registered office will be located in this state;
    4. The amount of its capital actually paid in and the amount subscribed for and unpaid; and
    5. The actual value of the assets of such international banking corporation, which must be at least $50 million in excess of its liabilities, and a complete and detailed statement of its financial condition as of a date within 60 days prior to the date of such application, provided that the department, in its discretion, may, when necessary or expedient, accept such statement of financial condition as of a date within 120 days prior to the date of such application.
  2. At the time such application is submitted to the department, such corporation shall also submit a duly authenticated copy of its articles and an authenticated copy of its bylaws, or an equivalent thereof satisfactory to the department, and pay an investigation and supervision fee to be established by regulation of the department.

    (Ga. L. 1972, p. 1140, § 6; Code 1933, § 41A-3306, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2015, p. 344, § 31/HB 184.)

The 2015 amendment, effective July 1, 2015, in subsection (a), deleted ", in duplicate," following "application" near the end of the introductory paragraph, substituted "the international bank agency" for "such agency" at the end of paragraph (a)(2), and substituted "application, provided" for "application; except" near the middle of paragraph (a)(5).

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 674 et seq.

7-1-716. Effect, renewal, and revocation of licenses; permissible activities.

  1. When the department shall have issued a license to any such international banking corporation, it may engage in the business authorized by this article at the office specified in such license until the license expires or until such license is surrendered or revoked. The department may establish the license period by regulation. No such license shall be transferable or assignable.
  2. Such license may be renewed annually within 30 days of the expiration of such license upon application to the department upon forms to be supplied by it for that purpose. Such license may be renewed by the department upon its determination, with or without examination, that the international banking corporation is in a safe and satisfactory condition, that it has complied with requirements of law with respect to the international bank agency, and that such renewal of the license is proper and has been duly authorized by proper corporate action.
  3. Such license may be revoked by the department, with or without examination, upon its determination that the international banking corporation does not meet the criteria established by subsection (b) of this Code section for renewal of licenses.
  4. In the event any such license shall be revoked by the department or the renewal thereof refused by the department, all the rights and privileges of such international banking corporation to transact the business thus licensed shall forthwith cease, and such license shall be surrendered to the department within 24 hours after the licensee has received written notice of such decision.
  5. An international banking corporation licensed under the terms of this article to carry on business in this state shall be authorized to conduct a general banking business through its international bank agency in like manner as banks existing under the laws of this state, except that no such international banking corporation shall, through such agency, exercise fiduciary powers or receive deposits but may maintain for the account of others credit balances incidental to or arising out of the exercise of its lawful powers.

    (Ga. L. 1972, p. 1140, § 7; Code 1933, § 41A-3307, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1976, p. 201, § 1; Ga. L. 1995, p. 673, § 31.)

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 674 et seq.

7-1-717. Securities, and other evidence of indebtedness to be held in this state.

  1. Each international banking corporation shall hold, at its office in this state, currency, bonds, notes, debentures, drafts, bills of exchange, or other evidence of indebtedness or other obligations payable in the United States or in United States funds or, with the prior approval of the department, in funds freely convertible into United States funds in an amount which shall be not less than 108 percent of the aggregate amount of liabilities of such international banking corporation payable at or through its office in this state or as a result of the operations of the international bank agency, including acceptances but excluding:
    1. Accrued expenses; and
    2. Amounts due and other liabilities to other offices or branches of and wholly owned (except for a nominal number of directors' shares) subsidiaries of such international banking corporation.
  2. For the purpose of this Code section, the department shall value marketable securities at principal amount or market value, whichever is lower; shall have the right to determine the value of any nonmarketable bond, note, debenture, draft, bill of exchange, or other evidence of indebtedness or of any other obligation held by or owed to the international banking corporation in this state; and, in determining the amount of assets for the purpose of computing the above ratio of assets to liabilities, shall have the power to exclude any particular assets but may give credit, subject to such rules and regulations as the department may from time to time promulgate, to deposits and credit balances with unaffiliated banking institutions outside this state if such deposits or credit balances are payable in United States funds or in currencies freely convertible into United States funds, provided that credit given for such deposits and credit balances shall not exceed in aggregate amounts such percentage, but not less than 8 percent, as the department may from time to time prescribe of the aggregate amount of liabilities of such international banking corporation, determined as hereinabove provided.
  3. If by reason of the existence or the potential occurrence of unusual or extraordinary circumstances the department deems it necessary or desirable for the maintenance of a sound financial condition, for the protection of creditors and the public interest, and to maintain public confidence in the business of the international bank agency of the international banking corporation, it may reduce the credit to be given as above provided for deposits and credit balances with unaffiliated banking institutions outside this state and it may require such international banking corporation to deposit, in accordance with such rules and regulations as the department shall from time to time promulgate, the assets required to be held in this state pursuant to this Code section with such bank or trust company existing under the laws of this state as such international banking corporation may designate and the department may approve.

    (Ga. L. 1972, p. 1140, § 8; Code 1933, § 41A-3308, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-718. Financial certifications; restrictions on investments, loans, and acceptances.

  1. Before opening an office in this state and annually thereafter so long as a bank office is maintained in this state, an international banking corporation, licensed pursuant to this article, shall certify to the department the amount of its paid-in capital, its surplus, and its undivided profits, each expressed in the currency of the country of its incorporation. The dollar equivalent of which amount, as determined by the department, shall be deemed to be the amount of its capital, surplus, and undivided profits.
  2. Purchases and discounts of bills of exchange, bonds, debentures, and other obligations and extensions of credit and acceptances by an international bank agency within this state shall be subject to the same limitations as to amount in relation to capital, surplus, and undivided profits as are applicable to banks organized under the laws of this state; provided, however, that, with the prior approval of the department, the capital notes and capital debentures of such international banking corporation may be treated as capital in computing such limitations.

    (Ga. L. 1972, p. 1140, § 9; Code 1933, § 41A-3309, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 674 et seq.

7-1-719. Reports.

  1. Every international banking corporation doing business in this state shall, at such times and in such form as the department shall prescribe, make written reports in the English language to the department under the oath of one of its officers, managers, or agents transacting business in this state, showing the amount of its assets and liabilities and containing such other matters as the department shall prescribe. If any such international banking corporation shall fail to make any such report, as directed by the department, or if any such report shall contain any false statement knowingly made, the same shall be grounds for revocation of the license of the international banking corporation.
  2. Code Section 7-1-68 shall not apply to international banking corporations or international bank agencies.

    (Ga. L. 1972, p. 1140, § 10; Code 1933, § 41A-3310, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 699, et seq.

7-1-720. Dissolution.

When an international banking corporation licensed to maintain an international bank agency in this state is dissolved or its authority or existence is otherwise terminated or canceled in the jurisdiction of its incorporation, a certificate of the official responsible for records of banking corporations of the jurisdiction of incorporation of such international banking corporation attesting to the occurrence of any such event or a certified copy of an order or decree of a court of such jurisdiction directing the dissolution of such international banking corporation or the termination of its existence or the cancellation of its authority shall be delivered to the department. The filing of the certificate, order, or decree shall have the same effect as the revocation of such international banking corporation's license as provided in subsection (d) of Code Section 7-1-716. The department shall continue as agent of the international banking corporation upon whom process against it may be served in any action based upon any liability or obligation incurred by the international banking corporation within this state prior to the filing of such certificate, order, or decree; and it shall promptly cause a copy of such process to be mailed by registered or certified mail or statutory overnight delivery, return receipt requested, to such international banking corporation at the post office address specified for such purpose on file with the department.

(Ga. L. 1972, p. 1140, § 11; Code 1933, § 41A-3311, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2000, p. 1589, § 3.)

Editor's notes. - Ga. L. 2000, p. 1589, § 16, not codified by the General Assembly, provides that the amendment to this Code section is applicable with respect to notices delivered on or after July 1, 2000.

RESEARCH REFERENCES

C.J.S. - 9 C.J.S., Banks and Banking, § 674 et seq.

7-1-721. International representative offices.

  1. An international bank agency which does not transact a banking business or any part thereof in or through an office in this state but maintains an office in this state for other purposes shall be deemed to have an "international representative office."
  2. Each international representative office located in this state shall register with the Department of Banking and Finance annually on forms prescribed by the department. Such registration shall be filed in accordance with departmental regulation, shall be accompanied by a registration fee prescribed by regulations of the department, and shall list the name and telephone and facsimile numbers of the local representative, the street address of the office, and the nature of the business to be transacted in or through the office.
  3. The department may review the operations of any international representative office annually or at such greater frequency as it deems necessary to assure that the office does not transact a banking business.

    (Code 1933, § 41A-3312, enacted by Ga. L. 1978, p. 1712, § 2; Ga. L. 1995, p. 673, § 32.)

ARTICLE 5A DOMESTIC INTERNATIONAL BANKING FACILITIES

7-1-730. Short title.

This article shall be known as the "Domestic International Banking Facility Act."

(Ga. L. 1981, p. 770, § 1.)

7-1-731. "Domestic international banking facility" defined.

As used in this article, the term "domestic international banking facility" means the location within this state of any banking office, other than an "international bank agency," as defined in Code Section 7-1-710, which derives its funds (1) from sources outside of the United States, (2) from another domestic international banking facility, or (3) from temporary advances from its parent organization and employs those funds for banking purposes outside of the United States or through its parent organization, but does not accept deposits subject to check or draft. A domestic international banking facility, when properly established pursuant to this article, shall not be considered to be a "branch office" or "main office" as defined in Code Section 7-1-600.

(Ga. L. 1981, p. 770, § 2; Ga. L. 1999, p. 674, § 28.)

7-1-732. Eligibility to operate domestic international banks; registration required; records; exemption from taxes and license fees.

  1. Any bank, whether domiciled within this state or elsewhere and having total capital funds of $25 million or more, as reported to its chartering authority as of December 31 of each year, may establish and operate a domestic international banking facility in this state upon compliance with this article. Any bank having total capital funds of $25 million or less may establish such facility upon compliance with this article and upon further obtaining the approval of the department. The department shall grant such approval only after it has satisfied itself that the registrant is financially sound, is operating in substantial conformity with all applicable laws and regulations, and is, along with its principals, of good character and reputation.
  2. Prior to establishing a domestic international banking facility and annually thereafter for so long as the facility shall continue in this state, the bank shall register with the department on such forms as the department shall prescribe and pay a registration fee as determined by the department. Such registration shall include:
    1. The name and main office address of the registrant;
    2. The address at which the facility is to be located;
    3. The names of the individuals responsible for administering the business affairs of the facility in this state;
    4. The name and address of the chartering authority for the registrant;
    5. A resolution from the board of directors or other governing body of the registrant authorizing the establishment of the facility;
    6. A statement of the registrant that it has the legal capacity under the laws pursuant to which it is organized to establish the facility and that its chartering authority (and regulatory authority if different) interposes no objection to the establishment of such facility; and
    7. Such other information as the department may require.

      Information required in paragraphs (5) and (6) of this subsection need not be resubmitted upon renewal of a registration. The facility shall promptly notify the department of any change in the management or location of the facility.

  3. The domestic international banking facility shall maintain records of its business activities separate from records of the domestic banking activities of its parent or head office.
  4. The domestic international banking facility shall not be subject to any tax or license fee in this state by virtue of its business location in this state or its business activities outside of this state.

    (Ga. L. 1981, p. 770, § 3.)

7-1-733. Rejection or revocation of registration as a domestic international banking facility.

  1. The department may revoke any registration or reject any application to register or renew a registration for a domestic international banking facility upon a finding that:
    1. The facility no longer qualifies to register under this article;
    2. The scope of the business conducted by the facility exceeds that authorized by this article;
    3. The chartering authority of the parent bank of the facility requests such action in writing; or
    4. The department determines, on its own initiative or otherwise, that representations made by the registrant, including, but not limited to, representations under paragraph (6) of subsection (b) of Code Section 7-1-732, are inaccurate.
  2. No facility whose registration has been rejected by the department may establish an international banking facility in this state.

    (Ga. L. 1981, p. 770, § 4.)

7-1-734. Examination and supervision by the department; agreements with other bank regulatory authorities.

  1. The department may examine the operations of any domestic international banking facility for the purpose of determining that the scope of its activities does not exceed that allowed pursuant to this article and that the facility is otherwise operating in compliance with the applicable laws of this state. The department may by regulation establish minimum requirements for the maintenance of books and records in sufficient form to enable the department to carry out its responsibilities under this Code section.
  2. The department may enter into cooperative and reciprocal agreements with the bank regulatory authority of any government for the periodic examination of banking offices and facilities of any kind, including domestic international banking facilities, located within this state and may accept records from such authorities in lieu of conducting its own examination for compliance with laws of this state.

    (Ga. L. 1981, p. 770, § 5.)

ARTICLE 6 BUSINESS DEVELOPMENT CORPORATIONS

7-1-740. Definitions.

As used in this article, the term:

  1. "Board of directors" means any board of directors of a corporation created under this article.
  2. "Corporation" means a Georgia business development corporation created under this article or existing on April 1, 1975, pursuant to the former "Georgia Business Development Corporation Act of 1972," approved April 3, 1972 (Ga. L. 1972, p. 798).
  3. "Lending institution" means any bank or trust company, savings and loan association, insurance company or related corporation, partnership, foundation, pension fund, or other institution engaged primarily in lending or investing funds.
  4. "Loan limit" means, for any member, the maximum amount permitted to be outstanding at any one time on member loans made by such member to the corporation, as determined under this article.
  5. "Member" means any lending institution authorized to do business in this state which shall undertake to make member loans to a corporation created under this article, upon its call, and in accordance with this article.
  6. "Member loan" means a loan made by a member upon the call of the corporation pursuant to Code Section 7-1-747.

    (Ga. L. 1972, p. 798, § 2; Code 1933, § 41A-3401, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 37; Ga. L. 1981, p. 965, § 1; Ga. L. 1982, p. 3, § 7; Ga. L. 2016, p. 390, § 7-4/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "building and loan association," following "trust company," in paragraph (3).

Editor's notes. - The Georgia Business Development Corporation Act of 1972 (Ga. L. 1972, p. 798), referred to in paragraph (2) of this section, was repealed by Ga. L. 1974, p. 705, § 3(k).

7-1-741. Contents, execution, and presentation of articles.

  1. Five or more persons competent to contract, a majority of whom shall be residents of this state, who may desire to create a business development corporation under this article, for the purpose of promoting, developing, and advancing the prosperity and economic welfare of the State of Georgia and, to that end, to exercise the powers and privileges provided in this article, may be incorporated by presenting articles to the Secretary of State, as provided in this Code section and Code Section 7-1-742. The articles shall contain:
    1. The name of the corporation, which shall include the words "Business Development Corporation of Georgia," and a recitation that the corporation is organized under this article;
    2. The location of its initial registered office, but such corporation may have branch offices in such other places within the state as may be fixed by the board of directors;
    3. The purposes for which the corporation is founded, which shall include: to promote, stimulate, develop, and advance the business prosperity and economic welfare of the State of Georgia and its citizens; to encourage and assist, through loans, investments, or other business transactions, in the location of the business and industry in this state and to rehabilitate and assist existing business and industry; to stimulate and assist in the expansion of all kinds of business activity which will tend to promote the business development and maintain the economic stability of this state; to provide maximum opportunities for employment, encourage thrift, and improve the standard of living of the citizens of this state; similarly to cooperate and act in conjunction with other organizations, public or private, in the promotion and advancement of industrial, commercial, agricultural, and recreational developments in this state; and to provide financing for the promotion, development, and conduct of all kinds of business activity in this state;
    4. The names and post office addresses of the members of the first board of directors, who, unless otherwise provided by the articles or the bylaws, shall hold office for the first year of existence of the corporation or until their successors are elected and have qualified;
    5. Any provisions which the incorporators may choose to insert for the regulation of the business and for the conduct of the affairs of the corporation and any provision creating, dividing, limiting, and regulating the powers of the corporation, the directors, shareholders, or any class of the shareholders, including, but not limited to, a list of the officers, and provisions governing the issuance of stock certificates to replace lost or destroyed certificates, provided that no provision shall be contained for cumulative voting for directors; and
    6. The amount and number of authorized shares, the par value of each share, and the minimum amount of capital with which it shall do business and, if there is more than one class of stock, a description of the different classes, the names and post office addresses of the subscribers of stock, and the number of shares subscribed by each. The aggregate of the subscription shall be the minimum amount of capital with which the corporation shall commence business, which shall not be less than $100,000.00.

      The articles may also contain any provisions consistent with the laws of this state for the regulation of the affairs of the corporation.

  2. The articles shall be in writing, subscribed by the incorporators, and acknowledged by each of them before an officer authorized to take acknowledgments. A copy of the articles so subscribed and acknowledged shall be filed with the department for approval.

    (Ga. L. 1972, p. 798, § 3; Code 1933, § 41A-3402, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 965, § 2.)

RESEARCH REFERENCES

Am. Jur. 2d. - 18A Am. Jur. 2d, Corporations, § 199 et seq.

C.J.S. - 18 C.J.S., Corporations, § 47 et seq.

7-1-742. Action on articles by department; preconditions to doing business.

The department shall not approve the articles until at least 15 lending institutions authorized to do business in this state have agreed in writing to become members of said corporation; and said written agreement shall be filed with the department with the articles, and the filing of same shall be a condition precedent to the approval of the articles by the department. Whenever the articles shall have been filed in the office of the Secretary of State and approved by the department and all filing fees and taxes prescribed by law have been paid, the subscribers, their successors, and assigns shall constitute a corporation. Said corporation shall not be authorized to commence business until its articles are approved by the department. Upon such approval by the department, authorized stock of the corporation may thereafter be issued.

(Ga. L. 1972, p. 798, § 4; Ga. L. 1973, p. 536, § 1; Code 1933, § 41A-3403, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1257, § 25.)

RESEARCH REFERENCES

Am. Jur. 2d. - 18A Am. Jur. 2d, Corporations, §§ 215, 216.

C.J.S. - 18 C.J.S., Corporations, § 63 et seq.

7-1-743. Approval or disapproval of department.

  1. Upon receipt of an application for approval of articles from a corporation organized pursuant to this article, the department shall exercise its discretion in its consideration of the application; but the department shall not approve the application until it has ascertained to its satisfaction:
    1. That the public need and advantage will be promoted by the establishment of the corporation;
    2. That conditions in the locality in which the corporation will transact business afford reasonable promise of a successful operation;
    3. That the applicants may legally invest in the stock of the corporation and that such investment would not be to the detriment of the applicants;
    4. That the proposed members are in good standing with their respective supervisory authorities; and
    5. That the proposed officers and directors have sufficient experience, ability, and standing to afford reasonable promise of a successful operation.
  2. Within 90 days after receipt of an application for approval of the articles, the department shall issue a certificate either granting or denying permission for the corporation to commence business, provided that in no instance shall the department grant such permission until it has ascertained to its satisfaction that the above conditions and circumstances have been met and that the articles are in accordance with this article.

    (Ga. L. 1973, p. 536, § 2; Code 1933, § 41A-3404, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 18A Am. Jur. 2d, Corporations, § 214.

C.J.S. - 18 C.J.S., Corporations, § 63 et seq.

7-1-744. Filing of articles.

Upon receiving the approval of the department, the incorporators shall file the same together with the fee specified by Code Section 7-1-862 with the Secretary of State.

(Code 1933, § 41A-3405, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 946, § 71; Ga. L. 1989, p. 1257, § 26.)

Editor's notes. - The amendment to this Code section by Ga. L. 1989, p. 946, § 71, was superseded by the amendment by Ga. L. 1989, p. 1257, § 26.

RESEARCH REFERENCES

Am. Jur. 2d. - 18A Am. Jur. 2d, Corporations, § 214.

C.J.S. - 18 C.J.S., Corporations, § 56 et seq.

7-1-745. Powers of corporation.

In furtherance of its purposes and in addition to the powers now or hereafter conferred on business corporations by the laws of this state, the corporation shall, subject to the restrictions and limitations contained in this Code section, have the following powers:

  1. To elect, appoint, and employ officers, agents, and employees;
  2. To make contracts and incur liabilities for any of the purposes of the corporation provided that the corporation shall not incur any secondary liability by way of the guaranty or endorsement of the obligations of any person or corporation or in any other manner unless the corporation has a substantial interest in the performance of the transaction;
  3. To borrow money and to do all things necessary or desirable to secure aid, assistance, loans, and other financing from its members (whether as member loans or otherwise), from any lending institution, or from any agency established under the Small Business Investment Act of 1958, as amended, or other similar federal or state legislation for any of the purposes of the corporation and to issue therefor its bonds, debentures, notes, or other evidences of indebtedness, whether secured or unsecured, and to secure the same by mortgage, pledge, deed of trust, or other lien on its property, franchise, rights, and privileges of every kind and nature or any part thereof or interest therein without securing shareholder or member approval;
  4. To make loans to any person or corporation and to establish and regulate the terms and conditions with respect to any such loans and the charges for interest and services connected therewith;
  5. To purchase, receive, hold, lease, or otherwise acquire and to sell, convey, transfer, lease, or otherwise dispose of commercial or historical real and personal property and residential projects referred to the corporation by its shareholders or members, together with such rights and privileges as may be incidental and appurtenant thereto and the use thereof, including, but not restricted to, any real or personal property acquired by the corporation from time to time in the satisfaction of debts or enforcement of obligations;
  6. To acquire the good will, business rights, real and personal property, and other assets or any part thereof or interest therein of any persons or corporations and to assume, undertake, or pay the obligations, debts, and liabilities of any such person or corporation; to acquire improved or unimproved real estate for the purpose of constructing residential buildings, industrial plants or business establishments thereon or for the purposes of disposing of such real estate to others for the construction of residential buildings, industrial plants, industrial parks, or business establishments; and to acquire, construct or reconstruct, alter, repair, maintain, operate, sell, convey, transfer, lease, or otherwise dispose of residential buildings, industrial plants, industrial parks, or business establishments;
  7. To acquire, subscribe for, own, sell, hold, assign, transfer, mortgage, pledge, or otherwise dispose of a partnership interest in any partnership or other entity or the stock, shares, bonds, debentures, notes, or other securities and evidences of interest in or indebtedness of any person or corporation and, while the owner or holder thereof, to exercise all the rights, powers, and privileges of ownership, including the right to vote thereon;
  8. To mortgage, pledge, or otherwise encumber any property, right, or thing of value, acquired pursuant to the powers contained in paragraph (5), (6), or (7) of this Code section, as security for the payment of any part of the purchase price therefor;
  9. To cooperate with and avail itself of the facilities of the United States Department of Commerce, the Department of Economic Development, and any other similar state or federal governmental agencies and to cooperate with and assist and otherwise encourage organizations in the various communities of this state in the promotion, assistance, and development of the business prosperity and economic well-being of such communities or of this state or any political subdivision thereof;
  10. To redeem or otherwise reacquire its shares under the circumstances and subject to the restrictions now or hereafter set forth for business corporations by the laws of this state;
  11. To make, amend, and repeal bylaws, not inconsistent with its articles of incorporation or with the laws of this state, for the administration and regulation of the affairs of the corporation, which bylaws may establish internal governance procedures and standards, including, but not limited to, procedures for voting by proxy at and for giving notice of meetings of directors and of shareholders and members, procedures and standards for the payment of dividends, and the delegation by the board of directors of its authority under the articles of incorporation and this article to one or more committees of the board or to officers of the corporation, and which bylaws may give the board of directors or committees thereof the power to pass resolutions necessary or convenient to carry out the purposes of the corporation; and
  12. To do all acts and things necessary or convenient to carry out the powers expressly granted in this article.

    (Ga. L. 1972, p. 798, § 5; Code 1933, § 41A-3406, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 965, § 3; Ga. L. 1989, p. 1641, § 2; Ga. L. 1991, p. 1100, § 1; Ga. L. 2001, p. 967, § 1; Ga. L. 2004, p. 690, § 1.)

Editor's notes. - Ga. L. 1989, p. 1641, § 18, not codified by the General Assembly, provides: "In the event of any substantive conflict between this Act and any other Act of the 1989 General Assembly, such other Act shall control over this Act."

Ga. L. 1991, p. 1100, § 2, not codified by the General Assembly, provides: "This Act shall apply to all loan applications received on or after July 1, 1991, by a business development corporation organized pursuant to Article 6 of Chapter 1 of Title 7 of the Official Code of Georgia Annotated."

U.S. Code. - The Small Business Investment Act of 1958 referred to in paragraph (3) of this Code section, is codified as 15 U.S.C. §§ 77c, 77ddd, 80a-18, 633, 636, 661 et seq. and 18 U.S.C. §§ 212, 213, 216, 657, 1006, 1014.

Law reviews. - For article, "Business Associations," see 53 Mercer L. Rev. 109 (2001).

RESEARCH REFERENCES

Am. Jur. 2d. - 18B Am. Jur. 2d, Corporations, §§ 1990 et seq.

C.J.S. - 19 C.J.S., Corporations, § 651 et seq.

7-1-746. Right to deal in corporation's stock or obligations.

Notwithstanding any rule at common law or any provision of any general or special law or any provision in their respective charters, agreements of association, articles of organization, or trust indentures:

  1. Any person, including all domestic corporations organized for the purpose of carrying on business within this state and further including, without implied limitation, public utility companies and insurance companies and foreign corporations licensed to do business within this state and all lending institutions as defined in paragraph (3) of Code Section 7-1-740 and all trusts are authorized to acquire, purchase, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of any bonds, securities, or other evidences of indebtedness created by or the shares of the corporation and, while owners of said shares, to exercise all the rights, powers, and privileges of ownership, including the right to vote thereon, all without the approval of any regulatory authority of the state, except as otherwise provided in this article;
  2. All lending institutions are authorized to become members of the corporation and to make loans to the corporation as provided in this article;
  3. Each lending institution which becomes a member of the corporation is authorized to acquire, purchase, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of any bonds, securities, or other evidences of indebtedness created by or the shares of the capital stock of the corporation and, while owners of said stock, to exercise all the rights, powers, and privileges of ownership, including the right to vote thereon, all without the approval of any regulatory authority of the State of Georgia, provided that the amount of the capital of the corporation which may be acquired by any member pursuant to the authority granted in this Code section shall not exceed 5 percent of the capital base of such member; and
  4. The amount of shares of the corporation which any member is authorized to acquire pursuant to the authority granted in this Code section is in addition to the amount of shares in the corporation which such member may otherwise be authorized to acquire.

    (Ga. L. 1972, p. 798, § 6; Code 1933, § 41A-3407, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 38; Ga. L. 1989, p. 14, § 7.)

RESEARCH REFERENCES

Am. Jur. 2d. - 19 Am. Jur. 2d, Corporations, §§ 2061 et seq., 2072 et seq.

C.J.S. - 19 C.J.S., Corporations, § 748 et seq.

7-1-747. Applying for membership; loans by members.

  1. Any lending institution may request membership in the corporation by making application to the board of directors on such form and in such manner as said board of directors may require, and membership shall become effective upon acceptance of such application by said board.
  2. Each member of the corporation shall make member loans to the corporation when called upon by it to do so on such terms and other conditions as shall be approved from time to time by the board of directors, subject to the following conditions:
    1. All loan limits for member loans may, at the option of the board of directors, be established at the $1,000.00 amount nearest the amount computed in accordance with this Code section; and
    2. No member loan to the corporation shall be made if immediately thereafter the total amount of the obligations (whether under member loans or otherwise) of the corporation would exceed 50 times the amount then paid in on the capital of the corporation.
  3. The total amount outstanding on member loans to the corporation made by any member at any one time, when added to the amount of the investment in the capital of the corporation then held by such member, shall not exceed the lesser of:
    1. Twenty percent of the aggregate of the capital of the corporation then outstanding plus the total amount then outstanding on all member loans to the corporation, including in said total amount outstanding amounts validly called as member loans but not yet loaned; or
    2. The following limit, to be determined each calendar year of membership on the basis of the audited balance sheet of such member at the close of its fiscal year immediately preceding or, in the case of an insurance company, its last annual statement to the Commissioner of Insurance:
      1. Five percent of the statutory capital base of a bank or trust company;
      2. One-half of 1 percent of the total outstanding loans made by savings and loan associations;
      3. Two and one-half percent of the capital and unassigned surplus of stock insurance companies, except fire insurance companies;
      4. Two and one-half percent of the unassigned surplus of mutual insurance companies, except fire insurance companies;
      5. One-tenth of 1 percent of the assets of fire insurance companies; and
      6. Such limits as may be approved by the board of directors of the corporation for other lending institutions; or
    3. Three million dollars.
  4. Subject to paragraphs (1) and (3) of subsection (c) of this Code section, each call for member loans made by the corporation shall be apportioned among the members of the corporation in such manner that, to the extent feasible, all members shall, after making such member loans, have adjusted loan limits constituting an equal percentage of their respective loan limits. The adjusted loan limit of a member shall be the amount of such member's loan limit, as determined by reference to subsection (c) of this Code section, reduced by the balance of outstanding member loans made by such member to the corporation and the investment in capital of the corporation held by such member at the time of such call.
  5. All member loans to the corporation shall be evidenced by bonds, debentures, notes, or other evidences of indebtedness of the corporation, which shall be freely transferable at all times and which shall bear interest at a rate of interest determined by the board of directors to be the prime rate prevailing at the date of issuance thereof on unsecured commercial loans plus one-fourth of 1 percent or less.

    (Ga. L. 1972, p. 798, § 7; Code 1933, § 41A-3408, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 39; Ga. L. 1981, p. 965, § 4; Ga. L. 1987, p. 1059, § 1; Ga. L. 1996, p. 732, § 1; Ga. L. 2001, p. 967, § 2; Ga. L. 2016, p. 390, § 7-4/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "building and loan or" following "loans made by" in subparagraph (c)(2)(B).

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1987, "Commissioner of Insurance" was substituted for "Insurance Commissioner" in paragraph (c)(2).

Pursuant to Code Section 28-9-5, in 1988, "limits" was substituted for "limit" near the beginning of paragraph (b)(1).

7-1-748. Duration of membership; withdrawal.

  1. Membership in the corporation shall be for the duration of the corporation, provided that, upon written notice given to the corporation two years in advance, a member may withdraw from membership in the corporation at the expiration of such notice.
  2. A member shall not be obligated to make any loans to the corporation pursuant to calls made subsequent to notice of the intended withdrawal of said member.

    (Ga. L. 1972, p. 798, § 8; Code 1933, § 41A-3409, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-749. Powers of shareholders and members; voting.

  1. The shareholders and the members of the corporation shall have the following powers of the corporation:
    1. To determine the number of and elect directors as provided in Code Section 7-1-751;
    2. To amend its articles as provided in Code Section 7-1-750;
    3. To dissolve the corporation as provided in Code Section 7-1-756; and
    4. To exercise such other of the powers of the corporation, consistent with this article, as may be conferred on the shareholders and the members by the bylaws.
  2. As to all matters requiring action by the shareholders and the members of the corporation, said shareholders and said members shall vote separately thereon by classes; and, except as otherwise provided in this article, such matters shall require the affirmative vote of a majority of the votes to which the shareholders present or represented at the meeting shall be entitled and the affirmative vote of a majority of the votes to which the members present or represented at the meeting shall be entitled.
  3. Each shareholder shall have one vote, in person or by proxy, for each share of stock held by him; and each member shall have one vote, in person or by proxy, except that any member having a loan limit of more than $1,000.00 shall have one additional vote, in person or by proxy, for each additional $1,000.00 which such member is authorized to have outstanding on loans to the corporation at any one time, as determined under subsection (c) of Code Section 7-1-747.
  4. A holder of or subscriber to shares of the corporation or a member of the corporation shall be under no obligation to the corporation or its creditors with respect to such shares, subscriptions, or membership except in the circumstances set forth in Code Section 14-2-620, except that this subsection does not affect the obligation of a member to lend funds to the corporation pursuant to valid call.

    (Ga. L. 1972, p. 798, § 9; Code 1933, § 41A-3410, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 965, § 5; Ga. L. 1989, p. 946, § 72.)

7-1-750. Amendment of articles.

  1. Except as provided in subsections (b) and (c) of this Code section and subject to the approval of the department, the articles may be amended by the votes of the shareholders and the members of the corporation, voting separately by classes, and such amendments shall require approval by the affirmative vote of two-thirds of the votes to which the members shall be entitled.
  2. No amendment shall be adopted which is inconsistent with the general purposes expressed in paragraph (3) of subsection (a) of Code Section 7-1-741 or which authorizes any additional class of stock to be issued or which would tend to impair the ability of the department to examine and supervise the corporation.
  3. No amendment of the articles which increases the obligation of a member to make loans to the corporation or makes any change in the principal amount, interest rate, or maturity date or in the security or credit position of any outstanding loan of a member to the corporation or affects a member's right to withdraw from membership as provided in Code Section 7-1-748 or affects a member's voting rights as provided in this article shall be made without the consent of each member affected by such amendment.
  4. Within 30 days after any meeting at which an amendment to the articles is approved, it shall be submitted to the department together with such information as the department shall require. If the department finds in its discretion that the proposed amendment is in conformity with the objectives and requirements of this article, it shall issue its certificate approving the amendment. If the amendment is disapproved, the department shall briefly state its reasons for such action to the corporation. The decision of the department shall be conclusive, except as it may be subject to judicial review as provided in Code Section 7-1-90.
  5. Upon the approval of the department, articles of amendment signed and sworn to by the president, treasurer, and a majority of the directors, setting forth such amendment and due adoption thereof, shall, together with the department's certificate of approval, be submitted to the Secretary of State, who shall examine them and, if he finds that they conform to the requirements of this article, shall so certify and endorse his approval thereon.

    (Ga. L. 1972, p. 798, § 10; Code 1933, § 41A-3411, enacted by Ga. L. 1974, p. 705, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 18 Am. Jur. 2d, Corporations, §§ 91, 92.

C.J.S. - 18 C.J.S., Corporations, §§ 57, 58.

7-1-751. Board of directors; officers and agents.

The business affairs of the corporation shall be managed and controlled by a board of directors, a president, a vice-president, a secretary, a treasurer, and such other officers and such agents as the corporation shall authorize by its bylaws. The board of directors shall consist of such number, not less than 15 nor more than 21, as shall be determined in the first instance by the incorporators and thereafter annually by the members and the shareholders of the corporation. The board of directors may exercise all the powers of the corporation except such as are conferred by law or by the bylaws of the corporation upon the shareholders or members and shall choose and appoint all the agents and officers of the corporation and fill all vacancies except vacancies in the office of director, which shall be filled as provided in this Code section. The annual meeting shall be held prior to May 1 or, if no annual meeting shall be held in the year of incorporation, then within 90 days after the approval of the articles at a special meeting as provided in this Code section. At such annual meeting or at each special meeting held as provided in this Code section, the members of the corporation shall elect two-thirds of the board of directors and the shareholders shall elect the remaining directors. The directors shall hold office until the next annual meeting of the corporation or special meeting held in lieu of the annual meeting after the election and until their successors are elected and qualified, unless sooner removed in accordance with provisions of the bylaws. Any vacancy in the office of a director elected by the members shall be filled by the directors elected by the members, and any vacancy in the office of a director elected by the shareholders shall be filled by the directors elected by the shareholders. Directors and officers shall not be responsible for losses unless the same shall have been occasioned by the willful misconduct of such directors and officers.

(Ga. L. 1972, p. 798, § 11, Code 1933, § 41A-3412, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 40; Ga. L. 1981, p. 965, § 6.)

RESEARCH REFERENCES

Am. Jur. 2d. - 18B Am. Jur. 2d, Corporations, § 1341 et seq.

7-1-752. Earned surplus; fiscal year.

  1. Each year the corporation shall set apart as earned surplus not less than 10 percent of its net earnings for all the preceding fiscal year until such surplus shall be equal in value to one-half of the amount paid in on the capital then outstanding. Whenever the amount of surplus established in this Code section shall become impaired, it shall be built up again to the required amount in the manner provided for its original accumulation. Net earnings and surplus shall be determined by the board of directors after providing for such reserves as said directors deem desirable, and the determination of the directors made in good faith shall be conclusive on all persons.
  2. Corporations organized under this article shall adopt the calendar year as their fiscal year.

    (Ga. L. 1972, p. 798, §§ 12, 21; Code 1933, § 41A-3413, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-753. Deposit of corporate funds; corporation not to accept deposits.

The corporation shall not deposit any of its funds in any bank or other financial institution unless such institution has been designated as a depository by a vote of a majority of the directors present at an authorized meeting of the board of directors, exclusive of any director who is an officer or director of the depository so designated. The corporation shall not receive money on deposit.

(Ga. L. 1972, p. 798, § 13; Code 1933, § 41A-3414, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-754. Supervision.

The department shall exercise the same power and authority over corporations organized under this article as is now or hereafter exercised over banks and trust companies by Articles 1 and 2 of this chapter where such law is not in conflict with this chapter.

(Ga. L. 1972, p. 798, § 14; Ga. L. 1973, p. 536, § 3; Code 1933, § 41A-3415, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-755. First meeting and organization.

  1. The first meeting of the corporation shall be called by a notice signed by three or more of the incorporators, stating the time, place, and purpose of the meeting, a copy of which notice shall be mailed or delivered to each incorporator at least five days before the day appointed for the meeting. Said first meeting may be held without such notice upon agreement in writing to that effect signed by all the incorporators. There shall be recorded in the minutes of the meeting a copy of said notice or of such unanimous agreement of the incorporators.
  2. At such first meeting the incorporators shall organize by the choice, by ballot, of a temporary clerk; by the adoption of bylaws; by the election, by ballot, of directors; and by action upon such other matters within the powers of the corporation as the incorporators may see fit. The temporary clerk shall be sworn and shall make and attest a record of the proceedings. Four of the incorporators shall be a quorum for the transaction of business.

    (Ga. L. 1972, p. 798, § 15; Code 1933, § 41A-3416, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-756. Duration and dissolution of corporation.

  1. The period of duration of a corporation organized under this article shall be 35 years, subject, however, to the right of its shareholders and the members to dissolve the corporation prior to the expiration of said period as provided in subsection (b) of this Code section, and further subject to any longer period of duration as may be specified in the articles of incorporation as originally filed and approved or as thereafter amended pursuant to Code Section 7-1-750.
  2. The corporation may, upon the votes of the shareholders and the members of the corporation, voting separately by classes, dissolve said corporation; and such dissolution shall require approval by the affirmative vote of two-thirds of the votes to which the shareholders shall be entitled. Upon any dissolution of the corporation, none of the corporation's assets shall be distributed to the shareholders until all sums due the members of the corporation as creditors thereof have been paid in full.

    (Ga. L. 1972, p. 798, §§ 16, 17; Code 1933, § 41A-3417, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1987, p. 1059, § 2.)

RESEARCH REFERENCES

Am. Jur. 2d. - 19 Am. Jur. 2d, Corporations, § 2750.

C.J.S. - 19 C.J.S., Corporations, § 914 et seq.

ALR. - Propriety of applying minority discount to value of shares purchased by corporation or its shareholders from minority shareholders, 13 A.L.R.5th 840.

7-1-757. State credit not pledged.

Under no circumstances shall the credit of the State of Georgia be pledged to any corporation organized under this article nor shall acts of such corporation in any manner constitute or result in the creation of any indebtedness of the State of Georgia or any county or municipal corporation therein.

(Ga. L. 1972, p. 798, § 18; Code 1933, § 41A-3418, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-758. Tax exemptions; state and local occupational license taxes.

  1. Any tax exemptions, tax credits, or tax privileges granted to banks or trust companies and other financial institutions by any general laws of this state are granted to corporations organized pursuant to this article.
  2. Every corporation organized and engaged in business under this article shall pay an annual state occupational license tax of $50.00. Counties and municipalities are authorized, in addition, to levy the occupational license taxes as prescribed; provided, however, that no county or municipality shall levy any such occupational license tax in a greater amount than those prescribed.

    (Ga. L. 1972, p. 798, §§ 19, 20; Code 1933, § 41A-3419, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 7-4/HB 811; Ga. L. 2017, p. 774, § 7/HB 323.)

The 2016 amendment, effective July 1, 2016, deleted "building and loan associations," following "trust companies," in subsection (a).

The 2017 amendment, effective May 9, 2017, part of an Act to revise, modernize, and correct the Code, revised punctuation in subsection (a).

ARTICLE 7 BUILDING AND LOAN ASSOCIATIONS AND SAVINGS AND LOAN ASSOCIATIONS

Cross references. - Authority of building and loan associations and savings and loan associations to invest in projects involving redevelopment of blighted areas, § 8-4-12 .

Appointment of building and loan associations and federal savings and loan associations as state depositories of state funds, § 50-17-50 et seq.

Administrative Rules and Regulations. - Building and loan associations generally, Official Compilation of Rules and Regulations of State of Georgia, Rules of Department of Banking and Finance, Chapter 80-4-1.

Law reviews. - For article discussing the consolidation of laws dealing with various types of financial organizations into the Financial Institutions Code of Georgia, see 11 Ga. St. B.J. 225 (1975). For article, "Small Loans Under Georgia Laws," see 3 Mercer L. Rev. 227 (1952).

RESEARCH REFERENCES

ALR. - Construction of savings bank by-law expressly assented to by depositor, relieving bank from liability for payment to unauthorized person, 52 A.L.R. 760 .

Constitutionality, construction, and effect of statutes relating to inspection, dissolution and liquidation of building and loan associations, 78 A.L.R. 1090 .

Right of borrowing member of building and loan association to tender matured stock purchased from nonborrowing members, 85 A.L.R. 968 .

Power of building and loan association to borrow money to pay withdrawing members holding either matured or partially matured stock, 87 A.L.R. 1156 .

Basis of settlement between building and loan association and borrowing member during solvency of association, 98 A.L.R. 6 .

Constitutionality of statute changing rights of withdrawing members of building and loan association, 98 A.L.R. 82 ; 133 A.L.R. 1493 .

Status of holder of withdrawn, matured, prepaid, and preferred stock in building and loan association and resulting rights and liabilities, 98 A.L.R. 89 .

Determination of "withdrawal value" of unmatured shares in building and loan association, 98 A.L.R. 142 .

Right of building and loan association to transfer to third person loan made to borrowing member, 112 A.L.R. 459 .

Purchase or retirement of stock by building and loan association at a price less than its withdrawal value, 134 A.L.R. 1212 .

Uniform Stock Transfer Act as applicable to shares in savings and loan associations or building and loan associations, 143 A.L.R. 1152 .

7-1-770. Definitions.

As used in this article:

  1. An association is "local" if the greater portion of its investment in real estate loans is limited to loans on the security of a first lien or security title on real estate. Any such association may purchase real estate loans or interests in real estate loans which are made and owned by any savings and loan association to the extent authorized by the regulations of the department, provided that such regulations shall not permit the purchase of loans or interests in loans of any type or in any amounts (per individual loan or in the aggregate) which are not permitted by law to be purchased by savings and loan associations with principal offices in this state.
  2. An association is "mutual" if all depositors in such association participate in the income of such association and if all borrowers are privileged to vote at least one vote at any meeting of members, it being unnecessary that any borrower should subscribe to or purchase any shares or be entitled to participate in any way in the income of such association.

    (Ga. L. 1937-38, Ex. Sess., p. 307, § 2; Ga. L. 1945, p. 263, § 2; Ga. L. 1965, p. 473, § 1; Code 1933, § 41A-3501, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1366, § 16; Ga. L. 1982, p. 3, § 7; Ga. L. 2016, p. 390, § 7-15/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted the subsection (a) designation and substituted the present provisions for the former provisions, which read: "(1) 'Building and loan association' means a local mutual association existing under the laws of this state on April 1, 1975, or organized under this article without capital stock which:

"(A) Is authorized to receive deposits but shall not have the power to offer third party payment services except in the same manner and subject to the same provisions as are set forth in Code Section 7-1-670 for credit unions;

"(B) Receives the greater portion of its funds from such deposits; and

"(C) Lends the greater portion of its funds on the security of first liens or security titles on homes and on the security of first liens on its own deposits.

"(2) 'Deposit' means any arrangement whereby a withdrawable interest is created in a building and loan association or whereby the building and loan association becomes indebted to a person transferring to it money, commercial paper, or similar items for the payment of money, whether called a 'share,' 'account,' 'certificate,' 'share account,' 'savings account,' 'deposit,' 'savings deposit,' 'deposit account,' or otherwise."; redesignated former subsection (b) as present paragraph (1), and, in paragraph (1), deleted "within the meaning of this article" following "local" near the beginning of the first sentence, and deleted "other associations qualified under the building and loan statutes of their respective states or from" following "made and owned by" near the middle of the second sentence; and redesignated former subsection (c) as present paragraph (2).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 5 et seq.

C.J.S. - 12 C.J.S., Building and Loan Associations, Savings and Loan Associations, and Credit Unions, § 1 et seq.

ALR. - Power of savings bank or similar institution to provide checking facilities or negotiable orders of withdrawal (NOW) to customers, 64 A.L.R.3d 1314.

Promissory estoppel of lending institution based on promise to lend money, 18 A.L.R.5th 307.

7-1-771. Members of building and loan association; voting.

Reserved. Repealed by Ga. L. 2016, p. 390, § 7-16/HB 811, effective July 1, 2016.

Editor's notes. - This Code section was based on Ga. L. 1945, p. 263, § 1; Code 1933, § 41A-3502, enacted by Ga. L. 1974, p. 705, § 1.

7-1-772. Presentation, contents, and execution of articles of building and loan association.

Reserved. Repealed by Ga. L. 2016, p. 390, § 7-16/HB 811, effective July 1, 2016.

Editor's notes. - This Code section was based on Code 1933, § 41A-3503, enacted by Ga. L. 1974, p. 705, § 1.

7-1-773. Approval or disapproval of articles of building and loan association by department.

Reserved. Repealed by Ga. L. 1989, p. 1257, § 27, effective July 1, 1989.

Editor's notes. - The former Code section was based on Ga. L. 1937-38, Ex. Sess., p. 307, § 6; Ga. L. 1973, p. 533, § 1; Code 1933, § 41A-3504, enacted by Ga. L. 1974, p. 705, § 1.

7-1-774. Approval of articles of building and loan association; renewals or amendments to existing charters.

Reserved. Repealed by Ga. L. 1989, p. 1257, § 28, effective July 1, 1989.

Editor's notes. - The former Code section was based on Ga. L. 1937-38, Ex. Sess., p. 307, § 6; Ga. L. 1973, p. 533, § 1; Code 1933, § 41A-3505, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 41.

7-1-775. Filing and processing articles of incorporation and amendments for building and loan association.

Reserved. Repealed by Ga. L. 2016, p. 390, § 7-16/HB 811, effective July 1, 2016.

Editor's notes. - This Code section was based on Code 1933, § 41A-3506, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 41; Ga. L. 1989, p. 1257, § 29.

7-1-776. Certificate of incorporation or amendment issued by Secretary of State.

Reserved. Repealed by Ga. L. 2016, p. 390, § 7-16/HB 811, effective July 1, 2016.

Editor's notes. - This Code section was based on Code 1933, § 41A-3507, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1257, § 30.

7-1-777. Principal and branch offices.

No savings and loan association or similar corporation existing under the laws of this state or of the United States shall accept deposits in this state except on the premises of an established principal office or branch office operated pursuant to this article. For the purposes of this Code section, the term "branch office" shall be construed to mean any office of such association or corporation which is intended to be permanently established in a fixed location and to be operated at such location on substantially a full-time basis.

(Ga. L. 1973, p. 653, § 1; Code 1933, § 41A-3508, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 7-4/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "building and loan association or" preceding "savings and loan" at the beginning of the first sentence of this Code section.

7-1-778. Rules and regulations governing building and loan associations.

Reserved. Repealed by Ga. L. 2016, p. 390, § 7-16/HB 811, effective July 1, 2016.

Editor's notes. - This Code section was based on Ga. L. 1937-38, Ex. Sess., p. 307, § 8; Code 1933, § 41A-3509, enacted by Ga. L. 1974, p. 705, § 1.

7-1-779. Use of "savings and loan" or other terms likely to mislead public as to nature of business.

No person or corporation, except a savings and loan association actually engaged in carrying on a savings and loan business as contemplated by this article or the laws of the United States, shall transact business under any name or title which contains the term "savings and loan" or combination of the words used in said phrase or use any sign or any letterhead or billhead, circular, or paper of any kind or advertise in any manner which indicates that his or its business is the character or kind of business carried on or transacted by a savings and loan association or which is likely to lead the public to believe that his or its business is that of a savings and loan association.

(Ga. L. 1937-38, Ex. Sess., p. 307, § 10; Code 1933, § 41A-3510, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 7-4/HB 811; Ga. L. 2017, p. 774, § 7/HB 323.)

The 2016 amendment, effective July 1, 2016, in this Code section, deleted "a building and loan association or" preceding "a savings and loan association" near the beginning, deleted "'building and loan' or" preceding "or combination" in the middle, and deleted "building and loan or" preceding "savings and loan" in three places.

The 2017 amendment, effective May 9, 2017, part of an Act to revise, modernize, and correct the Code, revised language in this Code section.

Cross references. - Regulations pertaining to use of names by financial institutions generally, § 7-1-130 .

OPINIONS OF THE ATTORNEY GENERAL

Foreign state building and loan associations. - Since building and loan associations are defined as local mutual associations under former Code 1933, § 41A-3501 (see now O.C.G.A. § 7-1-770 ), foreign state building and loan associations are prohibited from directly or indirectly establishing loan production offices in Georgia under former Code 1933, § 41A-3510 (see now O.C.G.A. § 7-1-779 ). 1978 Op. Att'y Gen. No. 78-70.

Foreign state savings and loan association may not transact business in Georgia under any name containing the terms "savings and loan," nor may it advertise in any manner which indicates that its business is the kind carried on by a savings and loan association. 1983 Op. Att'y Gen. No. 83-23.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 188.

C.J.S. - 12 C.J.S., Building and Loan Associations, Savings and Loan Associations, and Credit Unions, § 15.

7-1-780. Lien on deposits to secure loans.

To secure loans, savings and loan associations shall have a lien without further agreement or pledge upon all deposits with it by a borrower; and, upon default upon any loan, any such association may, without notice to or consent of the borrower, cancel on its books part or all of the amount outstanding to the credit of the borrower not exceeding his obligations to the association and apply such amount in payment of the obligations.

(Ga. L. 1937-38, Ex. Sess., p. 307, § 11; Code 1933, § 41A-3511, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 7-4/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "building and loan associations and" preceding "savings and loan associations" near the beginning of this Code section.

JUDICIAL DECISIONS

"Freeze" on checking account funds did not violate the automatic stay provisions of the Bankruptcy Code. Georgia Fed. Bank v. Owens-Peterson, 39 Bankr. 186 (Bankr. N.D. Ga. 1984).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 780.

C.J.S. - 12 C.J.S., Building and Loan Associations, Savings and Loan Associations, and Credit Unions, § 75.

ALR. - Bank's right of setoff, based on debit of one depositor, against funds in account standing in names of debtor and another, 68 A.L.R.3d 192.

7-1-781. Conversion into savings and loan association.

Any other financial institution existing under the laws of this state doing a home financing business may convert itself into a savings and loan association in accordance with Section 5 of the Home Owners' Loan Act, 12 U.S.C. Section 1464, upon a vote of 51 percent or more of the votes of the members cast at an annual meeting or at any special meeting called to consider such action.

(Ga. L. 1937-38, Ex. Sess., p. 307, § 12; Code 1933, § 41A-3512, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 7-17/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "building and loan association or" following "Any" at the beginning and deleted "of 1933" following "Home Owners' Loan Act" in the middle of this Code section.

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 235 et seq.

7-1-782. Effect of conversion into savings and loan association.

Reserved. Repealed by Ga. L. 2016, p. 390, § 7-16/HB 811, effective July 1, 2016.

Editor's notes. - This Code section was based on Ga. L. 1937-38, Ex. Sess., p. 307, § 12; Code 1933, § 41A-3513, enacted by Ga. L. 1974, p. 705, § 1.

7-1-783. Previous conversions into savings and loan associations ratified.

Any corporation which has converted itself prior to April 1, 1975, into a savings and loan association under the Home Owners' Loan Act and has received a charter from the Federal Home Loan Bank Board shall be recognized as a savings and loan association, and its federal charter shall be given full credence by the courts of this state to the same extent as if such conversion had taken place under this article.

(Ga. L. 1937-38, Ex. Sess., p. 307, § 12; Code 1933, § 41A-3514, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 7-18/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "building and loan association or" following "Any" at the beginning and deleted "of 1933" following "Home Owners' Loan Act" in the middle of this Code section.

U.S. Code. - The Home Owners' Loan Act of 1933, referred to in this Code section, is codified as 12 U.S.C. § 1461 et seq.

7-1-784. Conversion into building and loan association.

Reserved. Repealed by Ga. L. 2016, p. 390, § 7-16/HB 811, effective July 1, 2016.

Editor's notes. - This Code section was based on Ga. L. 1937-38, Ex. Sess., p. 307, § 12; Code 1933, § 41A-3515, enacted by Ga. L. 1974, p. 705, § 1.

7-1-785. Effect of conversion into building and loan association.

Reserved. Repealed by Ga. L. 2016, p. 390, § 7-16/HB 811, effective July 1, 2016.

Editor's notes. - This Code section was based on Ga. L. 1937-38, Ex. Sess., p. 307, § 12; Code 1933, § 41A-3516, enacted by Ga. L. 1974, p. 705, § 1.

7-1-786. Taxation.

No savings and loan association with a home office in this state shall be assessed or subjected to taxation by the state or any county, municipality, or other political subdivision taxing authority on its franchise, capital, reserves, surplus, loans, shares, or accounts; except that any real property and any tangible personal property not hereinbefore specifically mentioned, which may be owned by it, shall be subject to taxation to the same extent, according to its value, as all other real and tangible personal property is taxed.

(Ga. L. 1937-38, Ex. Sess., p. 307, § 13; Code 1933, § 41A-3517, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 7-4/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "building and loan association or" preceding "savings and loan association" at the beginning of this Code section.

JUDICIAL DECISIONS

Discussion of meaning of term franchise. - See City of Griffin v. First Fed. Sav. & Loan Ass'n, 80 Ga. App. 217 , 55 S.E.2d 771 (1949).

Savings and loan association is exempt from any license or occupation tax or fee for doing business in a city; and city ordinance, insofar as the ordinance attempts or purports to impose a license fee upon such association is invalid and prohibited. City of Griffin v. First Fed. Sav. & Loan Ass'n, 80 Ga. App. 217 , 55 S.E.2d 771 (1949). But see City of Atlanta v. First Fed. Sav. & Loan Ass'n, 209 Ga. 517 , 74 S.E.2d 243 (1953).

Exemption from taxation is not exemption from license or occupation fees. - To properly construe meaning of the word franchise, it must be considered in connection with the other property for which an exemption from taxation was given. Franchises are property and former Code 1933, § 92-2302 (see now O.C.G.A. § 48-5-421 ) made provision for taxation of franchises. When the word franchise is considered in connection with other items exempted from taxation, it must be taken as meaning powers conferred by a sovereignty, and that exemption granted is from taxation of property right in powers so conferred, and not exemption from license or occupation fee required by municipality in order to do business. City of Atlanta v. First Fed. Sav. & Loan Ass'n, 209 Ga. 517 , 74 S.E.2d 243 (1953).

7-1-787. Exemption from securities regulations.

The opening and transfer of deposits in a savings and loan association are exempted from all provisions of law of this state which provide for the supervision and the regulation of the sale of securities, even if the word "shares" or similar terminology is used in connection therewith; and the sale of any such deposits shall be legal without any action or approval whatsoever on the part of any official authorized to license, regulate, and supervise the sale of securities.

(Ga. L. 1937-38, Ex. Sess., p. 307, § 14; Code 1933, § 41A-3518, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 7-4/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "building and loan association or" preceding "savings and loan association" near the beginning of this Code section.

Cross references. - Exemption from securities-registration requirements of securities issued by federal savings and loan associations, or building and loan associations, § 10-5-8.

RESEARCH REFERENCES

ALR. - Purchase or retirement of stock by building and loan association at a price less than its withdrawal value, 134 A.L.R. 1212 .

7-1-788. Notaries and other officers not disqualified by interest in association; validation of prior instruments.

No notary public or other public officer shall be disqualified from taking the acknowledgment of or witnessing any instrument, in writing, in which a savings and loan association is interested, by reason of his holding an office in or being a member of or being pecuniarily interested in or employed by such association so interested; and any such acknowledgments or attestations taken prior to April 1, 1975, are validated.

(Ga. L. 1937-38, Ex. Sess., p. 307, § 15; Code 1933, § 41A-3519, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 7-4/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "a building and loan association or" preceding "a savings and loan association" near the middle of this Code section.

7-1-789. Minors' deposits, safe-deposit boxes, and third-party payment accounts; validity of releases.

  1. A minor shall be allowed to have deposits in a savings and loan association in his own name, and the deposits made by the minor shall not be subject to the control of his parent, guardian, or trustee. A minor may have third-party payment accounts. A receipt or acquittance signed by such a minor depositor shall be a valid and sufficient release and discharge of such association for any payment of any deposit to such minor. In the transactions involving payments to third parties out of the minor's account, the payment of an order of the minor shall be a valid and sufficient release and discharge of the savings and loan association for any payment of such funds from the minor's account.
  2. Subsection (a) of this Code section shall continue to include, without limitation:
    1. Deposits in such associations by a minor with one or more adults or other minors, as party to and with the same effect as a multiple-party account under Article 8 of this chapter;
    2. The rental to a minor by said associations of a safe-deposit box or other receptacle for the safe deposit of property from such minor (and the receipt of any such property), individually or jointly with one or more adults; and
    3. The dealing with a minor by said associations with respect to such a deposit account, third-party payment account, or safe-deposit agreement without the consent of a parent or guardian and with the same effect as though the minor were an adult.

      Any action of the minor with respect to such deposit account, third-party payment account, or safe-deposit agreement shall be binding on the minor with the same effect as though the minor were an adult.

      (Ga. L. 1937-38, Ex. Sess., p. 307, § 16; Code 1933, § 41A-3520, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1366, § 17; Ga. L. 1982, p. 1085, §§ 1, 2; Ga. L. 2016, p. 390, § 7-4/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "building and loan association or" preceding "savings and loan association" in the first sentence of subsection (a).

7-1-790. Deposits of fiduciaries.

A savings and loan association may receive deposits in the name of an administrator, executor, guardian, trustee, or other fiduciary in trust for a named or an unnamed beneficiary or beneficiaries. Such a deposit and dividends or interest thereon or other rights relating thereto may be paid or delivered, in whole or in part, to such fiduciary or may be exercised by such fiduciary without regard to any notice to the contrary so long as such fiduciary is living and until the association has received notice of the death of such fiduciary. The payment or delivery to any such fiduciary or a receipt or acquittance signed by any such fiduciary, to whom any such payment or any such delivery of rights is made, shall be a valid and sufficient release and discharge of such association for the payment or delivery so made.

(Ga. L. 1937-38, Ex. Sess., p. 307, § 16; Code 1933, § 41A-3522, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 7-4/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "building and loan association or" preceding "a savings and loan association" in the first sentence of this Code section.

Code Commission notes. - Pursuant to Code Section 28-9-5, in 2016, "a" was deleted preceding "savings and loan association" in the first sentence.

JUDICIAL DECISIONS

Legislative intent. - See Bank S. v. Grand Lodge of Free & Accepted Masons, 174 Ga. App. 777 , 331 S.E.2d 629 (1985).

Applicability to banks. - In an action by children against a bank for accepting custodial certificates of deposit as collateral for their custodian's personal loan, the provision of O.C.G.A. § 7-1-790 creating a presumption that a fiduciary was acting in a lawful manner consistent with the fiduciary's duties applied to shield the bank from liability. Grogan v. Lanier Bank & Trust Co., 219 Ga. App. 313 , 464 S.E.2d 892 (1995).

Bank challenge of trustee's withdrawals. - Bank is under no duty to challenge a trustee's withdrawal of trust funds merely because the amount withdrawn is large or for cash. Bank S. v. Grand Lodge of Free & Accepted Masons, 174 Ga. App. 777 , 331 S.E.2d 629 (1985).

Summary judgment in suit for mishandling trust. - Although there was a genuine issue of fact whether a savings and loan association had knowledge of the court order requiring court permission before encroaching upon the corpus of a trust, it was not a material fact because, even if the association had such knowledge, it was permitted by O.C.G.A. § 7-1-790 to pay out the funds on the order of the trustee under the presumption that the trustee was acting in compliance with duties as a fiduciary; therefore, summary judgment was properly granted in favor of the association in the beneficiaries' suit for mishandling of the trust. Chelena v. Georgia Fed. Sav. & Loan Ass'n, 256 Ga. 336 , 349 S.E.2d 180 (1986).

RESEARCH REFERENCES

ALR. - Liability of bank where funds deposited in account of trustee, agent, or other fiduciary, as such, are transferred to his personal account and misappropriated, 145 A.L.R. 445 .

7-1-791. Payment on death of depositor.

Except as provided in Article 8 of this chapter, upon the death of a depositor of a savings and loan association, such association may pay the amount of his deposit or any portion thereof to an executor, administrator, or other fiduciary duly appointed and qualified pursuant to the last will and testament of the depositor or by any court of competent jurisdiction in this state or any other state.

(Ga. L. 1937-38, Ex. Sess., p. 307, § 16; Ga. L. 1958, p. 620, § 1; Code 1933, § 41A-3523, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 43; Ga. L. 1976, p. 1388, § 6; Ga. L. 1983, p. 661, § 2; Ga. L. 2016, p. 390, § 7-4/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "a building and loan association or" preceding "a savings and loan association" near the beginning of this Code section.

Cross references. - Payment of deposits of deceased depositors, § 7-1-239 .

RESEARCH REFERENCES

Am. Jur. 2d. - 23 Am. Jur. 2d, Descent and Distribution, § 29.

7-1-792. Deposits applied to funeral expenses.

Except as provided in Article 8 of this chapter, if no application for the deposit is made by any person named in Code Section 7-1-791 within 90 days from the death of a depositor, a savings and loan association shall be authorized to apply not more than $1,000.00 of the deposit of such deceased depositor in payment of the funeral expenses of such deceased depositor upon receipt of an itemized statement of such expenses and the affidavit of the undertaker conducting the funeral that said statement was true and correct and had not been paid.

(Ga. L. 1937-38, Ex. Sess., p. 307, § 16; Code 1933, § 41A-3524, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1976, p. 1388, § 7; Ga. L. 2016, p. 390, § 7-4/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "a building and loan association or" preceding "a savings and loan association" near the middle of this Code section.

7-1-793. Investment of funds in insured deposits.

Administrators, executors, guardians, trustees, and other fiduciaries of every kind and nature; insurance companies; charitable, educational, eleemosynary, and public corporations and organizations; municipalities and other public corporations and bodies; and public officials are authorized to invest funds held by them, without any order of any court, in deposits in savings and loan associations which are insured under a federal deposit insurance program; and, to the extent of such insurance, such investments shall be deemed and held to be legal investments for such funds.

(Ga. L. 1937-38, Ex. Sess., p. 322, § 1; Ga. L. 1951, p. 756, § 1; Ga. L. 1952, p. 305, § 2; Ga. L. 1964, p. 194, § 1; Code 1933, § 41A-3525, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1980, p. 972, § 8; Ga. L. 1993, p. 917, § 7; Ga. L. 2016, p. 390, § 7-4/HB 811.)

The 2016 amendment, effective July 1, 2016, purported to delete the reference to building and loan associations in the middle of this Code section but actually only deleted "building and loan". See the Code Commission note.

Code Commission notes. - Pursuant to Code Section 28-9-5, in 2016, "associations or" was deleted preceding "savings and loan associations" in the middle of this Code section.

OPINIONS OF THE ATTORNEY GENERAL

Editor's notes. - In light of the similarity of the statutory provisions, opinions under former Code 1933, § 16-437 are included in the annotations for this section.

Former Code Section 53-13-54 (see now O.C.G.A. § 53-12-280 ) provides legal investments which can be made by trustees. 1971 Op. Att'y Gen. No. 71-20 (decided under former Code 1933, § 16-437).

7-1-794. Deposits as security or in lieu of bond.

Whenever, under the laws of this state or otherwise, a deposit of securities is required for any purpose, the deposits made legal investments by Code Section 7-1-793 shall be acceptable as such security; and, whenever, under the law of this state or otherwise, a bond is required with security, such bond may be furnished and the deposits made legal investments by Code Section 7-1-793 in the amount of such bond shall be acceptable to secure said bond without other security. This Code section and Code Section 7-1-793 are supplemental to any and all other laws relating to and declaring what shall be legal investments for the persons, corporations, organizations, and officials referred to in these Code sections and the laws relating to the deposit of securities and the making and filing of bonds for any purpose.

(Ga. L. 1937-38, Ex. Sess., p. 322, § 2; Ga. L. 1952, p. 305, § 3; Ga. L. 1964, p. 194, § 2; Code 1933, § 41A-3526, enacted by Ga. L. 1974, p. 705, § 1.)

OPINIONS OF THE ATTORNEY GENERAL

Former Code Section 53-13-54 (see now O.C.G.A. § 53-12-280 ) provides legal investments which can be made by trustees. 1971 Op. Att'y Gen. No. 71-20.

7-1-795. Savings account books and certificates.

The original record of deposits in savings and loan associations is the record on the books of the association, and the depositor shall be entitled to a savings account book or certificate which is a duplicate of such record. Those dealing with such savings account books and certificates shall be bound by the record on the books of the association. In the event of the loss or destruction of any such savings account book or certificate, any association may, upon receipt of an affidavit of such loss or destruction, issue a duplicate thereof and remain liable only to the holder or holders as shown on the records of the association. The only way an effective transfer or pledge may be accomplished so as to affect the rights of the association is by transfer on the books of the association in the case of transfer or written notice of a pledge entered on the books of the association and acknowledged in writing in the case of a pledge; and the association shall be protected in paying any part of a deposit to the holder thereof as shown on the books of the association unless it has received written notice of a pledge or transfer thereof.

(Code 1933, § 16-439, enacted by Ga. L. 1952, p. 305, § 4; Code 1933, § 41A-3527, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 7-4/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "building and loan associations and" preceding "savings and loan associations" in the first sentence of this Code section.

RESEARCH REFERENCES

ALR. - Right of member of savings and loan association to inspect books and records, 134 A.L.R. 699 .

7-1-796. Insanity, incompetency, bankruptcy, or death of depositor.

A savings and loan association paying deposits to an insane or otherwise incompetent depositor or bankrupt depositor or acting upon the release and discharge or authorization of such depositor or acting upon the power of attorney of an insane, deceased, or bankrupt depositor in good faith and without actual knowledge of the insanity or other incompetency, bankruptcy, or death of such depositor shall be protected in so doing and may lawfully charge such payment to the depositor's account.

(Code 1933, § 16-440, enacted by Ga. L. 1956, p. 628, § 1; Code 1933, § 41A-3528, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 7-4/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "building and loan association or" preceding "a savings and loan association" near the beginning of this Code section.

Code Commission notes. - Pursuant to Code Section 28-9-5, in 2016, "a" was deleted preceding "savings and loan association" at the beginning of this Code section.

7-1-797. Building and loan association deposit insurance requirements; public notices when deposits not properly insured.

Repealed by Ga. L. 2016, p. 390, § 7-16/HB 811, effective July 1, 2016.

Editor's notes. - Ga. L. 2017, p. 774, § 7(10)/HB 323, part of an Act to revise, modernize, and correct the Code, repealed the reservation of this Code section.

This Code section was based on Code 1933, § 41A-3529, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1980, p. 972, § 9; Ga. L. 1993, p. 917, § 8.

ARTICLE 8 MULTIPLE-PARTY ACCOUNTS

Law reviews. - For article discussing joint tenancy arrangements as a means of avoiding probate, see 6 Ga. L. Rev. 74 (1971). For article discussing Georgia commercial law in 1976 to 1977, see 29 Mercer L. Rev. 41 (1977). For article discussing developments in the law of wills, trusts and administration of estates in Georgia in 1976 to 1977, see 29 Mercer L. Rev. 291 (1977). For article, "Joint Bank Accounts: A Different Form of Joint Tenancy," see 17 Ga. St. B.J. 184 (1981). For article, "Transfer-on-Death Securities Registration: A New Title Form," see 21 Ga. L. Rev. 789 (1987).

JUDICIAL DECISIONS

Deposits made in joint form for convenience only. - When a deposit is made in joint form for convenience only and not for the purpose of making a gift to the other party, the party making the deposit may recover. The presumption of joint ownership is a rebuttable one and when the joint account was created as a matter of convenience with no intention of conferring a beneficial interest upon the codepositor the presumption is rebutted. Davidson v. Walsh, 158 Ga. App. 845 , 282 S.E.2d 366 (1981).

RESEARCH REFERENCES

ALR. - Power of one party to joint bank account to terminate the interests of the other, 161 A.L.R. 71 .

Effect of incompetency of joint depositor upon status and ownership of bank account, 62 A.L.R.2d 1091.

Liability of bank to joint depositor of savings account for amounts withdrawn by other joint depositor without presentation of passbook, 35 A.L.R.4th 1094.

Liability of bank to joint depositor for removal of name from account at request of other joint depositor, 39 A.L.R.4th 1112.

Nondrawing cosigner's liability for joint checking account overdraft, 48 A.L.R.4th 1136.

Payable-on-death savings account or certificate of deposit as will, 50 A.L.R.4th 272.

7-1-810. Definitions.

As used in this article, the term:

  1. "Account" means a contract of deposit of funds between a depositor and a financial institution and includes a checking account, savings account, certificate of deposit, share account, and other like arrangements.
  2. "Beneficiary" means a person named in a trust account as one for whom a party to the account is named as trustee.
  3. "Financial institution" means a savings and loan association as defined in paragraph (31) of Code Section 7-1-4 or any financial institution as defined in paragraph (21) of Code Section 7-1-4.
  4. "Joint account" means an account payable on request to one or more of two or more parties, whether or not mention is made of any right of survivorship.
  5. "Multiple-party account" means any of the following types of account:
    1. A joint account;
    2. A P.O.D. account; or
    3. A trust account.

      It does not include accounts established for deposit of funds of a partnership, joint venture, or other association for business purposes; accounts controlled by one or more persons as the duly authorized agent or trustee for a corporation, unincorporated association, or charitable or civic organization; or a regular fiduciary or trust account where the relationship is established other than by deposit agreement.

  6. "Net contribution" of a party to a multiple-party account as of any given time means the sum of all deposits thereto made by or for him, less all withdrawals made by or for him which have not been paid to or applied to the use of any other party, plus a pro rata share of any interest or dividends included in the current balance. The term includes, in addition, any proceeds of deposit life insurance added to the account by reason of the death of the party whose net contribution is in question.
  7. "Party" means a person who, by the terms of the account, has a present right, subject to request, to payment from a multiple-party account. A P.O.D. payee or beneficiary of a trust account is a party only after the account becomes payable to him by reason of his surviving the original payee or trustee. Unless the context otherwise requires, it includes a guardian, conservator, personal representative, or assignee, including an attaching creditor, of a party. It also includes a person identified as a trustee of an account for another, whether or not a beneficiary is named; but it does not include any named beneficiary unless he has a present right of withdrawal.
  8. "Payment" of sums on deposit includes withdrawal, payment on check or other directive of a party, and any pledge of sums on deposit by a party and any setoff or reduction or other disposition of all or part of an account pursuant to a pledge.
  9. "Proof of death" includes a death certificate or official record which is prima-facie proof of death.
  10. "P.O.D. account" means an account payable on request to one person during his or her lifetime or to an incorporated entity and on such person's death to one or more P.O.D. payees or to one or more persons during their lifetimes or to an incorporated entity and on the death of all of them or the dissolution of the incorporated entity to one or more P.O.D. payees.
  11. "P.O.D. payee" means a person or an incorporated entity designated on a P.O.D. account as one to whom the account is payable on request after the death of one or more persons.
  12. "Request" means a proper request for withdrawal or a check or order for payment which complies with all conditions of the account, including special requirements concerning necessary signatures and regulations of the financial institution; but, if the financial institution conditions withdrawal or payment on advance notice, for purposes of this article the request for withdrawal or payment is treated as immediately effective and a notice of intent to withdraw is treated as a request for withdrawal.
  13. "Sums on deposit" means the balance payable on a multiple-party account, including interest, dividends, and, in addition, any deposit life insurance proceeds added to the account by reason of the death of a party.
  14. "Trust account" means an account in the name of one or more parties as trustee for one or more beneficiaries where the relationship is established by the form of the account and the deposit agreement with the financial institution and there is no subject of the trust other than the sums on deposit in the account; it is not essential that payment to the beneficiary be mentioned in the deposit agreement. A trust account does not include a regular trust account under a testamentary trust or a trust agreement which has significance apart from the account or a fiduciary account arising from a fiduciary relation such as attorney-client.
  15. "Withdrawal" includes payment to a third person pursuant to check or other directive of a party.

    (Code 1933, § 41A-3801, enacted by Ga. L. 1976, p. 1388, § 8; Ga. L. 2011, p. 518, § 5/HB 239.)

Law reviews. - For annual survey of wills, trusts, and administration, see 43 Mercer L. Rev. 457 (1991). For annual survey article on wills, trusts and administration of estates, see 50 Mercer L. Rev. 381 (1998). For survey article discussing developments in law of business associations for the period from June 1, 1998 through May 31, 1999, see 51 Mercer L. Rev. 127 (1999). For article, "Business Associations," see 53 Mercer L. Rev. 109 (2001). For article, "Wills, Trusts & Administration of Estates," see 53 Mercer L. Rev. 499 (2001).

JUDICIAL DECISIONS

Multiple-party account. - Once the payee produced the sister's and husband's death certificates and had them removed as joint tenants on the CD accounts, the accounts ceased to be multiple-party accounts subject to the strictures of O.C.G.A. § 7-1-814 . Lowe v. Barnett Bank, 209 Ga. App. 112 , 433 S.E.2d 294 (1993).

Party's net contribution included amounts deposited for party. - In a dispute over a joint account created by a father, mother, and daughter, although only the father made contributions to the account, the daughter's contributions could include deposits made by the father for the daughter; because some evidence indicated an intent that the money would belong to the daughter, the trial court erred by concluding that all of the funds belonged to the mother after the father's death. Howard v. Leonard, 330 Ga. App. 331 , 765 S.E.2d 466 (2014).

Corporation not proper beneficiary on "payable on death" account. - Corporation was not an eligible "payable on death" (POD) beneficiary on certificates of deposit or a trust account because under O.C.G.A. § 7-1-810(11) , a POD payee on a death account had to have been a person, and under § 7-1-810(2) , a beneficiary on a trust account had to have been a person; under O.C.G.A. § 7-1-4(26) , a "person" was defined as an individual, trust, general or limited partnership, unincorporated association (except a joint-stock association), or any other form of unincorporated enterprise. Thus, the corporation did not meet the statutory definition of person. Tuvim v. United Jewish Cmtys., Inc., 285 Ga. 632 , 680 S.E.2d 827 (2009).

Cited in Lastinger v. Johnson, 148 Ga. App. 453 , 251 S.E.2d 369 (1978); White v. Royal, 150 Ga. App. 57 , 256 S.E.2d 662 (1979); Johnson v. Lastinger, 152 Ga. App. 328 , 262 S.E.2d 601 (1979); Bank S. v. Harrell, 181 Ga. App. 64 , 351 S.E.2d 263 (1986); Lamb v. Thalimer Enters., Inc., 193 Ga. App. 70 , 386 S.E.2d 912 (1989); Parker v. Peavey, 198 Ga. App. 694 , 403 S.E.2d 213 (1991); South v. Bank of Am., 250 Ga. App. 747 , 551 S.E.2d 55 (2001).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 662 et seq., 682 et seq. 22A Am. Jur. 2d, Death, §§ 366, 426, 427. 60 Am. Jur. 2d, Payment, § 1.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 294, et seq., 300 et seq. 32A C.J.S., Evidence, § 1028. 70 C.J.S., Payment, § 1 et seq.

7-1-811. Applicability of provisions as to beneficial ownership and protection of financial institutions.

Code Sections 7-1-812 through 7-1-814, concerning beneficial ownership as between parties or as between parties and P.O.D. payees or beneficiaries of multiple-party accounts, are relevant only to controversies between those persons and their creditors and other successors and have no bearing on the power of withdrawal of these persons as determined by the terms of account contracts. Code Sections 7-1-816 through 7-1-821 govern the liability of financial institutions which make payments pursuant thereto and their setoff rights.

(Code 1933, § 41A-3802, enacted by Ga. L. 1976, p. 1388, § 8.)

JUDICIAL DECISIONS

Cited in Parker v. Kennon, 242 Ga. App. 627 , 530 S.E.2d 527 (2000).

RESEARCH REFERENCES

ALR. - Right of one party to a joint bank account to follow money withdrawn by the other, 77 A.L.R. 799 .

Joint bank account as subject to attachment, garnishment, or execution by creditor of one joint depositor, 86 A.L.R.5th 527.

7-1-812. Ownership during lifetime.

  1. A joint account belongs, during the lifetime of all parties, to the parties in proportion to the net contributions by each to the sums on deposit, unless there is clear and convincing evidence of a different intent.
  2. A P.O.D. account belongs to the original payee during his lifetime and not to the P.O.D. payee or payees; if two or more parties are named as original payees, during their lifetimes the account belongs to them in proportion to the net contributions by each to the sums on deposit, unless there is clear and convincing evidence of a different intent.
  3. Unless a contrary intent is manifested by the terms of the account or the deposit agreement or there is other clear and convincing evidence of an irrevocable trust, a trust account belongs beneficially to the trustee during his lifetime; and, if two or more parties are named as trustee on the account, during their lifetimes the account belongs to them in proportion to the net contributions by each to the sums on deposit, unless there is clear and convincing evidence of a different intent. If there is an irrevocable trust, the account belongs beneficially to the beneficiary.

    (Code 1933, § 41A-3803, enacted by Ga. L. 1976, p. 1388, § 8.)

Cross references. - Joint tenancy with survivorship generally, § 44-6-190 .

Law reviews. - For article, "Wills, Trusts & Administration of Estates," see 53 Mercer L. Rev. 499 (2001).

JUDICIAL DECISIONS

ANALYSIS

General Consideration

Editor's notes. - In light of the similarity of the statutory provisions, decisions under former Code 1933, § 13-2039 have been included in the annotations for this Code section.

Use in determining breach of duty of financial institution. - Although the provisions of O.C.G.A. §§ 7-1-812 through 7-1-814 do not apply in disputes involving financial institutions and their customers concerning whether a party can properly withdraw funds in compliance with the terms of the applicable account contract, these sections may be considered in determining whether there has been a breach of the duty owed by financial institutions to properly handle transactions for their customers. Tucker Fed. Sav. & Loan Ass'n v. Rawlins, 209 Ga. App. 649 , 434 S.E.2d 94 (1993).

Two parties having joint control of an account does not make deposits therein a gift from one to the other when there was no relinquishment of dominion by the original depositor such as would create a gift in presenti. Georgia Sav. Bank & Trust Co. v. Sims, 332 F. Supp. 1306 (N.D. Ga. 1971) (decided under former Code 1933, § 13-2039).

O.C.G.A. § 7-1-812 created a presumption that a party funding a joint account did not intend to make a gift of the funds of the account during the funder's life, and that presumption was subject to rebuttal only by clear and convincing evidence of a contrary intent. Caldwell v. Walraven, 268 Ga. 444 , 490 S.E.2d 384 (1997).

Trial court correctly ruled that proceeds from jointly held CDs cashed in by daughters belonged entirely to their mother, since the daughters admitted to making no contributions to the CDs, no evidence whatsoever was presented of any other intent, and all the parties to the original CDs were still living, including the mother. Parker v. Kennon, 242 Ga. App. 627 , 530 S.E.2d 527 (2000).

Trial court erred to the extent the court applied the presumption in O.C.G.A. § 7-1-813(a) to funds which the executors withdrew from the original joint accounts and placed in accounts solely in their name because to the extent the executors took funds in excess of their ownership from a joint account containing funds owned by two beneficiaries and placed those funds in an account in their name, the executors severed the joint account relationship and extinguished the presumption that the funds belonged to them. Shirley v. Sailors, 329 Ga. App. 850 , 766 S.E.2d 201 (2014).

Social Security benefits retain character as such, remaining exempt from garnishment, though deposited in a joint account. Anderson v. First Nat'l Bank, 151 Ga. App. 573 , 260 S.E.2d 501 (1979).

Intent of parties in making deposits. - In a dispute over a joint account created by a father, mother, and daughter, although only the father made contributions to the account, the daughter's contributions could include deposits made by him for her; because some evidence indicated an intent that the money would belong to the daughter, the trial court erred by concluding that all of the funds belonged to the mother after the father's death. Howard v. Leonard, 330 Ga. App. 331 , 765 S.E.2d 466 (2014).

Presumption not overcome. - Viewed in conjunction with everything presented to the court, the trustee's evidence did not clearly lead to the conclusion that the claimant intended to make a voluntary transfer of the claimant's property to the debtor. Therefore, the trustee failed to overcome the presumption that the funds belonged to the claimant. In re Thornton, 549 Bankr. 922 (Bankr. N.D. Ga. 2016).

Cited in Lamb v. Thalimer Enters., Inc., 193 Ga. App. 70 , 386 S.E.2d 912 (1989); Daniell v. Clein, 206 Ga. App. 377 , 425 S.E.2d 344 (1992); Jordan v. Stephens, 221 Ga. App. 8 , 470 S.E.2d 733 (1996); Bradshaw v. McNeill, 228 Ga. App. 653 , 492 S.E.2d 568 (1997); Howard v. Estate of Howard, 249 Ga. App. 287 , 548 S.E.2d 48 (2001); McLain v. Brown (In re McLain), Bankr. (Bankr. N.D. Ga. Sept. 30, 2004); Davis v. Walker, 288 Ga. App. 820 , 655 S.E.2d 634 (2007).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 663.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 300, 301.

ALR. - Right of one party to a joint bank account to follow money withdrawn by the other, 77 A.L.R. 799 .

Power of one party to joint bank account to terminate the interests of the other, 161 A.L.R. 71 .

Conflict of laws as to disposition of and relative rights to bank deposits in the names of more than one person, 25 A.L.R.2d 1240.

7-1-813. Rights of survivorship.

  1. Sums remaining on deposit at the death of a party to a joint account belong to the surviving party or parties as against the estate of the decedent, unless there is clear and convincing evidence of a different intention at the time the account is created. If there are two or more surviving parties, the respective ownership of each during his lifetime shall be in proportion to his previous ownership interests under Code Section 7-1-812, augmented by an equal share for each survivor of any interest the decedent may have owned in the account immediately before his death; and the right of survivorship continues between the surviving parties.
  2. If the account is a P.O.D. account, on death of the original payee or of the survivor of two or more original payees, any sums remaining on deposit belong to the P.O.D. payee or to the P.O.D. payees in equal portions if surviving or to the survivor of them if one or more die before the original payee; if two or more P.O.D. payees survive, there is no right of survivorship in event of death of a P.O.D. payee thereafter unless the terms of the account or deposit agreement expressly provide for survivorship between them.
  3. If the account is a trust account, on the death of the trustee or the survivor of two or more trustees, any sums remaining on deposit belong to such person or persons named as beneficiaries who survive the death of the trustee or the survivor of two or more trustees, unless there is clear and convincing evidence of a contrary intent. If two or more beneficiaries survive:
    1. They receive equal portions of the sums contained in the trust account; and
    2. There is no right of survivorship in event of death of any beneficiary thereafter unless the terms of the account or deposit agreement expressly provide for survivorship between them.
  4. In other cases, the death of any party to a multiple-party account has no effect on beneficial ownership of the account other than to transfer the rights of the decedent as part of his estate.
  5. A right of survivorship arising from the express terms of the account or under this Code section, a beneficiary designation in a trust account, or a P.O.D. payee designation cannot be changed by will.

    (Code 1933, § 41A-3804, enacted by Ga. L. 1976, p. 1388, § 8.)

Cross references. - Joint tenancy with survivorship generally, § 44-6-190 .

Law reviews. - For article, "Multiple Party Accounts: Georgia Law Compared with the Uniform Probate Code," see 8 Ga. L. Rev. 739 (1974). For article surveying Georgia cases in the area of wills, trusts, and administration of estates from June 1977 through May 1978, see 30 Mercer L. Rev. 259 (1978). For article surveying legislative and judicial developments in Georgia's will, trusts, and estate laws, see 31 Mercer L. Rev. 281 (1979). For annual survey of law of wills, trusts, and administration of estates, see 38 Mercer L. Rev. 417 (1986). For annual survey of law of wills, trusts, and administration of estates, see 44 Mercer L. Rev. 445 (1992). For annual survey article on commercial law, see 50 Mercer L. Rev. 193 (1998). For annual survey on wills, trusts, guardianships, and fiduciary administration, see 64 Mercer L. Rev. 325 (2012).

JUDICIAL DECISIONS

Editor's notes. - In light of the similarity of the sections, decisions under former Code 1933, § 13-2039 have been included in the annotations for this Code section.

In order to constitute a "joint account" for purposes of O.C.G.A. § 7-1-813 , an arrangement must constitute a contract of deposit of funds between a depositor and a financial institution; a municipal bond is not a contract of deposit, but an evidence of indebtness issued by a city or other corporate public body. Urban v. Lemley, 232 Ga. App. 259 , 501 S.E.2d 529 (1998).

Presumptions. - When savings certificates were issued jointly to a decedent and another party and since the certificates contain no language expressly creating a survivorship interest, one of two presumptions will be applied, depending on the date of issue of the certificates: (1) if the certificates were issued before the effective date of former Code 1933, § 41A-3804 (see now O.C.G.A. § 7-1-813 ), July 1, 1976, the presumption is that there was no right of survivorship intended; or (2) if the certificates were issued after July 1, 1976, there is a presumption that a right of survivorship was intended unless there is clear and convincing evidence to the contrary. Collins v. Collins, 176 Ga. App. 79 , 335 S.E.2d 307 (1985).

There exists a presumption that a right of survivorship is intended by the issuance of joint certificates of deposit, absent clear and convincing evidence to the contrary. Wynn v. Wynn, 202 Ga. App. 679 , 415 S.E.2d 287 , cert. denied, 202 Ga. App. 907 , 415 S.E.2d 287 (1992).

Trial court erred to the extent the court applied the presumption in O.C.G.A. § 7-1-813(a) to funds which the executors withdrew from the original joint accounts and placed in accounts solely in their name because to the extent they took funds in excess of their ownership from a joint account containing funds owned by two beneficiaries and placed those funds in an account in their name, they severed the joint account relationship and extinguished the presumption that the funds belonged to them. Shirley v. Sailors, 329 Ga. App. 850 , 766 S.E.2d 201 (2014).

Survivorship presumption rebutted. - Presumption of survivorship in O.C.G.A. § 7-1-813 was effectively rebutted since there was testimony from a family member that around the time decedent opened a certificate account with the money from the decedent's sister's estate, the decedent gave assurances that the money was "taken care of" and would eventually reach those the money was intended to reach, as the plaintiff would "do the right thing with it". Hopkins v. Moore, 207 Ga. App. 383 , 427 S.E.2d 853 (1993).

When as the decedent had done with other assets, a decedent designated the defendant as co-owner with the decedent of subordinated debentures with right of survivorship, evidence was sufficient to show that decedent intended that the defendant should receive the gifts which resulted from the defendant's transfer of their debentures and the sale of stock decedent owned individually. Stewart v. Stewart, 240 Ga. App. 573 , 524 S.E.2d 267 (1999).

Denial of a sister's motion for a judgment notwithstanding the verdict was affirmed as there was evidence supporting the imposition of a constructive trust after a mother's death on a bank account owned jointly with a right of survivorship by the mother and the sister since the sister acknowledged that the account was opened for the mother's convenience. Jenkins v. Jenkins, 281 Ga. App. 756 , 637 S.E.2d 56 (2006), cert. denied, 2007 Ga. LEXIS 87 (Ga. 2007).

Survivorship presumption not rebutted. - In an action by the executor of a joint tenant's estate against the executor of the surviving joint tenant's estate, evidence presented by the former was not sufficient to overcome the presumption that funds in joint bank accounts belong to the survivor's estate. Urban v. Lemley, 232 Ga. App. 259 , 501 S.E.2d 529 (1998).

Denial of a sister's and an executrix's motions for a judgment notwithstanding the verdict were reversed as a constructive trust could not be imposed over the proceeds of a condemnation since: (1) a mother did not make any agreement with her children regarding the quitclaim deeds or the proceeds of the condemnation; (2) the documents signed by the siblings were unequivocal and unrestricted; (3) the mother did not make any promise with the intent not to carry it out; (4) there was nothing to indicate that when the mother obtained a certificate of deposit and opened a money market account in her and the executrix's and the sister's names as joint tenants with right of survivorship, she meant to do anything other than that; and (5) the siblings did not raise the issue of a constructive trust in the condemnation proceedings and were collaterally estopped from raising the issue in a later action. Jenkins v. Jenkins, 281 Ga. App. 756 , 637 S.E.2d 56 (2006), cert. denied, 2007 Ga. LEXIS 87 (Ga. 2007).

Sufficient evidence to overcome presumption. - In an action to recover property of an estate, when the administrator presented evidence that the decedent intended to divide the decedent's estate among the decedent's children equally and did not intend for the decedent's two youngest sons to have the funds in the joint accounts at the decedent's death, and also presented evidence of undue influence in the creation of the accounts, there was some evidence to overcome the presumption arising from O.C.G.A § 7-1-813 , and a directed verdict was inappropriate. Myers v. Myers, 195 Ga. App. 529 , 394 S.E.2d 374 (1990).

Lack of intention to make gift of funds. - Trial judge's determination that the decedent's lack of intention to make a gift of the funds to the decedent's daughter was established by clear and convincing evidence; thus, applying either O.C.G.A § 7-1-813(a) or pre-existing law, the trial judge was authorized to declare that the funds belonged to the estate. James v. Elder, 186 Ga. App. 810 , 368 S.E.2d 570 (1988).

Evidence showing that the decedent's daughter had suggested putting another name on the decedent's certificates of deposit "in case Mama got sick," provided clear and convincing support for the jury's determination that the decedent had added the daughter's name to the certificates for convenience rather than to effect a gift of the funds to the daughter. Turner v. Mikell, 195 Ga. App. 766 , 395 S.E.2d 20 (1990).

Since the decedent's expressed intent in establishing joint accounts was for the convenience of the decedent's niece in writing checks, paying bills and expenses, and handling the decedent's affairs during the decedent's illness, there was sufficient evidence to overcome the presumption that the niece, as surviving joint tenant, was entitled to the accounts. Williamson v. Echols, 205 Ga. App. 453 , 422 S.E.2d 329 (1992).

Intent held question for jury. - After a decedent had given a power of attorney to the decedent's nephews, and created joint accounts with one of the nephews, while expressing a concern that someone have access to the decedent's money should the decedent become ill, but there was testimony that the decedent understood the effect of survivorship accounts, there existed a material issue regarding the decedents' intent, which created a jury question. Godwin v. Johnson, 197 Ga. App. 829 , 399 S.E.2d 581 (1990).

In an action for conversion of an estate's assets relating to a joint account created under O.C.G.A. § 7-1-813 between the executrix and a half-sister, given that some evidence existed that the decedent's purpose in establishing a joint account between the executrix of the decedent's estate and the half-sister was for the decedent's convenience, and not to effect a gift, summary judgment was erroneously granted to the half-sister. Gray v. Benton, 280 Ga. App. 339 , 634 S.E.2d 86 (2006).

In a dispute over a joint account created by a father, mother, and daughter, although only the father made contributions to the account, the daughter's contributions could include deposits made by him for her; because some evidence indicated an intent that the money would belong to the daughter, the trial court erred by concluding that all of the funds belonged to the mother after the father's death. Howard v. Leonard, 330 Ga. App. 331 , 765 S.E.2d 466 (2014).

Simultaneous death of husband and wife. - When the husband and wife died simultaneously there is no evidence, either "clear and convincing" or otherwise, which would authorize a finding that the husband did not intend for the wife to have a right of survivorship as to the joint bank accounts. Trust Co. Bank v. Thornton, 204 Ga. App. 903 , 420 S.E.2d 817 (1992).

Equitable division of property titled in name of surviving wife. - When the issue of the division of marital assets of a former husband and wife had not been resolved at the time of the husband's death, property acquired as a direct result of the labor and investments of the former husband during the course of the marriage was subject to equitable division in spite of the fact that it was titled in the former wife's name after the former husband's death as a matter of contract law. White v. White, 253 Ga. 267 , 319 S.E.2d 447 (1984).

Ex-spouse entitled to balance of funds jointly held. - In a dispute between an estate administratrix and the decedent's ex-spouse, the trial court did not err by granting the ex-spouse summary judgment as to the accounts that were jointly held with the decedent because their divorce settlement agreement did not address such accounts and Georgia law entitled the ex-spouse to the balance remaining. Lowry v. Fenzel, 331 Ga. App. 603 , 769 S.E.2d 522 (2015).

Joint tenancy not terminated by tenant's incapacity. - Joint tenancies in bank and stock investment accounts and in real property did not terminate as a matter of law when one of the joint tenants was declared incapacitated and a guardian was appointed for the incapacitated individual's person and property. A guardian, unlike a trustee, has no beneficial title in the ward's estate, but is merely a custodian or manager. Moore v. Self, 222 Ga. App. 71 , 473 S.E.2d 507 (1996).

Two parties having joint control of account does not make deposits therein a gift from one to the other when there was no relinquishment of dominion by the original depositor such as would create a gift in presenti. Georgia Sav. Bank & Trust Co. v. Sims, 332 F. Supp. 1306 (N.D. Ga. 1971) (decided under Code 1933, § 13-2039).

Joint property not property of trust estate. - Funds, which had been deposited by a trust donor from a joint account in the names of one of the beneficiaries, the donor, and the trustee had been used prior to the donor's death to purchase securities in the name of the donor and the trustee as joint tenants; those securities properly belonged to the trustee as the surviving party under O.C.G.A. §§ 7-1-813(a) and 14-5-8 , and did not belong to the trust estate. Davis v. Walker, 288 Ga. App. 820 , 655 S.E.2d 634 (2007).

Cited in Lastinger v. Johnson, 148 Ga. App. 453 , 251 S.E.2d 369 (1978); White v. Royal, 150 Ga. App. 57 , 256 S.E.2d 662 (1979); Nowlin v. Parker, 183 Ga. App. 137 , 358 S.E.2d 258 (1987); Banks v. Todd, 184 Ga. App. 681 , 362 S.E.2d 410 (1987); Parker v. Peavey, 198 Ga. App. 694 , 403 S.E.2d 213 (1991); Daniell v. Clein, 206 Ga. App. 377 , 425 S.E.2d 344 (1992); Lowe v. Barnett Bank, 209 Ga. App. 112 , 433 S.E.2d 294 (1993); Jordan v. Stephens, 221 Ga. App. 8 , 470 S.E.2d 733 (1996); Willig v. Shellnut, 224 Ga. App. 530 , 480 S.E.2d 924 (1997); Nails v. Rebhan, 246 Ga. App. 19 , 538 S.E.2d 843 (2000); Buice v. Buice, 255 Ga. App. 699 , 566 S.E.2d 421 (2002); Rushin v. Ussery, 298 Ga. App. 830 , 681 S.E.2d 263 (2009).

OPINIONS OF THE ATTORNEY GENERAL

Editor's notes. - In light of the similarity of the provisions, opinions under former Ga. L. 1937-38, Ex. Sess., p. 307 are included in the annotations for this section.

Disposition of joint account in federal institution when one party dies. - Upon death of the depositor in a federal savings and loan association, another person whose name was on the depositor's account is entitled absolutely to the deposit. 1958-59 Op. Att'y Gen. p. 19 (decided under Ga. L. 1937-38, Ex. Sess., p. 307).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 662 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 300, 301.

ALR. - Gift or trust by deposit of funds belonging to depositor in bank account in name of himself and another, 103 A.L.R. 1123 ; 135 A.L.R. 993 ; 149 A.L.R. 879 .

Conflict of laws as to disposition of and relative rights to bank deposits in the names of more than one person, 25 A.L.R.2d 1240.

7-1-814. Changing terms of account.

The provisions of Code Section 7-1-813 as to rights of survivorship are determined by the form of the account at the death of a party. Once established, the terms of a multiple-party account can be changed only:

  1. By closing the account and reopening it under different terms; or
  2. By presentation to the financial institution of a modification agreement in a form satisfactory to the financial institution and signed by all parties with a present right of withdrawal.

    (Code 1933, § 41A-3805, enacted by Ga. L. 1976, p. 1388, § 8.)

Law reviews. - For article surveying Georgia cases in the area of wills, trusts, and administration of estates from June 1977 through May 1978, see 30 Mercer L. Rev. 259 (1978).

JUDICIAL DECISIONS

Duty of financial institution to change customer's account. - Any financial institution which receives money from its customer in exchange for certificate(s) of deposit has a duty to issue and/or change the certificate in a manner that complies with the wishes of the customer, so long as the wishes of the customer are not contrary to any applicable law, and the financial institution may be liable to the customer or a third-party beneficiary for mishandling the transaction, including improperly advising the customer how the certificate should be established or changed to comply with the wishes of the customer. Tucker Fed. Sav. & Loan Ass'n v. Rawlins, 209 Ga. App. 649 , 434 S.E.2d 94 (1993).

Financial institution's duty to establish or change a customer's account in a manner that is consistent with the customer's wishes and the applicable law does not derive solely from O.C.G.A § 7-1-814 . Tucker Fed. Sav. & Loan Ass'n v. Rawlins, 209 Ga. App. 649 , 434 S.E.2d 94 (1993).

One party to account cannot unilaterally divest another party of right to draw on the account. - Once account of a wife is established as multiple-party account, her husband acquires a right to draw on it and she cannot unilaterally divest him of that right by instructing a credit union to delete his name from the account. Grady v. DeKalb County Teachers Fed. Credit Union, 152 Ga. App. 86 , 262 S.E.2d 250 (1979).

Compliance with statute required. - Terms of a multiple-party account, including the designation of those parties who have the right of withdrawal, can be changed only by compliance with the requirements of O.C.G.A § 7-1-814 . Rawlins v. Campbell, 199 Ga. App. 472 , 405 S.E.2d 111 (1991); Ralston v. Etowah Bank, 207 Ga. App. 775 , 429 S.E.2d 102 (1993).

Removal of joint tenants. - Once payee produced her sister's and husband's death certificates and had them removed as joint tenants on the CD accounts, the accounts ceased to be multiple-party accounts subject to the strictures of O.C.G.A § 7-1-814 . Lowe v. Barnett Bank, 209 Ga. App. 112 , 433 S.E.2d 294 (1993).

Punitive damages improperly imposed. - Bank's action in violation of O.C.G.A § 7-1-814 did not evidence the necessary willful misconduct necessary for an award of punitive damages pursuant to O.C.G.A § 51-12-5.1(b) . Ralston v. Etowah Bank, 207 Ga. App. 775 , 429 S.E.2d 102 (1993).

Cited in Parker v. Peavey, 198 Ga. App. 694 , 403 S.E.2d 213 (1991); First Union Nat'l Bank v. Davies-Elliott, Inc., 215 Ga. App. 498 , 452 S.E.2d 132 (1994); Jordan v. Stephens, 221 Ga. App. 8 , 470 S.E.2d 733 (1996); Parker v. Kennon, 242 Ga. App. 627 , 530 S.E.2d 527 (2000).

7-1-815. Survivorship transfers nontestamentary.

Any transfers resulting from the application of Code Section 7-1-813 are effective by reason of the account contracts involved in this article and are not to be considered as testamentary.

(Code 1933, § 41A-3806, enacted by Ga. L. 1976, p. 1388, § 8.)

Law reviews. - For article, "Commercial Law," see 53 Mercer L. Rev. 153 (2001).

JUDICIAL DECISIONS

Summary judgment was not proper when a question of fact remained as to whether the funds received by the surviving spouse passed to the survivor outside the estate and did not constitute an election to take under the will and if the surviving spouse was therefore entitled to the statutory year's support. Wynn v. Wynn, 202 Ga. App. 679 , 415 S.E.2d 287 , cert. denied, 202 Ga. App. 907 , 415 S.E.2d 287 (1992).

Cited in Lowry v. Fenzel, 331 Ga. App. 603 , 769 S.E.2d 522 (2015).

7-1-816. Financial institution protection - Multiple-party accounts authorized; payment on signature of one party; inquiry as to deposits or withdrawals not required.

Financial institutions may enter into multiple-party accounts to the same extent that they may enter into single-party accounts. Any multiple-party account may be paid, on request, to any one or more of the parties. For purposes of establishing net contributions, a financial institution shall not be required to inquire as to the source of funds received for deposit to a multiple-party account or to inquire as to the proposed application of any sum withdrawn from an account.

(Code 1933, § 41A-3807, enacted by Ga. L. 1976, p. 1388, § 8.)

Law reviews. - For article, "Business Associations," see 53 Mercer L. Rev. 109 (2001). For article, "Wills, Trusts & Administration of Estates," see 53 Mercer L. Rev. 499 (2001).

JUDICIAL DECISIONS

ANALYSIS

General Consideration

Editor's notes. - In light of the similarity of the issues dealt with by the statutory provisions, decisions under Ga. L. 1919, p. 135, and former Code 1933, § 13-2039 have been included in the annotations for this Code section.

When O.C.G.A. § 7-1-816 applies, there is no basis for a breach of contract claim. South v. Bank of Am., 250 Ga. App. 747 , 551 S.E.2d 55 (2001).

Section does not affect right to property as between parties to account. - Former Code 1933, § 13-2039 included reference only to liability of bank as to such deposit and did not affect right to property as between parties. Georgia Sav. Bank & Trust Co. v. Sims, 332 F. Supp. 1306 (N.D. Ga. 1971) (decided under former Code 1933, § 13-2039).

Effect of section upon title to deposits. - Ga. L. 1919, p. 135 had reference to liability of bank as to joint deposit, making it lawful for a bank to pay either party under such circumstances. It did not affect the right of property as between parties; that was, between the depositor and a third person claiming deposit. It had no applicability to title to money as between the depositor and a third party. Clark v. Bridges, 163 Ga. 542 , 136 S.E. 444 (1927) (decided under Ga. L. 1919, p. 135).

Caption of O.C.G.A. § 7-1-816 , which refers to "payment on signature of one party," does not create a requirement that banks obtain the signature of at least one party to the account. South v. Bank of Am., 250 Ga. App. 747 , 551 S.E.2d 55 (2001).

Payment on proper request not established. - Trial court erred in determining that a bank complied with O.C.G.A. § 7-1-816 because, despite the fact that CD proceeds were paid to a person who had a lawful interest in the funds, a jury could find that a joint owner of the account suffered financial harm as a result of the funds being disbursed. South v. Bank of Am., 250 Ga. App. 747 , 551 S.E.2d 55 (2001).

Payment on proper request established. - In an action filed by a bank customer's son after the bank paid the proceeds of a certificate of deposit (CD) which the customer purchased in the customer's name and the son's name to the customer, alleging violations of the son's rights in the CD, the appellate court held that the bank was protected from liability by O.C.G.A. §§ 7-1-816 and 7-1-820 because the customer's telephone request for redemption was made in accordance with conditions of the customer's account and the bank's regulations, and the appellate court affirmed the trial court's judgment granting summary judgment for the bank. South v. Bank of Am., 260 Ga. App. 91 , 579 S.E.2d 80 (2003).

Title upon death of depositors. - When husband deposited in bank a sum of money belonging to himself, in name of his wife but with understanding that all or any part thereof might be withdrawn either by himself or by the wife, but by no one else, thus reserving to himself a free right of withdrawal, but giving to the wife the same right, the effect was to make a joint deposit with the conditions stated attached thereto. Had money been thus withdrawn by the wife or by the husband, the bank, under such conditions would in such disbursement have been protected against suit by a legal representative of the other; but when the deposit remained intact and nothing was withdrawn by either the husband or wife, both of whom subsequently died, title to such moneys vested jointly in the estates of the husband and wife. First Nat'l Bank v. Sanders, 31 Ga. App. 789 , 122 S.E. 341 (1924).

Cited in Williams v. Citizens Bank, 182 Ga. App. 461 , 356 S.E.2d 80 (1987); Jordan v. Stephens, 221 Ga. App. 8 , 470 S.E.2d 733 (1996); Emmett v. Regions Bank, 238 Ga. App. 455 , 518 S.E.2d 472 (1999).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 662 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 300, 301.

7-1-817. Financial institution protection - Payment from joint account after death or disability.

Any sums in a joint account may be paid, on request, to any party without regard to whether any other party is incapacitated or deceased at the time the payment is demanded; but payment may not be made to the personal representative or heirs of a deceased party unless proof of death is presented to the financial institution showing that the decedent was the last surviving party or unless there is no right of survivorship under Code Section 7-1-813.

(Code 1933, § 41A-3808, enacted by Ga. L. 1976, p. 1388, § 8.)

Law reviews. - For article discussing nonjudicial settlement of decedent's estate, see 6 Ga. L. Rev. 74 (1971).

JUDICIAL DECISIONS

Joint account holder entitled to withdraw all funds. - Under the terms of a joint account agreement and O.C.G.A. § 7-1-817 , a daughter was authorized to withdraw all the funds in a joint account created by her father, mother, and herself, following the father's death; the question of withdrawal was a separate question from whether she was entitled to the funds. Howard v. Leonard, 330 Ga. App. 331 , 765 S.E.2d 466 (2014).

Joint accounts. - Trial court erred to the extent the court applied the presumption in O.C.G.A. § 7-1-813(a) to funds which the executors withdrew from the original joint accounts and placed in accounts solely in their name because to the extent they took funds in excess of their ownership from a joint account containing funds owned by two beneficiaries and placed those funds in an account in their name, they severed the joint account relationship and extinguished the presumption that the funds belonged to them. Shirley v. Sailors, 329 Ga. App. 850 , 766 S.E.2d 201 (2014).

Cited in Lastinger v. Johnson, 148 Ga. App. 453 , 251 S.E.2d 369 (1978); White v. Royal, 150 Ga. App. 57 , 256 S.E.2d 662 (1979); Parker v. Peavey, 198 Ga. App. 694 , 403 S.E.2d 213 (1991).

OPINIONS OF THE ATTORNEY GENERAL

Editor's notes. - In light of the similarity of the statutory provisions, opinions under former Code 1933, § 13-2039 are included in the annotations for this Code section.

Effect of section. - Although former Code 1933, § 13-2039 (see now O.C.G.A. § 7-1-817 ) does not give the right of survivorship between two parties to a bank account, the statute protects a bank which makes a payment of an account to a survivor. 1958-59 Op. Att'y Gen. p. 16 (decided under former Code 1933, § 13-2039).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 662 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 294, 295.

ALR. - Conflict of laws as to disposition of and relative rights to bank deposits in the names of more than one person, 25 A.L.R.2d 1240.

7-1-818. Financial institution protection - Payment of P.O.D. account.

Any P.O.D. account may be paid, on request, to any original party to the account. Payment may be made, on request, to the P.O.D. payee or to the personal representative or heirs of a deceased P.O.D. payee upon presentation to the financial institution of proof of death showing that the P.O.D. payee survived all persons named as original payees. Payment may be made to the personal representative or heirs of a deceased original payee if proof of death is presented to the financial institution showing that his or their decedent was the survivor of all other persons named on the account either as an original payee or as P.O.D. payee.

(Code 1933, § 41A-3809, enacted by Ga. L. 1976, p. 1388, § 8.)

RESEARCH REFERENCES

ALR. - Conflict of laws as to disposition of and relative rights to bank deposits in the names of more than one person, 25 A.L.R.2d 1240.

7-1-819. Financial institution protection - Payment of trust account.

Any trust account may be paid, on request, to any trustee. Payment may be made to the personal representative or heirs of a deceased trustee if proof of death is presented to the financial institution showing that his or their decedent was the survivor of all other persons named on the account either as trustee or beneficiary, unless:

  1. The financial institution, with respect to a trust account as to which there is only one trustee, has received written notice, in a form satisfactory to the financial institution, that the beneficiary has a vested interest not dependent upon his surviving the trustee; or
  2. The financial institution, with respect to a trust account as to which there is more than one trustee, has been provided with a copy of an agreement or resolution of all trustees, in a form satisfactory to the financial institution, to the effect that the beneficiary has a vested interest not dependent upon his surviving the trustees.

    Payment may be made, on request, to a beneficiary or beneficiaries or the heirs or representative of a beneficiary or beneficiaries upon presentation to the financial institution of proof of death showing that the beneficiary or beneficiaries survived all persons named as trustees.

    (Code 1933, § 41A-3810, enacted by Ga. L. 1976, p. 1388, § 8.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 683, 684, 687.

7-1-820. Financial institution protection - Discharge upon proper payment; notice not to permit withdrawals.

Payment made pursuant to Code Section 7-1-816, 7-1-817, 7-1-818, or 7-1-819 discharges the financial institution from all claims for amounts so paid, whether or not the payment is consistent with the beneficial ownership of the account as between parties, P.O.D. payees, or beneficiaries or their successors. The protection here given does not extend to payments made after a financial institution has received written notice from any party able to request present payment to the effect that withdrawals in accordance with the terms of the account should not be permitted.

(Code 1933, § 41A-3811, enacted by Ga. L. 1976, p. 1388, § 8.)

JUDICIAL DECISIONS

Payment on proper request established. - In an action filed by a bank customer's son after the bank paid the proceeds of a certificate of deposit (CD) which the customer purchased in the customer's name and the son's name to the customer, alleging violations of the son's rights in the CD, the appellate court held that the bank was protected from liability by O.C.G.A. §§ 7-1-816 and 7-1-820 because the customer's telephone request for redemption was made in accordance with the conditions of the customer's account and the bank's regulations, and the appellate court affirmed the trial court's judgment granting summary judgment for the bank. South v. Bank of Am., 260 Ga. App. 91 , 579 S.E.2d 80 (2003).

Cited in Callahan v. C. & S. Bank, 150 Ga. App. 62 , 256 S.E.2d 666 (1979); Williams v. Citizens Bank, 182 Ga. App. 461 , 356 S.E.2d 80 (1987); Echols v. Trust Co. Bank, 198 Ga. App. 340 , 401 S.E.2d 565 (1991); South v. Bank of Am., 250 Ga. App. 747 , 551 S.E.2d 55 (2001).

7-1-821. Financial institution protection - Right to setoff.

Without qualifying any other statutory right to setoff or lien and subject to any contractual provision, if a party to a multiple-party account is indebted to a financial institution, the financial institution has a right to setoff against the account in which the party has or had immediately before his death a present right of withdrawal. The amount of the account subject to setoff is that proportion to which the debtor is or was immediately before his death beneficially entitled and, in the absence of proof of net contributions, an equal share with all parties having present rights of withdrawal.

(Code 1933, § 41A-3812, enacted by Ga. L. 1976, p. 1388, § 8.)

JUDICIAL DECISIONS

Right to setoff provided in O.C.G.A § 7-1-821 is also subject to any contractual provision. Simpson v. Georgia State Bank, 159 Ga. App. 310 , 283 S.E.2d 278 (1981).

Setoff held not unconscionable. - Under Georgia law, a contract allowing a bank a setoff of the bank's indebtedness to depositors against the depositors' indebtedness to the bank was not substantively unconscionable and the language in the agreement regarding arbitration was conspicuous so the provision was not procedurally unconscionable; thus, the arbitration clause was enforceable under the Federal Arbitration Act, 9 U.S.C. § 1. In re Checking Account Overdraft Litig., F.3d (11th Cir. Mar. 1, 2012)(Unpublished).

Right to set-off shown. - Even though the debtor was not beneficially entitled to any of the funds, the financial institution had a right of set off under the contractual provisions. Yates v. Trust Co. Bank, 212 Ga. App. 438 , 443 S.E.2d 293 (1994).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 853 et seq., 862 et seq.

ALR. - Bank's right to set off unmatured claims as against receiver, assignee for benefit of creditors, or trustee in bankruptcy, of insolvent depositor, 37 A.L.R.2d 850.

Bank's right of setoff, based on debit of one depositor, against funds in account standing in names of debtor and another, 68 A.L.R.3d 192.

ARTICLE 9 CRIMINAL AND RELATED PROVISIONS

7-1-840. Institution of criminal prosecutions; assistance to state and federal law enforcement agencies; providing information to financial institutions considering employment of suspected person.

  1. Upon discovery, by report or otherwise, of any apparent violation of any state or federal criminal law which is perpetrated through a deposit or loan account maintained at or which utilizes a monetary instrument issued by a financial institution located in this state or of any state or federal criminal law which relates to a financial institution, the department shall refer the matter to an appropriate law enforcement or prosecuting authority for further action. The appropriate state prosecuting authority shall have the right to submit to the grand juries of the respective counties of the state, or otherwise seek an indictment of, any criminal violations of the laws of Georgia known by it to have occurred in such counties. Similarly, any United States attorney may likewise submit to a grand jury, or otherwise seek an indictment of, any criminal violations of the laws of Georgia which also constitute violations of the laws of the United States applicable to such financial institution. Nothing herein shall be so construed as to prevent the appropriate state prosecuting authority or other persons from proceeding in such cases by affidavit and warrant.
  2. The department may assist state and federal law enforcement agencies in further investigation of apparent violations of state or federal criminal statutes referred to in subsection (a) of this Code section.
  3. Without incurring civil liability or, in the case of the department, violating the provisions of Code Section 7-1-70, any financial institution that is the employer or former employer of a person or the department, whether in its regulatory capacity or as the employer or former employer of a person, may provide information to a financial institution which has employed or is considering employment of such person concerning the known or suspected involvement of such person in an apparent violation of a state or federal law or regulation which has been reported to the state or federal law enforcement or regulatory agency having jurisdiction of the violation unless the information is false and such employer, former employer, or the department knows that it is false and provides it with actual malice. For purposes of this Code section, the terms "financial institution" and "department" shall mean any duly elected or appointed official of such entities.
  4. If any board of directors, director, or officer of any financial institution is required by the department or the Federal Deposit Insurance Corporation or any other federal bank supervisory agency to provide any such regulatory agency or the fidelity bond carrier with any information regarding the appearance or suspicion of criminal activity involving any director, officer, agent, employee, or customer of such financial institution, such board of directors, director, or officer shall not incur any civil liability for providing such information unless the information is false and such board of directors, director, or officer knows that it is false and provides it with actual malice.

    (Ga. L. 1919, p. 135, art. 20, § 37; Code 1933, § 13-9936; Code 1933, § 41A-9901, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1211, § 16; Ga. L. 1991, p. 1374, § 1; Ga. L. 2016, p. 390, § 5-1/HB 811.)

The 2016 amendment, effective July 1, 2016, in subsection (a), deleted "in its discretion either institute criminal proceedings in the manner provided by law or" following "the department shall" near the end of the first sentence, in the second sentence, substituted "The appropriate state prosecuting authority" for "The department", inserted ", or otherwise seek an indictment of," near the middle, and substituted "such counties. Similarly, any" for "such counties, or it may likewise submit to any" in the middle, in the third sentence, inserted "may likewise submit to a grand jury, or otherwise seek an indictment of,", and in the fourth sentence, substituted "Nothing herein shall be so construed as to prevent the appropriate state prosecuting authority" for "This provision shall not be so construed as to prevent the commissioner".

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 429 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 11 et seq., 137.

7-1-841. Applicability of Title 16.

  1. The following provisions of Title 16 are expressly made applicable to financial institutions, their directors, officers, agents, and employees and persons or corporations having dealings with, supervision over, or other contact with financial institutions:
    1. Article 2 of Chapter 7 of Title 16, relating to damage to property;
    2. Article 3 of Chapter 7 of Title 16, relating to arson and related offenses;
    3. Article 1 of Chapter 7 of Title 16, relating to burglary and related offenses;
    4. Chapter 9 of Title 16, relating to deceptive practices;
    5. Chapter 8 of Title 16, relating to theft, including robbery;
    6. Article 1 of Chapter 10 of Title 16, relating to abuse of government office; and
    7. Article 4 of Chapter 10 of Title 16, relating to perjury and other falsifications.
  2. Nothing in subsection (a) of this Code section shall be construed to indicate that the designated chapters of Title 16 were not applicable to the enumerated financial institutions, persons, or corporations prior to April 1, 1975, or that other provisions of Title 16 are not, in appropriate circumstances, also applicable to the enumerated financial institutions, persons, or corporations.

    (Code 1933, § 41A-9902, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 7-19/HB 811.)

The 2016 amendment, effective July 1, 2016, in subsection (a), added ", including robbery" at the end of paragraph (5), deleted former paragraph (6), which read: "Article 2 of Chapter 8 of Title 16, relating to robbery;" and redesignated former paragraphs (7) and (8) as present paragraphs (6) and (7), respectively.

RESEARCH REFERENCES

ALR. - Criminal offense of making false statement or report as to assets or condition of bank, 85 A.L.R. 824 .

7-1-842. Felonies of directors, officers, agents, and employees of financial institutions; aiding and abetting false entries.

Any director, officer, agent, or employee of a financial institution who knowingly:

  1. Makes any false entry in any book, report, or statement of the financial institution or who omits or concurs in omitting to make any material entry in its books or accounts with intent in either case to injure or defraud the financial institution or any other company, firm, or person or to deceive any officer of the financial institution, the commissioner, or any examiner and every person who with like intent aids or abets any officer, director, clerk, agent, or employee in making any false entry, report, or statement or omitting to make any material entry on its books and accounts shall be guilty of a felony and, upon conviction, shall be punished by imprisonment for not less than one year nor more than ten years.
  2. While in charge of or employed in a financial institution, allows it to receive a deposit when he or she knows the financial institution to be insolvent shall be guilty of a felony and, upon conviction, shall be punished by imprisonment for not less than one year nor more than ten years if loss or injury shall result to such depositor.
  3. By letterheads, newspaper advertisements, signs, circulars, or otherwise, represents the capital stock of any financial institution to be in excess of the capital actually paid in or who knowingly makes or concurs in making or publishing any written report, exhibit, or statement of its affairs or pecuniary condition containing any material statement therein which is false or who knowingly omits or concurs in omitting any statement required by law or to be contained therein shall be guilty of a felony and, upon conviction, shall be punished by imprisonment for not less than one year nor more than five years.
  4. Uses information obtained through his or her association with the financial institution which he or she serves as a director, officer, agent, or employee, which is not otherwise publicly available, with the intent to realize personal gain or to cause financial harm to another party shall be guilty of a felony and, upon conviction, shall be punished by a fine not to exceed $10,000.00 or twice the amount of improper gain realized, whichever is less, or by imprisonment for not less than one year nor more than five years, or both.

    (Ga. L. 1919, p. 135, art. 20, §§ 10, 12, 14, 28; Code 1933, §§ 13-9910, 13-9912, 13-9914, 13-9928; Code 1933, § 41A-9905, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1249, § 8; Ga. L. 2016, p. 390, § 5-2/HB 811.)

The 2016 amendment, effective July 1, 2016, changed the semicolon to a period at the end of paragraphs (1) through (3); deleted "and labor in the penitentiary" following "by imprisonment" near the end of paragraphs (1), (3), and (4); inserted "or she" near the middle of paragraphs (2) and (4); deleted "in the penitentiary" following "punished by imprisonment" in paragraph (2); deleted former paragraph (4), which read: "Violates or is involved in violating any provision of the charter or bylaws of said financial institution shall be guilty of a felony and, upon conviction, shall be punished by imprisonment and labor in the penitentiary for not less than one year nor more than five years;"; redesignated former paragraph (5) as present paragraph (4); and, in paragraph (4), inserted "or her" near the beginning.

JUDICIAL DECISIONS

Editor's notes. - In light of the similarity of the statutory provisions, decisions under Ga. L. 1919, p. 212 are included in the annotations for this Code section.

Ga. L. 1919, p. 135 being a penal statute, it must be strictly construed. Johnson v. State, 166 Ga. 755 , 144 S.E. 283 (1928).

Unexplained false entries are sufficient to raise presumption of guilt against officer making the presumption. Holder v. Farmers Exch. Bank, 28 Ga. App. 21 , 110 S.E. 762 (1921) (decided under Ga. L. 1919, p. 212).

Cashier who receives deposit knowing bank is insolvent commits a felony. - When a cashier of an insolvent bank, having charge and control of bank, and having knowledge of the bank's insolvency, receives money on general deposit in the bank, and thereby loss or injury results to the person who made the deposit, the cashier is guilty of a felony. Lenhardt v. State, 37 Ga. App. 41 , 138 S.E. 590 (1927).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 434, 443 et seq., 455 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 777 et seq., 780 et seq.

ALR. - What amounts to a deposit within statute in relation to civil or criminal liability for accepting deposit when bank is unsafe or insolvent, 76 A.L.R. 1320 .

When bank deemed insolvent within meaning of criminal statute, 81 A.L.R. 1160 .

Criminal offense of making false statement or report as to assets or condition of bank, 85 A.L.R. 824 .

7-1-843. Certain misdemeanors of directors, officers, agents, and employees of financial institutions.

Any officer, director, agent, or employee of any financial institution who shall perform the following acts or deeds shall be guilty of a misdemeanor:

  1. Advertises by any office sign or upon any letterhead, billhead, bank note, receipt, certificate, or circular or on any written or printed paper that the deposits in said financial institution are insured or guaranteed, unless such deposits in said financial institution are, in fact, insured and guaranteed as required by Code Sections 7-1-244 and 7-1-666 or regulation or action of the department pursuant thereto.
  2. Intentionally conceals from the directors of any financial institution or from the committee to whom the directors have delegated authority to pass on loans and discounts any discount or loan made for and in behalf of said financial institution or the purchase or sale of any evidence of indebtedness or agreement for the payment of money.
  3. Uses or applies any part of the capital or other funds of any financial institution to the purchase of shares of its own stock, unless such purchase shall be necessary to prevent loss upon a debt previously contracted in good faith under Code Section 7-1-263 or is otherwise permitted by law.
  4. Concurs in any vote or act of the directors of such financial institution by which it is intended to declare a dividend or reduce or make a distribution of capital, except as authorized by Code Section 7-1-460 or 7-1-461 or otherwise under this chapter or other applicable law.
  5. Discounts or receives any evidence of indebtedness or agreement for the payment of money in payment of any subscription for common or preferred shares or with intent to enable any shareholder to withdraw any part of the money paid by him for shares held in the financial institution.
  6. Knowingly and willfully issues, participates in issuing, or concurs in any vote of the directors to issue any increase of its capital beyond the amount of the capital thereof duly authorized by or in pursuance of law or who knowingly or willfully sells or agrees to sell or who is interested, directly or indirectly, in the sale of any such shares of stock of such financial institution or in any agreement to sell the same.
  7. Certifies any check, draft, or order where the drawer of such check, draft, or order does not have on deposit with the financial institution at the time of such certification an amount of money equal to the amount specified in such check, draft, or order or fails to charge or set aside such amount from the deposit of the drawer immediately for the purpose of paying such certified check, draft, or order when presented.
  8. Makes or consents to the making of any conveyance, assignment, transfer, mortgage, or lien with intent to hinder, delay, or defraud creditors, after insolvency of the financial institution or in contemplation thereof, whether the same is made to an innocent purchaser or to any other person.

    (Ga. L. 1919, p. 135, art. 19, § 37; Ga. L. 1919, p. 135, art. 20, §§ 15, 16, 24, 25, 26, 27, 30; Ga. L. 1927, p. 195, § 14; Code 1933, §§ 13-2037, 13-9915, 13-9916, 13-9924, 13-9925, 13-9926, 13-9927, 13-9929; Code 1933, § 41A-9906, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 7-20/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted a period for a semicolon at the end of paragraphs (1) through (7); and substituted "Code Sections 7-1-244 and 7-1-666" for "Code Sections 7-1-244, 7-1-666, and 7-1-797" in paragraph (1).

Cross references. - Obligation of bank to certify check, § 11-3-411 .

JUDICIAL DECISIONS

No defense in action for purchase price to cancel notes. - It is no defense to action for purchase price to set up agreement of bank president to cancel notes in consideration of surrender of stock. Knight v. Jeff Davis Banking Co., 31 Ga. App. 440 , 120 S.E. 696 (1923).

Cited in Commercial Bank v. Department of Banking & Fin., 244 Ga. 172 , 259 S.E.2d 435 (1979).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 429 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, § 776.

ALR. - Validity and enforceability of agreement with bank officer or employee individually in connection with bank accommodation, 41 A.L.R. 349 .

Criminal offense of making false statement or report as to assets or condition of bank, 85 A.L.R. 824 .

7-1-844. Other misdemeanors of directors, officers, agents, and employees of financial institutions.

Any director, officer, agent, or employee of a financial institution who shall willfully violate or participate in the violation of any of the following provisions of this chapter shall be guilty of a misdemeanor:

  1. Code Section 7-1-37, relating to restrictions on department officials and employees;
  2. Code Section 7-1-62, relating to accounting requirements to be followed by financial institutions;
  3. Code Section 7-1-285, relating to loan limits on banks;
  4. Code Section 7-1-291, relating to borrowing limits on banks;
  5. Code Section 7-1-311, relating to operations as a fiduciary by a trust company;
  6. Code Section 7-1-491, relating to limitations on financing to directors and officers of banks and trust companies;
  7. Code Section 7-1-492, relating to prohibitions applicable to directors, officers, employees, and attorneys of bank and trust companies in dealings with the institutions with which they are connected; or
  8. Code Section 7-1-658, relating to loan limits on credit unions.

    (Ga. L. 1919, p. 135, art. 20, §§ 6, 21, 22, 23, 31; Code 1933, §§ 13-9906, 13-9922, 13-9930; Ga. L. 1966, p. 692, § 51; Code 1933, § 41A-9907, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 45.)

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 429 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, § 776.

ALR. - Construction and application of criminal statutes relating to loans by bank to officers, directors, stockholders, or employees of bank or of banking department, 90 A.L.R. 509 .

7-1-845. Miscellaneous felonies; when punished as misdemeanors.

  1. Any person or corporation, including any financial institution or its directors, officers, agents, or employees, who shall perform the following acts or deeds shall be guilty of a felony:
    1. Publishes or causes to be published any false statement, expressed either by printing or writing or by signs, pictures, or the like, of or concerning any financial institution as to the assets or liabilities of such financial institution or as to its solvency or ability to meet its obligations or as to its soundness or who shall publish or cause to be published any other false statement so expressed, calculated to affect the credit or standing of such financial institution or to cast suspicion upon its solvency, soundness, or ability to meet its deposits or other obligations in due course;
    2. Falsely circulates any report or makes any false oral statement as to the assets or liabilities of a financial institution or as to its solvency or ability to meet its obligations or as to its soundness or who shall make any other false oral statement calculated to affect the credit or standing of such financial institution or to cast suspicion upon its solvency, soundness, or ability to meet its deposits or other obligations in due course;
    3. Willfully engages in the business of:
      1. A bank in violation of Code Section 7-1-241;
      2. A trust company in violation of Code Section 7-1-242;
      3. A credit union in violation of Code Section 7-1-633;
      4. Selling payment instruments before receiving a license as required by Code Section 7-1-681;
      5. An international bank agency before receiving the license required by Code Section 7-1-713;
      6. A business development corporation before approval of the department is granted under Code Section 7-1-743; or
      7. Transacting business either directly or indirectly as a mortgage loan originator, mortgage broker, or mortgage lender unless licensed by the department or exempt from licensing pursuant to Code Section 7-1-1001; or
    4. Being an agent of a licensee or such agent's employee who is authorized to sell or issue payment instruments on behalf of a licensee, issues payment instruments directly or indirectly to or for his or her own benefit, or sells or issues payment instruments without accepting funds therefor or sells or issues payment instruments and willfully fails to remit to the licensee the proceeds from the sale or issuance of such payment instruments within five business days from the date of such sale or issuance.
  2. Upon conviction under this Code section such person or corporation shall be punished by imprisonment for not less than one nor more than five years or fined $10,000.00; but, on the recommendation of the jury trying the case, when such recommendation is approved by the judge presiding on the trial, such crime shall be punished as a misdemeanor. If the judge trying the case deems it proper, he may, in fixing the punishment, reduce such felony to a misdemeanor.

    (Ga. L. 1919, p. 135, art. 20, §§ 8, 32, 33; Code 1933, §§ 13-9907, 13-9931, 13-9932; Ga. L. 1937-38, Ex. Sess., p. 307, §§ 17, 18; Ga. L. 1965, p. 81, § 18; Code 1933, § 41A-9908, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1978, p. 1717, § 10; Ga. L. 1983, p. 602, § 20; Ga. L. 1989, p. 1257, § 31; Ga. L. 1999, p. 674, § 29; Ga. L. 2015, p. 344, § 32/HB 184; Ga. L. 2016, p. 390, § 7-21/HB 811.)

The 2015 amendment, effective July 1, 2015, in subsection (a), substituted "such" for "said" throughout, substituted "payment instruments" for "checks" in subparagraph (a)(3)(D), in subparagraph (a)(3)(H), inserted "mortgage loan originator," and inserted a comma, and, in paragraph (a)(4), substituted "payment instruments" for "checks" five times and inserted "or her" near the middle.

The 2016 amendment, effective July 1, 2016, in subsection (a), added "or" at the end of subparagraph (3)(F), deleted former subparagraph (3)(G), which read: "A building and loan association before its articles are approved; or", and redesignated former subparagraph (3)(H) as present subparagraph (3)(G).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 429 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, § 776.

ALR. - Criminal offense of making false statement or report as to assets or condition of bank, 85 A.L.R. 824 .

False representation by officers or directors of bank or building and loan association that impairment of capital has been made good, as basis of action against them, 144 A.L.R. 1498 .

Liability of bank, to other than party whose financial condition is misrepresented, for erroneous credit information furnished by bank or its directors, officers, or employees, 77 A.L.R.3d 6.

7-1-846. Punishment for misdemeanor violations.

Upon conviction of a misdemeanor as prescribed by the several provisions of this chapter, the offender shall be punished as prescribed by Code Section 17-10-3, as now or hereafter amended.

(Ga. L. 1919, p. 135, art. 20, § 38; Code 1933, § 13-9937; Code 1933, § 41A-9910, enacted by Ga. L. 1974, p. 705, § 1.)

ARTICLE 10 TRANSITION PROVISIONS; FEES OF SECRETARY OF STATE

7-1-860. Application of chapter.

This chapter applies to transactions and events occurring on and after April 1, 1975.

(Code 1933, § 41A-3701, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-861. Completion of pending transactions; continuation of existing charters, appointments, regulations, and fees.

  1. Transactions validly entered into before April 1, 1975, and the rights, duties, and interests flowing from them remain valid thereafter and may be terminated, completed, consummated, or enforced as required or permitted by any statute or other law amended or repealed by this chapter as though such repeal or amendment had not occurred.
  2. The validity of existing articles and charters shall not be impaired by this chapter. Appointments of officers in effect on April 1, 1975, shall continue in force until changed as permitted by this chapter or other applicable law. Regulations which have been issued by the department or the commissioner and fee schedules established by either of them or existing pursuant to statute shall remain in effect until changed pursuant to this chapter.

    (Code 1933, § 41A-3702, enacted by Ga. L. 1974, p. 705, § 1.)

7-1-862. Fees to be paid to Secretary of State.

The Secretary of State shall charge and collect fees with regard to filings by persons subject to the provisions of this chapter to the same extent as are charged and collected with regard to similar filings by corporations organized under Chapter 2 of Title 14, known as the "Georgia Business Corporation Code."

(Code 1933, § 41A-3703, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1983, p. 602, § 21; Ga. L. 1989, p. 1257, § 32.)

Cross references. - Fees to be paid to Secretary of State for filing documents and issuing certificates pertaining to Secretary of State corporations, § 14-4-183 .

ARTICLE 11 RECORDS AND REPORTS OF CURRENCY TRANSACTIONS

7-1-910. Purpose.

It is the purpose of this article to require certain reports and records of transactions involving United States currency where such reports and records have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings.

(Code 1981, § 7-1-910 , enacted by Ga. L. 1982, p. 2219, § 1.)

JUDICIAL DECISIONS

Applicability. - O.C.G.A. § 7-1-910 was not applicable in an action alleging that a bank improperly cashed certificates of deposit and a savings account. Emmett v. Regions Bank, 238 Ga. App. 455 , 518 S.E.2d 472 (1999).

7-1-911. Definitions.

As used in this article, the term:

  1. "Commissioner" means the commissioner of banking and finance.
  2. "Conducts" includes initiating, concluding, or participating in initiating or concluding a transaction.
  3. "Currency" means currency and coin of the United States.
  4. "Currency transaction" means a transaction:
    1. Initiated from the receipt or payment of currency or concluding with the receipt or payment of currency; or
    2. Involving the movement or transfer of monetary value by electronic means other than within the books of account of the same financial institution.
  5. "Department" means the Department of Banking and Finance of the State of Georgia.
  6. "Financial institution" means:
    1. A state or national bank;
    2. A trust company;
    3. A state savings and loan association or a federal savings and loan association;
    4. A state or federal credit union;
    5. An international bank agency doing business in this state on April 1, 1975, pursuant to the former "International Bank Agency Act," approved April 6, 1972 (Ga. L. 1972, p. 1140), or authorized to do business in this state pursuant to Article 5 of this chapter; or
    6. A licensee under Article 4 or Article 4A of this chapter and such other persons as may be engaged in the business of:
      1. Cashing payment instruments for a fee; or
      2. Performing transactions by wire or other electronic means to facilitate the movement or transfer of money.
  7. "Knowing that the moneys involved in a currency transaction represent the proceeds of some form of unlawful activity" means that the person knew the moneys involved in the transaction represented proceeds from some form, although not necessarily which form, of activity that constitutes a felony under this Code.
  8. "Monetary instruments" means coin or currency of the United States or of any other country, travelers' checks, personal checks, bank checks, money orders, investment securities in bearer form or otherwise in such form that title thereto passes upon delivery, and negotiable instruments in bearer form or otherwise in such form that title thereto passes upon delivery.
  9. "Person" means natural persons, partnerships, trusts, estates, associations, corporations, and all entities cognizable as legal personalities.
  10. "Specified unlawful activity" means any act or activity constituting an offense punishable as a felony pursuant to the laws of this state or any act or acts constituting a pattern of racketeering activity as that term is defined in Code Section 16-14-3.
  11. "Transaction" includes:
    1. A purchase, sale, loan, pledge, gift, transfer, delivery, or other disposition and, with respect to a financial institution, includes a deposit, withdrawal, transfer between accounts, exchange of currency, loan, extension of credit, purchase or sale of any stock, bond, certificate of deposit, or other monetary instrument, or any other payment, transfer, or delivery by, through, or to a financial institution, by whatever means effected; or
    2. The movement of funds by wire or other means or involving one or more monetary instruments or the use of a financial institution. (Code 1981, § 7-1-911 , enacted by Ga. L. 1982, p. 2219, § 1; Ga. L. 1986, p. 214, § 1; Ga. L. 1989, p. 1211, § 17; Ga. L. 1990, p. 362, § 2; Ga. L. 2004, p. 458, § 9; Ga. L. 2016, p. 390, § 7-22/HB 811; Ga. L. 2017, p. 774, § 7/HB 323.)

The 2016 amendment, effective July 1, 2016, in paragraph (6), deleted "building and loan association," preceding "state savings and loan" in subparagraph (C) and substituted "payment instruments" for "checks" in division (F)(i).

The 2017 amendment, effective May 9, 2017, part of an Act to revise, modernize, and correct the Code, revised punctuation in subparagraph (6)(C).

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1989, deleted the comma following "disposition" and inserted commas preceding and following "with respect to a financial institution" in subparagraph (A) of paragraph (10) (now paragraph (11)).

Editor's notes. - The "International Bank Agency Act" (Ga. L. 1972, p. 1140), referred to in subparagraph (6)(E), was repealed by Ga. L. 1974, p. 705, § 3.

Law reviews. - For note on 1990 amendment of this Code section, see 7 Ga. St. U.L. Rev. 201 (1990).

7-1-912. Records and reports of certain currency transactions; regulations; commissioner's authority under Code Section 7-1-64; prohibited acts; definitions.

    1. Financial institutions and other money service businesses are required by state law to comply with the filing, reporting, and record-keeping requirements provided for in federal law. The department may promulgate regulations that specify additional requirements for currency transaction reports, record keeping, and suspicious activity reports.
    2. Pursuant to federal law, a financial institution must keep a record of any currency transaction deemed suspicious for any reason, including transactions where money laundering is suspected, and file a report of such transaction with the appropriate federal authority. All such suspicious activity reports shall be simultaneously filed with the department, unless by regulation the department deems a federal filing to be adequate.
    3. The provisions of paragraph (1) of this subsection shall not apply to transfers between banks, credit unions, or savings and loan associations chartered under the laws of any state or the United States which do not involve the payment or receipt of currency and which are accomplished through a wire or electronic transfer system operated by the Federal Reserve System, the Federal Home Loan Bank System, or other governmental agency or instrumentality; provided, however, with regard to each such transfer the bank, credit union, or savings and loan association shall maintain a record of the name, address, and tax identification number of its customer, the name and location of the corresponding bank, credit union, or savings and loan association, and the name of the customer of the corresponding bank, credit union, or savings and loan association.
  1. The commissioner shall prescribe such regulations as he may deem appropriate to carry out the purposes of this article. Such regulations shall to the extent feasible be consistent with federal regulations and may provide for exemption of such transactions as the commissioner determines are clearly of a legitimate nature for which mandatory reporting would serve no useful purpose.  The regulations shall provide for adequate safeguards against unauthorized currency transactions or transactions otherwise inconsistent with this article.
  2. The commissioner in his discretion may exercise the authority granted in Code Section 7-1-64 to assure that financial institutions subject to this article are in compliance herewith.
  3. No person shall for the purpose of evading the reporting requirements of this Code section:
    1. Cause or attempt to cause a financial institution to fail to file a report required pursuant to this Code section;
    2. Cause or attempt to cause a financial institution to file a report required pursuant to this Code section that contains a material omission or misstatement of fact; or
    3. Structure or assist in structuring or attempt to structure or assist in structuring any currency transaction with one or more financial institutions.
  4. For purposes of this Code section, the term:
    1. "Material omission or misstatement" shall include the furnishing of a false or erroneous name, address, taxpayer identification number, and business, profession, or occupation for the person performing the currency transaction or the beneficiary of such transaction or displaying or otherwise producing physical proof of identity on such persons which is forged, falsified, or otherwise altered; and
    2. "Structuring" of a currency transaction means the division of a transaction which would otherwise be reportable under this Code section into two or more transactions which if considered separately would not be reportable. (Code 1981, § 7-1-912 , enacted by Ga. L. 1982, p. 2219, § 1; Ga. L. 1986, p. 214, § 2; Ga. L. 1989, p. 1211, § 18; Ga. L. 1990, p. 362, § 3; Ga. L. 1993, p. 917, § 9; Ga. L. 1994, p. 1780, § 6; Ga. L. 1996, p. 848, § 12; Ga. L. 1997, p. 485, § 28; Ga. L. 2004, p. 458, § 10.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1997, a comma was inserted following "federal law" in the first sentence of paragraph (a)(2).

Law reviews. - For note on 1990 amendment of this Code section, see 7 Ga. St. U.L. Rev. 201 (1990).

7-1-913. Access to reports.

The Georgia Bureau of Investigation and the Department of Revenue shall have access to and shall be authorized to inspect and copy any reports filed with the department pursuant to this article. In addition, unless prohibited by federal law or by any agreements with federal authorities, the Georgia Bureau of Investigation and the Department of Revenue shall have access to and shall be authorized to inspect and copy any currency transaction report information received by the department from federal authorities.

(Code 1981, § 7-1-913 , enacted by Ga. L. 1982, p. 2219, § 1; Ga. L. 1994, p. 1780, § 7.)

7-1-914. Civil penalties; action for recovery; penalty.

  1. For each willful violation of this article, the commissioner may assess upon any financial institution and upon any director, officer, or employee thereof who willfully participates in the violation a civil penalty not exceeding $1,000.00.
  2. In the event of the failure of any person to pay any penalty assessed under this Code section, a civil action for recovery thereof may, in the discretion of the commissioner, be brought in the name of the State of Georgia.
  3. Whoever conducts or attempts to conduct a transaction described in subsection (c) of Code Section 7-1-915 is liable to the State of Georgia for a civil penalty of not more than the amount of the funds involved in the transaction or $10,000.00, whichever is greater. (Code 1981, § 7-1-914 , enacted by Ga. L. 1982, p. 2219, § 1; Ga. L. 1989, p. 1211, § 19.)

7-1-915. Criminal penalties; penalties imposed by other Code sections not superseded.

  1. Except as provided in subsection (b) of this Code section, whoever willfully violates any provision of this article shall be guilty of a misdemeanor.
  2. Whoever willfully violates any provision of this article where the violation is:
    1. Committed in furtherance of the commission of any other violation of Georgia law; or
    2. Committed as part of a pattern of illegal activity involving transactions exceeding $100,000.00 in any 12 month period

      shall be guilty of a felony and, upon conviction thereof, shall be punished by a fine of not more than $500,000.00 or by imprisonment for not more than five years, or both.

  3. Whoever, knowing that the moneys involved in a currency transaction represent the proceeds of some form of unlawful activity, conducts or attempts to conduct such a transaction which in fact involves the proceeds of specified unlawful activity:
    1. With the intent to promote the carrying on of specified unlawful activity; or
    2. Knowing that the transaction is designed in whole or in part to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or to avoid a transaction reporting requirement under this article

      shall be sentenced to a fine of not more than $500,000.00 or twice the amount involved in the transaction, whichever is greater, or imprisonment for not more than 20 years, or both.

  4. Nothing in subsection (c) of this Code section nor in subsection (c) of Code Section 7-1-914 shall supersede any provision of law imposing criminal or civil penalties or affording civil remedies in addition to those provided for in this Code section or in Code Section 7-1-914 . (Code 1981, § 7-1-915 , enacted by Ga. L. 1982, p. 2219, § 1; Ga. L. 1983, p. 3, § 5; Ga. L. 1989, p. 1211, § 20.)

JUDICIAL DECISIONS

Evidence sufficient to support conviction. - Evidence that the defendant was part of a conspiracy to deceive the victims into believing the victims had to wire money to a co-conspirator's bank account, and that the funds were used to promote unlawful activity was sufficient to support the defendant's conviction for money laundering. Akintoye v. State, 340 Ga. App. 777 , 798 S.E.2d 720 (2017).

7-1-916. Forfeiture of property involved in illegal transactions.

All property of every kind used or intended for use in the course of, derived from, or realized through a transaction which in fact involves the proceeds of unlawful activity specified in Chapter 14 of Title 16 or otherwise subject to the provisions of this article shall be subject to forfeiture to the state. Forfeiture shall be had by the same procedure as is set forth in Chapter 16 of Title 9. As used in this Code section, the terms "proceeds" and "property" shall have the same meaning as set forth in Code Section 9-16-2.

(Code 1981, § 7-1-916 , enacted by Ga. L. 1989, p. 1211, § 21; Ga. L. 2015, p. 693, § 3-6/HB 233.)

The 2015 amendment, effective July 1, 2015, substituted "Chapter 16 of Title 9." for "Code Section 16-14-7" in the next-to-last sentence and added the last sentence. See editor's note for applicability.

Editor's notes. - Ga. L. 2015, p. 693, § 4-1/HB 233, not codified by the General Assembly, provides: "This Act shall become effective on July 1, 2015, and shall apply to seizures of property for forfeiture that occur on or after that date. Any such seizure that occurs before July 1, 2015, shall be governed by the statute in effect at the time of such seizure."

Law reviews. - For article on the 2015 amendment of this Code section, see 32 Ga. St. U.L. Rev. 1 (2015).

RESEARCH REFERENCES

ALR. - Forfeiture of homestead based on criminal activity conducted on premises - state cases, 16 A.L.R.5th 855.

ARTICLE 12 SMALL MINORITY BUSINESS DEVELOPMENT CORPORATIONS

7-1-940. Definitions.

As used in this article, the term:

  1. "Board of directors" means any board of directors of a corporation created under this article.
  2. "Corporation" means a Georgia small minority business development corporation created under this article;
  3. "Lending institution" means any bank or trust company, savings and loan association, insurance company or related corporation, partnership, foundation, pension fund, or other institution engaged primarily in lending or investing funds.
  4. "Loan limit" means, for any member, the maximum amount permitted to be outstanding at any one time on member loans made by such member to the corporation, as determined under this article.
  5. "Member" means any lending institution authorized to do business in this state which shall undertake to make member loans to a corporation created under this article, upon its call, and in accordance with this article.
  6. "Member loan" means a loan made by a member upon the call of the corporation pursuant to Code Section 7-1-947.
  7. "Minority person" means a lawful permanent resident of the United States who is:
    1. Black;
    2. Hispanic;
    3. Asian-Pacific American;
    4. Native American; or
    5. Asian-Indian American.
  8. "Small minority business" means any for profit corporation, partnership, proprietorship, association, or other business entity which:
    1. Is at least 51 percent owned and controlled by minority persons and whose management and daily operation are controlled by one or more of the minority persons who own it;
    2. Has gross revenue of less than $6 million in a 12 month fiscal year;
    3. Has a net profit after taxes for each of the last two taxable years of less than $1 million;
    4. Employs less than 500 people; and
    5. Is not a lending institution. (Code 1981, § 7-1-940 , enacted by Ga. L. 1988, p. 804, § 1; Ga. L. 2016, p. 390, § 7-4/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "building and loan association," preceding "savings and loan association" in paragraph (3).

7-1-941. Creation of corporations; contents of articles of incorporation; subscription and acknowledgment.

  1. Five or more persons competent to contract, a majority of whom shall be residents of this state, who may desire to create a small minority business development corporation under this article, for the purpose of promoting, developing, and advancing small minority business and, to that end, to exercise the powers and privileges provided in this article, may be incorporated by presenting articles to the Secretary of State, as provided in this Code section and Code Section 7-1-942. The articles shall contain:
    1. The name of the corporation, which shall include the words "Small Minority Business Development Corporation of Georgia," and a recitation that the corporation is organized under this article;
    2. The location of its initial registered office, but such corporation may have branch offices in such other places within the state as may be fixed by the board of directors;
    3. The purposes for which the corporation is founded, which shall include: to promote, stimulate, develop, and advance small minority business and thereby promote, stimulate, develop, and advance the business prosperity and economic welfare of the State of Georgia; to encourage and assist, through loans, investments, or other business transactions, in the location of the small minority business and industry in this state and to rehabilitate and assist existing small minority business and industry; to stimulate and assist in the expansion of all kinds of small minority business activity which will tend to promote the small minority business development and maintain the economic stability of this state; to provide maximum opportunities for minority employment, encourage thrift, and improve the standard of living of minorities and other citizens of this state; similarly to cooperate and act in conjunction with other organizations, public or private, in the promotion and advancement of industrial, commercial, agricultural, and recreational small minority business developments in this state; and to provide financing for the promotion, development, and conduct of all kinds of small minority business activity in this state;
    4. The names and post office addresses of the members of the first board of directors, who, unless otherwise provided by the articles or the bylaws, shall hold office for the first year of existence of the corporation or until their successors are elected and have qualified;
    5. Any provisions which the incorporators may choose to insert for the regulation of the business and for the conduct of the affairs of the corporation and any provision creating, dividing, limiting, and regulating the powers of the corporation, the directors, shareholders, or any class of the shareholders, including, but not limited to, a list of the officers, and provisions governing the issuance of stock certificates to replace lost or destroyed certificates, provided that no provision shall be contained for cumulative voting for directors; and
    6. The amount and number of authorized shares, the par value of each share, and the minimum amount of capital with which it shall do business and, if there is more than one class of stock, a description of the different classes.  The minimum amount of capital with which the corporation shall commence business shall not be less than $50,000.00.

      The articles may also contain any provisions consistent with the laws of this state for the regulation of the affairs of the corporation.

  2. The articles shall be in writing, subscribed by the incorporators, and acknowledged by each of them before an officer authorized to take acknowledgments. A copy of the articles so subscribed and acknowledged shall be filed with the department for approval. (Code 1981, § 7-1-941 , enacted by Ga. L. 1988, p. 804, § 1; Ga. L. 1990, p. 176, § 1.)

7-1-942. Approval of articles by department.

Whenever the articles shall have been filed in the office of the Secretary of State and approved by the department and all filing fees and taxes prescribed by law have been paid, said entity shall constitute a corporation. Said corporation shall not be authorized to commence business until its articles are approved by the department. Upon such approval by the department, authorized stock of the corporation may thereafter be issued.

(Code 1981, § 7-1-942 , enacted by Ga. L. 1988, p. 804, § 1; Ga. L. 1989, p. 1257, § 33; Ga. L. 1990, p. 176, § 2.)

7-1-943. Standards for approval of articles by department; timing.

  1. Upon receipt of an application for approval of articles from a corporation organized pursuant to this article, the department shall exercise its discretion in its consideration of the application; but the department shall not approve the application until it has ascertained to its satisfaction:
    1. That the public need and advantage will be promoted by the establishment of the corporation;
    2. That conditions in the locality in which the corporation will transact business afford reasonable promise of a successful operation;
    3. That the applicants may legally invest in the stock of the corporation and that such investment would not be to the detriment of the applicants; and
    4. That the proposed officers and directors have sufficient experience, ability, and standing to afford reasonable promise of a successful operation.
  2. Within 90 days after receipt of an application for approval of the articles, the department shall issue a certificate either granting or denying permission for the corporation to commence business, provided that in no instance shall the department grant such permission until it has ascertained to its satisfaction that the above conditions and circumstances have been met and that the articles are in accordance with this article. (Code 1981, § 7-1-943 , enacted by Ga. L. 1988, p. 804, § 1; Ga. L. 1990, p. 176, § 3.)

7-1-944. Filing departmental approval with Secretary of State.

Upon receiving the approval of the department, the incorporators shall file the same together with the fee specified by Code Section 7-1-862 with the Secretary of State.

(Code 1981, § 7-1-944 , enacted by Ga. L. 1988, p. 804, § 1; Ga. L. 1989, p. 946, § 73; Ga. L. 1989, p. 1257, § 34.)

7-1-945. Corporate powers.

In furtherance of its purposes and in addition to the powers now or hereafter conferred on business corporations by the laws of this state, the corporation shall, subject to the restrictions and limitations contained in this Code section, have the following powers:

  1. To elect, appoint, and employ officers, agents, and employees;
  2. To make contracts and incur liabilities for any of the purposes of the corporation, provided that the corporation shall not incur any secondary liability by way of the guaranty or endorsement of the obligations of any person or corporation or in any other manner;
  3. To borrow money and to do all things necessary or desirable to secure aid, assistance, loans, and other financing from its members (whether as member loans or otherwise), from any lending institution, or from any agency established under federal or state law for any of the purposes of the corporation and to issue therefor its bonds, debentures, notes, or other evidences of indebtedness, whether secured or unsecured, and to secure the same by mortgage, pledge, deed of trust, or other lien on its property, franchise, rights, and privileges of every kind and nature or any part thereof or interest therein without securing shareholder or member approval;
  4. To make loans to any small minority business and to establish and regulate the terms and conditions with respect to any such loans and the charges for interest and services connected therewith; provided, however, that the corporation shall not approve any application for a loan unless and until the small minority business applying for said loan shall show that such business has applied for the loan through ordinary lending channels and that the loan has been refused by at least two lending institutions that would be qualified by law to make such a loan, it not being the intention of this article to take from any lending institution any such loans or commitments as may be desired by such organizations generally in the ordinary course of their business;
  5. To purchase, receive, hold, lease, or otherwise acquire and to sell, convey, transfer, lease, or otherwise dispose of real and personal property, together with such rights and privileges as may be incidental and appurtenant thereto and the use thereof, including, but not restricted to, any real or personal property acquired by the corporation from time to time in the satisfaction of debts or enforcement of obligations;
  6. To acquire the good will, business rights, real and personal property, and other assets or any part thereof or interest therein of any small minority business and to assume, undertake, or pay the obligations, debts, and liabilities of any such small minority business; to acquire improved or unimproved real estate for the purpose of constructing small minority business establishments thereon or for the purposes of disposing of such real estate to others for the construction of small minority business establishments; and to acquire, construct or reconstruct, alter, repair, maintain, operate, sell, convey, transfer, lease, or otherwise dispose of small minority business establishments;
  7. To acquire, subscribe for, own, sell, hold, assign, transfer, mortgage, pledge, or otherwise dispose of the stock, shares, bonds, debentures, notes, or other securities and evidences of interest in or indebtedness of any small minority business and, while the owner or holder thereof, to exercise all the rights, powers, and privileges of ownership, including the right to vote thereon;
  8. To mortgage, pledge, or otherwise encumber any property, right, or thing of value, acquired pursuant to the powers contained in paragraph (5), (6), or (7) of this Code section, as security for the payment of any part of the purchase price therefor;
  9. To cooperate with and avail itself of the facilities of the United States Department of Commerce, the Department of Economic Development, and any other similar state or federal governmental agencies and to cooperate with and assist and otherwise encourage organizations in the various communities of this state in the promotion, assistance, and development of small minority business and the economic well-being of such communities or of this state or any political subdivision thereof;
  10. To redeem or otherwise reacquire its shares under the circumstances and subject to the restrictions now or hereafter set forth for business corporations by the laws of this state;
  11. To make, amend, and repeal bylaws, not inconsistent with its articles of incorporation or with the laws of this state, for the administration and regulation of the affairs of the corporation, which bylaws may establish internal governance procedures and standards, including, but not limited to, procedures for voting by proxy at and for giving notice of meetings of directors and of shareholders and members and the delegation by the board of directors of its authority under the articles of incorporation and this article to one or more committees of the board or to officers of the corporation, and which bylaws may give the board of directors or committees thereof the power to pass resolutions necessary or convenient to carry out the purposes of the corporation;
  12. To contract with the Small Business Development Centers of the University System of Georgia and economic development centers of other colleges and universities, which centers shall also be authorized to contract with the corporation, for the performance of loan application and packaging functions, market studies, and such other activities necessary or convenient to carry out the purposes of the corporation;
  13. To provide technical assistance for both public and private sources of contract opportunities for small minority businesses;
  14. To provide equity funding as authorized for Minority Enterprise Small Business Investment Corporations through the federal Small Business Administration;
  15. To provide for import and export financing for small minority businesses; and
  16. To do all acts and things necessary or convenient to carry out the powers expressly granted in this article. (Code 1981, § 7-1-945 , enacted by Ga. L. 1988, p. 804, § 1; Ga. L. 1989, p. 1641, § 3; Ga. L. 2004, p. 690, § 2.)

Editor's notes. - Ga. L. 1989, p. 1641, § 18, not codified by the General Assembly, provides that: "In the event of any substantive conflict between this Act and any other Act of the 1989 General Assembly, such other Act shall control over this Act."

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1988, "business" was substituted for "businesses" following "any small minority" near the beginning of paragraph (6).

7-1-946. Bond and stock holding authority; member loans to corporation not discriminatory.

Notwithstanding any rule at common law or any provision of any general or special law or any provision in their respective charters, agreements of association, articles of organization, or trust indentures:

  1. Any person, including all domestic corporations organized for the purpose of carrying on business within this state and further including, without implied limitation, public utility companies and insurance companies and foreign corporations licensed to do business within this state and all lending institutions as defined in Code Section 7-1-940 and all trusts are authorized to acquire, purchase, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of any bonds, securities, or other evidences of indebtedness created by or the shares of the corporation and, while owners of said shares, to exercise all the rights, powers, and privileges of ownership, including the right to vote thereon, all without the approval of any regulatory authority of the state, except as otherwise provided in this article;
  2. All lending institutions are authorized to become members of the corporation and to make loans to the corporation as provided in this article and such membership shall not constitute a violation of the prohibitions contained in Code Section 7-6-1;
  3. Each lending institution which becomes a member of the corporation is authorized to acquire, purchase, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of any bonds, securities, or other evidences of indebtedness created by or the shares of the capital stock of the corporation and, while owners of said stock, to exercise all the rights, powers, and privileges of ownership, including the right to vote thereon, all without the approval of any regulatory authority of the State of Georgia, provided that the amount of the capital of the corporation which may be acquired by any member pursuant to the authority granted in this Code section shall not exceed 5 percent of the capital base of such member; and
  4. The amount of shares of the corporation which any member is authorized to acquire pursuant to the authority granted in this Code section is in addition to the amount of shares in the corporation which such member may otherwise be authorized to acquire. (Code 1981, § 7-1-946 , enacted by Ga. L. 1988, p. 804, § 1.)

7-1-947. Application for membership; requirements for loans to corporation; member loan limits.

  1. Any lending institution may request membership in the corporation by making application to the board of directors on such form and in such manner as said board of directors may require, and membership shall become effective upon acceptance of such application by said board.
  2. Each member of the corporation shall make member loans to the corporation when called upon by it to do so on such terms and other conditions as shall be approved from time to time by the board of directors, subject to the following conditions:
    1. All loan limits for member loans may, at the option of the board of directors, be established at the $1,000.00 amount nearest the amount computed in accordance with this Code section; and
    2. No member loan to the corporation shall be made if immediately thereafter the total amount of the obligations (whether under member loans or otherwise) of the corporation would exceed 50 times the amount then paid in on the capital of the corporation.
  3. The total amount outstanding on member loans to the corporation made by any member at any one time, when added to the amount of the investment in the capital of the corporation then held by such member, shall not exceed the lesser of:
    1. Twenty percent of the aggregate of the capital of the corporation then outstanding plus the total amount then outstanding on all member loans to the corporation, including in said total amount outstanding amounts validly called as member loans but not yet loaned;
    2. The following limit, to be determined each calendar year of membership on the basis of the audited balance sheet of such member at the close of its fiscal year immediately preceding or, in the case of an insurance company, its last annual statement to the Commissioner of Insurance:
      1. Five percent of the statutory capital base of a bank or trust company;
      2. One-half of 1 percent of the total outstanding loans made by savings and loan associations;
      3. Two and one-half percent of the capital and unassigned surplus of stock insurance companies, except fire insurance companies;
      4. Two and one-half percent of the unassigned surplus of mutual insurance companies, except fire insurance companies;
      5. One-tenth of 1 percent of the assets of fire insurance companies; and
      6. Such limits as may be approved by the board of directors of the corporation for other lending institutions; or
    3. Seven hundred fifty thousand dollars.
  4. Subject to paragraphs (1) and (3) of subsection (c) of this Code section, each call for member loans made by the corporation shall be prorated among the members of the corporation in substantially the same proportion that the adjusted loan limit of each member bears to the aggregate of the adjusted loan limits of all members. The adjusted loan limit of a member shall be the amount of such member's loan limit, as determined by reference to paragraph (2) of subsection (c) of this Code section, reduced by the balance of outstanding member loans made by such member to the corporation and the investment in capital of the corporation held by such member at the time of such call.
  5. All member loans to the corporation shall be evidenced by bonds, debentures, notes, or other evidences of indebtedness of the corporation, which shall be freely transferable at all times and which shall bear interest at a rate of interest determined by the board of directors. (Code 1981, § 7-1-947 , enacted by Ga. L. 1988, p. 804, § 1; Ga. L. 1989, p. 14, § 7; Ga. L. 2016, p. 390, § 7-4/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "building and loan or" preceding "savings and loan associations" in subparagraph (c)(2)(B).

7-1-948. Duration of membership; withdrawal.

  1. Membership in the corporation shall be for the duration of the corporation, provided that, upon written notice given to the corporation two years in advance, a member may withdraw from membership in the corporation at the expiration of such notice.
  2. A member shall not be obligated to make any loans to the corporation pursuant to calls made subsequent to notice of the intended withdrawal of said member. (Code 1981, § 7-1-948 , enacted by Ga. L. 1988, p. 804, § 1.)

7-1-949. Powers of shareholders and members.

  1. The shareholders and the members of the corporation shall have the following powers of the corporation:
    1. To determine the number of and elect directors as provided in Code Section 7-1-951;
    2. To amend its articles as provided in Code Section 7-1-950;
    3. To dissolve the corporation as provided in Code Section 7-1-956; and
    4. To exercise such other of the powers of the corporation, consistent with this article, as may be conferred on the shareholders and the members by the bylaws.
  2. As to all matters requiring action by the shareholders and the members of the corporation, said shareholders and said members shall vote separately thereon by classes; and, except as otherwise provided in this article, such matters shall require the affirmative vote of a majority of the votes to which the shareholders present or represented at the meeting shall be entitled and the affirmative vote of a majority of the votes to which the members present or represented at the meeting shall be entitled.
  3. Each shareholder shall have one vote, in person or by proxy, for each share of stock held by him; and each member shall have one vote, in person or by proxy, except that any member having a loan limit of more than $1,000.00 shall have one additional vote, in person or by proxy, for each additional $1,000.00 which such member is authorized to have outstanding on loans to the corporation at any one time, as determined under subsection (c) of Code Section 7-1-947.
  4. A holder of or subscriber to shares of the corporation or a member of the corporation shall be under no obligation to the corporation or its creditors with respect to such shares, subscriptions, or membership except in the circumstances set forth in Code Section 14-2-622 , except that this subsection does not affect the obligation of a member to lend funds to the corporation pursuant to valid call. (Code 1981, § 7-1-949 , enacted by Ga. L. 1988, p. 804, § 1; Ga. L. 1989, p. 946, § 74.)

7-1-950. Amendment of articles.

  1. Except as provided in subsections (b) and (c) of this Code section and subject to the approval of the department, the articles may be amended by the votes of the shareholders and the members of the corporation, voting separately by classes, and such amendments shall require approval by the affirmative vote of two-thirds of the votes to which the members shall be entitled.
  2. No amendment shall be adopted which is inconsistent with the general purposes expressed in paragraph (3) of subsection (a) of Code Section 7-1-941 or which authorizes any additional class of stock to be issued or which would tend to impair the ability of the department to examine and supervise the corporation.
  3. No amendment of the articles which increases the obligation of a member to make loans to the corporation or makes any change in the principal amount, interest rate, or maturity date or in the security or credit position of any outstanding loan of a member to the corporation or affects a member's right to withdraw from membership as provided in Code Section 7-1-948 or affects a member's voting rights as provided in this article shall be made without the consent of each member affected by such amendment.
  4. Within 30 days after any meeting at which an amendment to the articles is approved, it shall be submitted to the department together with such information as the department shall require. If the department finds in its discretion that the proposed amendment is in conformity with the objectives and requirements of this article, it shall issue its certificate approving the amendment. If the amendment is disapproved, the department shall briefly state its reasons for such action to the corporation. The decision of the department shall be conclusive, except as it may be subject to judicial review as provided in Code Section 7-1-90.
  5. Upon the approval of the department, articles of amendment signed and sworn to by the president, treasurer, and a majority of the directors, setting forth such amendment and due adoption thereof, shall, together with the department's certificate of approval, be submitted to the Secretary of State, who shall examine them and, if he finds that they conform to the requirements of this article, shall so certify and endorse his approval thereon. (Code 1981, § 7-1-950 , enacted by Ga. L. 1988, p. 804, § 1.)

7-1-951. Board of directors; officers and agents.

The business affairs of the corporation shall be managed and controlled by a board of directors, a president, a vice-president, a secretary, a treasurer, and such other officers and such agents as the corporation shall authorize by its bylaws. The board of directors shall consist of such number, not less than nine nor more than 15, as shall be determined in the first instance by the incorporators and thereafter annually by the members and the shareholders of the corporation. The board of directors may exercise all the powers of the corporation except such as are conferred by law or by the bylaws of the corporation upon the shareholders or members and shall choose and appoint all the agents and officers of the corporation and fill all vacancies except vacancies in the office of director, which shall be filled as provided in this Code section. The annual meeting shall be held prior to May 1 or, if no annual meeting shall be held in the year of incorporation, then within 90 days after the approval of the articles at a special meeting as provided in this Code section. At such annual meeting or at each special meeting held as provided in this Code section, the members of the corporation shall elect one-fifth of the board of directors and the shareholders shall elect the remaining directors. The directors shall hold office until the next annual meeting of the corporation or special meeting held in lieu of the annual meeting after the election and until their successors are elected and qualified, unless sooner removed in accordance with provisions of the bylaws. Any vacancy in the office of a director elected by the members shall be filled by the directors elected by the members, and any vacancy in the office of a director elected by the shareholders shall be filled by the directors elected by the shareholders. Directors and officers shall not be responsible for losses unless the same shall have been occasioned by the willful misconduct of such directors and officers. Directors shall serve without compensation.

(Code 1981, § 7-1-951 , enacted by Ga. L. 1988, p. 804, § 1; Ga. L. 1990, p. 176, § 4.)

7-1-952. Setting apart net earnings; fiscal year.

  1. Each year the corporation shall set apart its net earnings for all the preceding fiscal year. Whenever the amount of minimum capital established in Code Section 7-1-941 shall become impaired, it shall be built up again to the required amount in the manner provided for its original accumulation. Net earnings and surplus shall be determined by the board of directors after providing for such reserves as said directors deem desirable, and the determination of the directors made in good faith shall be conclusive on all persons.
  2. Corporations organized under this article shall adopt the calendar year as their fiscal year. (Code 1981, § 7-1-952 , enacted by Ga. L. 1988, p. 804, § 1.)

7-1-953. Deposit of corporate funds.

The corporation shall not deposit any of its funds in any bank or other financial institution unless such institution has been designated as a depository by a vote of a majority of the directors present at an authorized meeting of the board of directors, exclusive of any director who is an officer or director of the depository so designated. The corporation shall not receive money on deposit.

(Code 1981, § 7-1-953 , enacted by Ga. L. 1988, p. 804, § 1.)

7-1-954. Departmental power over corporations.

The department shall exercise the same power and authority over corporations organized under this article as is now or hereafter exercised over banks and trust companies by Articles 1 and 2 of this chapter where such law is not in conflict with this chapter.

(Code 1981, § 7-1-954 , enacted by Ga. L. 1988, p. 804, § 1.)

7-1-955. First meeting.

  1. The first meeting of the corporation shall be called by a notice signed by three or more of the incorporators, stating the time, place, and purpose of the meeting, a copy of which notice shall be mailed or delivered to each incorporator at least five days before the day appointed for the meeting. Said first meeting may be held without such notice upon agreement in writing to that effect signed by all the incorporators. There shall be recorded in the minutes of the meeting a copy of said notice or of such unanimous agreement of the incorporators.
  2. At such first meeting the incorporators shall organize by the choice, by ballot, of a temporary clerk; by the adoption of bylaws; by the election, by ballot, of directors; and by action upon such other matters within the powers of the corporation as the incorporators may see fit. The temporary clerk shall be sworn and shall make and attest a record of the proceedings. Four of the incorporators shall be a quorum for the transaction of business. (Code 1981, § 7-1-955 , enacted by Ga. L. 1988, p. 804, § 1.)

7-1-956. Duration of corporation; dissolution.

  1. The period of duration of the corporation shall be 35 years, subject, however, to the right of its shareholders and the members to dissolve the corporation prior to the expiration of said period as provided in subsection (b) of this Code section.
  2. The corporation may, upon the votes of the shareholders and the members of the corporation, voting separately by classes, dissolve said corporation; and such dissolution shall require approval by the affirmative vote of two-thirds of the votes to which the shareholders shall be entitled. Upon any dissolution of the corporation, none of the corporation's assets shall be distributed to the shareholders until all sums due the members of the corporation as creditors thereof have been paid in full. (Code 1981, § 7-1-956 , enacted by Ga. L. 1988, p. 804, § 1.)

RESEARCH REFERENCES

ALR. - Propriety of applying minority discount to value of shares purchased by corporation or its shareholders from minority shareholders, 13 A.L.R.5th 840.

7-1-957. State indebtedness not to be created.

Under no circumstances shall the credit of the State of Georgia be pledged to any corporation organized under this article nor shall acts of such corporation in any manner constitute or result in the creation of any indebtedness of the State of Georgia or any county or municipal corporation therein.

(Code 1981, § 7-1-957 , enacted by Ga. L. 1988, p. 804, § 1.)

7-1-958. Tax exemptions, credits, and privileges; occupational license taxes.

  1. Any tax exemptions, tax credits, or tax privileges granted to banks or trust companies and other lending institutions by any general laws of this state are granted to corporations organized pursuant to this article.
  2. Every corporation organized and engaged in business under this article shall pay an annual state occupational license tax of $50.00. Counties and municipalities are authorized, in addition, to levy the occupational license taxes as prescribed; provided, however, that no county or municipality shall levy any such occupational license tax in a greater amount than those prescribed. (Code 1981, § 7-1-958 , enacted by Ga. L. 1988, p. 804, § 1; Ga. L. 2016, p. 390, § 7-4/HB 811; Ga. L. 2017, p. 774, § 7/HB 323.)

The 2016 amendment, effective July 1, 2016, deleted "building and loan associations," following "trust companies," in subsection (a).

The 2017 amendment, effective May 9, 2017, part of an Act to revise, modernize, and correct the Code, revised punctuation in subsection (a).

ARTICLE 13 LICENSING OF MORTGAGE LENDERS AND MORTGAGE BROKERS

Cross references. - Real estate brokers' license requirement, § 44-3-190 .

Law reviews. - For note on 1993 enactment of this article, see 10 Ga. St. U.L. Rev. 11 (1993). For note on the 1994 amendments of Code Sections 7-1-1000 to 7-1-1006, 7-1-1008, 7-1-1010 to 7-1-1011, 7-1-1014, 7-1-1016 to 7-1-1018 and enactment of Code Section 7-1-1021 of this article, see 11 Ga. St. U.L. Rev. 41 (1994). For comment, "Regulation X: A New Direction for the Regulation of Mortgage Servicers," see 63 Emory L. J. 175 (2013). For comment, "Amidst the Walking Dead: Judicial and Nonjudicial Approaches for Eradicating Zombie Mortgages," see 65 Emory L.J. 795 (2016).

RESEARCH REFERENCES

C.J.S. - 59 C.J.S. (Rev), Mortgages, § 73 et seq.

7-1-1000. Definitions.

As used in this article, the term:

  1. "Affiliate" or "person affiliated with" means, when used with reference to a specified person, a person who directly, indirectly, or through one or more intermediaries controls, is controlled by, or is under common control with the person specified. Any beneficial owner of 10 percent or more of the securities of a person or any executive officer, director, trustee, joint venturer, or general partner of a person is an affiliate of such person unless the shareholder, executive officer, director, trustee, joint venturer, or general partner shall prove that he or she in fact does not control, is not controlled by, or is not under common control with such person.
  2. "Audited financial statement" means the product of the examination of financial statements in accordance with generally accepted auditing standards by an independent certified public accountant, which product consists of an opinion on the financial statements indicating their conformity with generally accepted accounting principles.
  3. "Commissioner" means the commissioner of banking and finance.
  4. "Commitment" or "commitment agreement" means a statement by a lender required to be licensed or registered under this article that sets forth the terms and conditions upon which the lender is willing to make a particular mortgage loan to a particular borrower.
  5. "Control," including "controlling," "controlled by," and "under common control with,"' means the direct or indirect possession of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting or nonvoting securities, by contract, or otherwise.
  6. "Department" means the Department of Banking and Finance.
  7. "Depository institution" has the same meaning as in Section 3 of the Federal Deposit Insurance Act, 12 U.S.C. Section 1813(c), and includes any credit union.
  8. "Dwelling" means a residential structure that contains one to four units, whether or not that structure is attached to real property pursuant to Regulation Z Section 226.2(a)(19). The term includes an individual condominium unit, cooperative unit, mobile home, and trailer if it is used as a residence.
  9. "Executive officer" means the chief executive officer, the president, the principal financial officer, the principal operating officer, each vice president with responsibility involving policy-making functions for a significant aspect of a person's business, the secretary, the treasurer, or any other person performing similar managerial or supervisory functions with respect to any organization whether incorporated or unincorporated.
  10. "Extortionate means" means the use or the threat of violence or other criminal means to cause harm to the person, reputation of the person, or property of the person.
  11. "Federal banking agencies" means the Comptroller of the Currency, the National Credit Union Administration, and the Federal Deposit Insurance Corporation. Such term shall also include the Board of Governors of the Federal Reserve System.
  12. "Georgia Residential Mortgage Act" means this article, which also includes certain provisions in order to implement the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008.
  13. "Individual" means a natural person.
  14. "License" means a license issued by the department under this article to act as a mortgage loan originator, mortgage lender, or mortgage broker.
  15. "Loan processor or underwriter" means an individual who performs clerical or support duties as an employee at the direction of and subject to the supervision and instruction of a person licensed or exempt from licensing. For purposes of this paragraph, "clerical or support duties" may include, subsequent to the receipt of an application, the receipt, collection, distribution, and analysis of information common for the processing or underwriting of a residential mortgage loan; and communicating with a consumer to obtain the information necessary for the processing or underwriting of a loan, to the extent that such communication does not include offering or negotiating loan rates or terms or counseling consumers about residential mortgage loan rates or terms. An individual engaging solely in loan processor or underwriter activities shall not represent to the public, through advertising or other means of communicating or providing information, including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items, that such individual can or will perform any of the activities of a mortgage loan originator.
  16. "Lock-in agreement" means a written agreement whereby a lender or a broker required to be licensed or registered under this article guarantees for a specified number of days or until a specified date the availability of a specified rate of interest for a mortgage loan, a specified formula by which the rate of interest will be determined, or a specific number of discount points if the mortgage loan is approved and closed within the stated period of time.
  17. "Makes a mortgage loan" means to advance funds, offer to advance funds, or make a commitment to advance funds to an applicant for a mortgage loan.
  18. "Misrepresent"' means to make a false statement of a substantive fact. Misrepresent may also mean to intentionally engage in any conduct which leads to a false belief which is material to the transaction.
  19. "Mortgage broker" means any person who directly or indirectly solicits, processes, places, or negotiates mortgage loans for others, or offers to solicit, process, place, or negotiate mortgage loans for others or who closes mortgage loans which may be in the mortgage broker's own name with funds provided by others and which loans are assigned within 24 hours of the funding of the loans to the mortgage lenders providing the funding of such loans.
  20. "Mortgage lender" means any person who directly or indirectly makes, originates, underwrites, holds, or purchases mortgage loans or who services mortgage loans.
  21. "Mortgage loan" means a loan or agreement to extend credit made to a natural person, which loan is secured by a deed to secure debt, security deed, mortgage, security instrument, deed of trust, or other document representing a security interest or lien upon any interest in one-to-four family residential property located in Georgia, regardless of where made, including the renewal or refinancing of any such loan.
  22. "Mortgage loan originator" means an individual who for compensation or gain or in the expectation of compensation or gain takes a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan. Generally, this does not include an individual engaged solely as a loan processor or underwriter except as otherwise provided in subsection (a.1) of Code Section 7-1-1002; a person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with Georgia law unless the person or entity is compensated by a mortgage lender, mortgage broker, or other mortgage loan originator or by any agent of such mortgage lender, mortgage broker, or other mortgage loan originator; and does not include a person or entity solely involved in extensions of credit relating to time-share plans, as that term is defined in 11 U.S.C. Section 101(53D).
  23. "Nation-wide Multistate Licensing System and Registry" means a mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for the licensing and registration of licensed mortgage loan originators, mortgage loan brokers, and mortgage loan lenders, or its successor.
  24. "Nontraditional mortgage product" means any mortgage product other than a 30 year fixed rate mortgage.
  25. "Person" means any individual, sole proprietorship, corporation, limited liability company, partnership, trust, or any other group of individuals, however organized.
  26. "Real estate brokerage activity" means any activity that involves offering or providing real estate brokerage services to the public, including acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property; bringing together parties interested in the sale, purchase, lease, rental, or exchange of real property; negotiating, on behalf of any party, any portion of a contract relating to the sale, purchase, lease, rental, or exchange of real property, other than in connection with providing financing with respect to any such transaction; engaging in any activity for which a person engaged in the activity is required to be registered or licensed as a real estate agent or real estate broker under any applicable law; and offering to engage in any activity or act in any capacity described herein.
  27. "Registered mortgage loan originator" means any individual who meets the definition of mortgage loan originator, is registered with and maintains a unique identifier through the Nation-wide Multistate Licensing System and Registry, and is an employee of:
    1. A depository institution;
    2. A subsidiary that is:
      1. Owned and controlled by a depository institution; and
      2. Regulated by a federal banking agency; or
    3. An institution regulated by the Farm Credit Administration.
  28. "Registrant" means any person required to register pursuant to Code Sections 7-1-1001 and 7-1-1003.2.
  29. "Residential property" means improved real property used or occupied, or intended to be used or occupied, as the primary residence of a natural person. Such term does not include rental property or second homes. A natural person can have only one primary residence.
  30. "Residential mortgage loan" means any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling, as defined in Section 103(v) of the Truth in Lending Act, or residential real estate upon which is constructed or intended to be constructed a dwelling.
  31. "Residential real estate" means any real property located in Georgia upon which is constructed or intended to be constructed a dwelling.
  32. "Service a mortgage loan" means the collection or remittance or the right to collect or remit payments of principal, interest, trust items such as insurance and taxes, and any other payments pursuant to a mortgage loan.
  33. "Ultimate equitable owner" means a natural person who, directly or indirectly, owns or controls an ownership interest in a corporation or any other form of business organization, regardless of whether such natural person owns or controls such ownership interest through one or more natural persons or one or more proxies, powers of attorney, nominees, corporations, associations, limited liability companies, partnerships, trusts, joint-stock companies, other entities or devices, or any combination thereof.
  34. "Unique identifier" means a number or other identifier assigned by protocols established by the Nation-wide Multistate Licensing System and Registry. (Code 1981, § 7-1-1000 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 1994, p. 570, § 1; Ga. L. 1996, p. 848, § 13; Ga. L. 1997, p. 143, § 7; Ga. L. 1997, p. 485, §§ 29, 30; Ga. L. 2000, p. 174, § 22; Ga. L. 2005, p. 826, § 29/SB 82; Ga. L. 2005, p. 1030, § 13/SB 55; Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2011, p. 518, § 6/HB 239; Ga. L. 2015, p. 5, § 7/HB 90; Ga. L. 2016, p. 390, § 6-1/HB 811; Ga. L. 2018, p. 214, § 24/HB 780.)

The 2015 amendment, effective March 13, 2015, part of an Act to revise, modernize, and correct the Code, deleted "the Director of the Office of Thrift Supervision," preceding "the National" in paragraph (11); and substituted "subsection (a.1) of Code Section 7-1-1002" for "paragraph (5) of subsection (a) of Code Section 7-1-1002" in the second sentence of paragraph (22).

The 2016 amendment, effective July 1, 2016, substituted "Nation-wide Multistate Licensing System and Registry" for "Nationwide Mortgage Licensing System and Registry" throughout this Code section.

The 2018 amendment, effective May 3, 2018, in paragraph (32), deleted "for another" following "remittance" and deleted "for another of" following "remit". See Editor's notes for applicability.

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1993, "attorney" was substituted for "attorneys" in paragraph (12) (now paragraph (33)).

Editor's notes. - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

Law reviews. - For survey article on real property law, see 60 Mercer L. Rev. 345 (2008). For note, "State-Imposed Interest Rate Ceilings and Home Equity Loan Scandal in Georgia," see 11 Ga. St. U.L. Rev. 591 (1995).

JUDICIAL DECISIONS

Construction. - Georgia Residential Mortgage Act, O.C.G.A. § 7-1-1000 et seq., gives rights not had under the common law and, thus, the Act is in derogation of the common law and must be strictly construed. Hartford Fire Ins. Co. v. iFreedom Direct Corp., 312 Ga. App. 262 , 718 S.E.2d 103 (2011), cert. denied, No. S12C0408, 2012 Ga. LEXIS 246 (Ga. 2012).

7-1-1001. Exemption for certain persons and entities; registration requirements.

  1. The following persons shall not be required to obtain a mortgage loan originator, mortgage broker, or mortgage lender license and shall not be subject to the provisions of this article but may be subject to registration requirements, unless otherwise provided by this article:
    1. Any lender authorized to engage in business as a bank, credit card bank, savings institution, or credit union under the laws of the United States, any state or territory of the United States, or the District of Columbia, the deposits of which are federally insured;
    2. Any wholly owned subsidiary of any lender described in paragraph (1) of this subsection. Any subsidiary that violates any applicable law of this article may be subject to a cease and desist order as provided for in Code Section 7-1-1018;

      (2.1) Any wholly owned subsidiary of any bank holding company; provided, however, that such subsidiary shall be subject to registration requirements in order to facilitate the department's handling of consumer inquiries. Such requirements are contained in Code Section 7-1-1003.3;

    3. Registered mortgage loan originators, when acting for an entity described in paragraph (1) or (2) of this subsection. To qualify for this exemption, an individual shall be registered with and maintain a unique identifier through registration with the Nation-wide Multistate Licensing System and Registry;
    4. Any individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member of such individual. For purposes of this exemption, the term "immediate family member" means a spouse, child, sibling, parent, grandparent, or grandchild. Immediate family members shall include stepparents, stepchildren, stepsiblings, and adoptive relationships;
    5. An attorney licensed to practice law in Georgia who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney's representation of the client, unless the attorney is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker, or other mortgage loan originator;
    6. A Georgia licensed real estate broker or real estate salesperson not actively engaged in the business of negotiating mortgage loans or a Georgia licensed real estate salesperson providing information to a lender or its agent related to an existing or potential short sale transaction in which a separate fee is not received by such real estate broker or real estate salesperson; however, such real estate broker or real estate salesperson who directly or indirectly negotiates, places, or finds a mortgage for others shall not be exempt from the provisions of this article;
    7. Any person performing any act relating to mortgage loans under order of any court;
    8. Any natural person or the estate of or trust created by a natural person making a mortgage loan with his or her own funds for his or her own investment, including those natural persons or the estates of or trusts created by such natural persons who make a purchase money mortgage for financing sales of their own property;
    9. The United States of America, the State of Georgia or any other state, and any agency, division, or corporate instrumentality of any governmental entity, including without limitation: the Georgia Housing and Finance Authority, the Georgia Development Authority, the Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage Corporation (FHLMC), the Government National Mortgage Association (GNMA), the United States Department of Housing and Urban Development (HUD), the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), the Farmers Home Administration (FmHA), and the Farm Credit Administration and its chartered agricultural credit associations;
    10. Any individual who offers or negotiates terms of a residential mortgage loan secured by a dwelling that serves as the individual's residence;
    11. Any person who makes a mortgage loan to an employee of such person as an employment benefit;
    12. Any licensee under Chapter 3 of this title, the "Georgia Industrial Loan Act," provided that any mortgage loan made by such licensee is for $3,000.00 or less;
    13. Nonprofit corporations making mortgage loans to promote home ownership or improvements for the disadvantaged;
    14. A natural person employed by a licensed or registered mortgage broker, a licensed or registered mortgage lender, or any person exempted from the mortgage broker or mortgage lender licensing requirements of this article when acting within the scope of employment and under the supervision of the mortgage broker or mortgage lender or exempted person as an employee and not as an independent contractor, except those natural persons exempt from licensure as a mortgage broker or mortgage lender under paragraph (17) of this subsection. To be exempt from licensure as a mortgage broker or mortgage lender, a natural person shall be employed by only one such employer and shall be at all times eligible for employment in compliance with the provisions and prohibitions of Code Section 7-1-1004. Such natural person, who meets the definition of mortgage loan originator provided in paragraph (22) of Code Section 7-1-1000, shall be subject to mortgage loan originator licensing requirements. A natural person against whom a cease and desist order has become final shall not qualify for this exemption while under the employment time restrictions of subsection (o) of Code Section 7-1-1004 if such order was based on a violation of Code Section 7-1-1002 or 7-1-1013 or whose license was revoked within five years of the date such person was hired;
    15. Any person who purchases mortgage loans from a mortgage broker or mortgage lender solely as an investment and who is not in the business of brokering, making, purchasing, or servicing mortgage loans;
    16. Any natural person who makes five or fewer mortgage loans in any one calendar year. A person other than a natural person who makes five or fewer mortgage loans in any one calendar year shall not be exempt from the licensing requirements of this article;
      1. A natural person otherwise required to be licensed as a mortgage lender or mortgage broker, who is under an exclusive written independent contractor agreement with any person that is a wholly owned subsidiary of a financial holding company or bank holding company, savings bank holding company, or thrift holding company, which subsidiary also meets the following requirements, subject to the review and approval of the department:
        1. The subsidiary has provided an undertaking of accountability supported by a surety bond equal to the lesser of $1 million or $50,000.00 per exempt person, to cover all of its persons exempted by this paragraph, that includes full and direct financial responsibility for the mortgage broker activities of each such exempted person, and also provides for the education of the exempt persons, the handling of consumer complaints related to the exempt persons, and the supervision of the mortgage broker activities of the exempt persons;
        2. The subsidiary has applied for and been granted a mortgage broker or mortgage lender license, consistent with the provisions of this article and renewable annually; and
        3. The subsidiary has paid applicable fees for this license, which license fees shall be the lesser of one-half of the sum of the cost of the individual licenses or $100,000.00.
      2. To maintain the exemption, a natural person shall:
        1. Solicit, process, place, or negotiate a mortgage loan to be made only by the licensed subsidiary or its affiliate; and
        2. Be at all times in compliance with the provisions and prohibitions of Code Section 7-1-1013 and the provisions and prohibitions applicable to employees under Code Section 7-1-1004.
      3. For purposes of this paragraph, the term "financial holding company" means a financial holding company as defined in the Bank Holding Company Act of 1956, as amended.
      4. The commissioner shall provide by rule or regulation for the implementation of this paragraph; or
      1. An employee of a bona fide nonprofit corporation who acts as a mortgage loan originator only with respect to his or her work duties with the bona fide nonprofit corporation and who acts as a mortgage loan originator only with respect to mortgage loans with terms that are favorable to the borrower shall be exempt from obtaining a mortgage loan originator license. In order for a corporation to be considered a bona fide nonprofit corporation under this paragraph, the department shall determine, under criteria and pursuant to processes established by the department, that the nonprofit corporation:
        1. Has the status of a tax-exempt organization under Section 501(c) (3) of the Internal Revenue Code of 1986;
        2. Promotes affordable housing;
        3. Conducts its activities in a manner that serves public or charitable purposes, rather than commercial purposes;
        4. Receives funding and revenue and charges fees in a manner that does not incentivize it or its employees to act other than in the best interests of its clients;
        5. Compensates its employees in a manner that does not incentivize employees to act other than in the best interests of its clients;
        6. Provides or identifies for the borrower mortgage loans with terms favorable to the borrower and comparable to mortgage loans and housing assistance provided under government housing assistance programs. In order for mortgage loans to have terms that are favorable to the borrower, the department shall determine that the terms are consistent with loan origination in a public or charitable context, rather than in a commercial context; and
        7. Satisfies the exemption from licensure set forth in paragraph (13) of this subsection.
      2. The department shall periodically examine the books and activities of an organization it has previously identified as a bona fide nonprofit corporation for purposes of this paragraph in order to determine if it continues to meet the criteria for such status under subparagraph (A) of this paragraph. In conducting such an examination, the department shall have all of the powers set forth in Code Section 7-1-1009. In the event the nonprofit corporation no longer qualifies for such status, then the employee exemption from having a mortgage loan originator license shall no longer be applicable.
  2. Exemptions enumerated in paragraphs (1), (2), (2.1), (7), (8), (9), (11), (12), (13), (14), (15), (16), and (17) of subsection (a) of this Code section shall be exemptions from licensure as a mortgage broker or mortgage lender only. Nothing in paragraphs (1), (2), (2.1), (7), (8), (9), (11), (12), (13), (14), (15), (16), and (17) of subsection (a) of this Code section shall be intended to exempt natural persons from compliance with mortgage loan originator licensing requirements as set forth in this article and the Secure and Fair Enforcement for Mortgage Licensing Act of 2008. Individuals that transact business as a mortgage loan originator, unless specifically exempted by paragraph (3), (4), (5), (6), (10), or (18) of subsection (a) of this Code section, shall obtain a mortgage loan originator license as required by Code Section 7-1-1002 whether they are employed by a mortgage broker, mortgage lender, or person exempted as a mortgage broker or lender as set forth in this subsection. (Code 1981, § 7-1-1001 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 1994, p. 570, § 2; Ga. L. 1996, p. 848, § 14; Ga. L. 1997, p. 485, § 31; Ga. L. 1999, p. 674, § 30; Ga. L. 2000, p. 174, § 23; Ga. L. 2003, p. 843, § 16; Ga. L. 2006, p. 750, § 1/SB 505; Ga. L. 2007, p. 502, § 33/SB 70; Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2010, p. 878, § 7/HB 1387; Ga. L. 2011, p. 518, § 7/HB 239; Ga. L. 2011, p. 752, § 7/HB 142; Ga. L. 2012, p. 775, § 7/HB 942; Ga. L. 2013, p. 638, § 1/HB 83; Ga. L. 2014, p. 421, § 1/HB 750; Ga. L. 2016, p. 390, §§ 6-1, 7-4/HB 811.)

The 2013 amendment, effective July 1, 2013, in paragraph (a)(6), inserted "Georgia licensed" near the beginning and, near the middle, inserted "or a Georgia licensed real estate salesperson providing information to a lender or its agent related to an existing or potential short sale transaction in which a separate fee is not received by such real estate broker or real estate salesperson" and substituted "such real estate" for "a real estate".

The 2014 amendment, effective April 21, 2014, deleted "or" at the end of paragraph (a)(16); added "; or" at the end of subparagraph (a)(17)(D); added paragraph (a)(18); and substituted "(6), (10), or (18)" for "(6), or (10)" near the middle of the last sentence of subsection (b).

The 2016 amendment, effective July 1, 2016, deleted "building and loan association," following "savings institution," in paragraph (a)(1); and substituted "Nation-wide Multistate Licensing System and Registry" for "Nationwide Mortgage Licensing System and Registry" in paragraph (a)(3).

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1993, a semicolon was substituted for a period at the end of paragraph (6) of subsection (a) (now paragraph (a)(8)).

Pursuant to Code Section 28-9-5, in 2000, "Code section" was substituted for "subsection" in the first sentence in paragraph (2) (now paragraph (a)(2)).

Law reviews. - For annual survey on real property, see 65 Mercer L. Rev. 233 (2013).

7-1-1001.1. Requirement for mortgage loan originator license; application to sellers of mobile homes.

  1. Effective August 1, 2010, it shall be prohibited for any person to engage in the activities of a mortgage loan originator without first obtaining and maintaining a mortgage loan originator license as set forth in this article. All provisions within this article that relate to the licensing requirements and associated duties and responsibilities of mortgage loan originators shall be effective as of August 1, 2010.
  2. The department shall have the broad administrative authority to administer, interpret, and enforce this article and the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008, and promulgate rules or regulations implementing it, in order to carry out the intentions of the federal legislation.
  3. The provisions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 shall apply to the activities of retail sellers of manufactured homes to the extent determined by the United States Department of Housing and Urban Development through written guidelines, rules, regulations, or interpretive letters. (Code 1981, § 7-1-1001.1 , enacted by Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2011, p. 518, § 8/HB 239.)

7-1-1002. Transaction of business without a license, registration, or exemption prohibited; knowing purchase of mortgage loan from unlicensed or nonexempt broker or lender prohibited; liability of persons controlling violators.

  1. It shall be prohibited for any person to transact business in this state directly or indirectly as a mortgage broker, a mortgage lender, or a mortgage loan originator unless such person:
    1. Is licensed or registered as such by the department utilizing the Nation-wide Multistate Licensing System and Registry;
    2. Is exempted from the licensing or registration requirements pursuant to Code Section 7-1-1001;
    3. In the case of an employee of a mortgage broker or mortgage lender, has qualified to be relieved of the necessity for a license under the employee exemption in paragraph (14) of subsection (a) of Code Section 7-1-1001; or
    4. In the case of a mortgage loan originator, is supervised by a mortgage broker, mortgage lender, or exemptee on a daily basis while performing mortgage functions; is employed by and works exclusively for only one mortgage broker, mortgage lender, or exemptee; and is paid on a W-2 basis by the employing mortgage broker, mortgage lender, or exemptee, except those natural persons exempt from licensure as a mortgage broker or mortgage lender under paragraph (17) of subsection (a) of Code Section 7-1-1001. Each licensed mortgage loan originator shall register with and maintain a valid unique identifier issued by the Nation-wide Multistate Licensing System and Registry. For the purposes of implementing an orderly and efficient mortgage loan originator process, the department may establish licensing rules or regulations and interim procedures for licensing and acceptance of applications.

    (a.1) A loan processor or underwriter who is an independent contractor shall not engage in the activities of a loan processor or underwriter unless such independent contractor loan processor or underwriter obtains and maintains a mortgage broker or mortgage lender license. Each independent contractor loan processor or underwriter licensed as a mortgage broker or mortgage lender shall have and maintain a valid unique identifier issued by the Nation-wide Multistate Licensing System and Registry.

  2. It shall be prohibited for any person, as defined in Code Section 7-1-1000, to purchase, sell, or transfer one or more mortgage loans or loan applications from or to a mortgage loan originator, mortgage broker, or mortgage lender who is neither licensed nor exempt from the licensing or registration provisions of this article. Such a purchase shall not affect the obligation of the borrower under the terms of the mortgage loan. The department shall provide for distribution or availability of information regarding approved or revoked licenses.
  3. Every person who directly or indirectly controls a person who violates subsection (a), (a.1), or (b) of this Code section, every general partner, executive officer, joint venturer, or director of such person, and every person occupying a similar status or performing similar functions as such person violates with and to the same extent as such person, unless the person whose violation arises under this subsection sustains the burden of proof that he or she did not know and, in the exercise of reasonable care, could not have known of the existence of the facts by reason of which the original violation is alleged to exist. (Code 1981, § 7-1-1002 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 1995, p. 673, § 33; Ga. L. 1996, p. 848, § 15; Ga. L. 1998, p. 795, § 28; Ga. L. 2000, p. 174, § 24; Ga. L. 2003, p. 843, § 17; Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2010, p. 878, § 7/HB 1387; Ga. L. 2011, p. 518, § 9/HB 239; Ga. L. 2015, p. 5, § 7/HB 90; Ga. L. 2016, p. 390, § 6-1/HB 811; Ga. L. 2017, p. 774, § 7/HB 323.)

The 2015 amendment, effective March 3, 2015, part of an Act to revise, modernize, and correct the Code, in subsection (a), deleted "a person" preceding "exempted from" in paragraph (a)(2), in paragraph (a)(3), deleted "such person" preceding "has qualified" near the beginning and added "or" at the end, and substituted a period for "; or" at the end of paragraph (a)(4); redesignated former paragraph (a)(5) as subsection (a.1); and in subsection (c), substituted "subsection (a), (a.1)," for "subsection (a)".

The 2016 amendment, effective July 1, 2016, in subsection (a), substituted "Nation-wide Multistate Licensing System and Registry" for "Nationwide Mortgage Licensing System and Registry" in paragraph (1), in the second sentence of paragraph (4), and at the end of subsection (a.1).

The 2017 amendment, effective May 9, 2017, part of an Act to revise, modernize, and correct the Code, deleted "such person" preceding "is supervised" near the beginning of paragraph (a)(4).

7-1-1003. Applications for licenses.

  1. An application for a license under this article shall be made in writing, under oath, and in such form as the department may prescribe. Each such form shall contain content as set forth by rule, regulation, instruction, or procedure of the department and may be changed or updated as necessary by the department in order to carry out the purposes of this article. The department, by regulation, may prescribe different classes of licenses for mortgage loan originators, mortgage brokers, and mortgage lenders.
  2. The application shall include the following:
    1. The legal name and address of the applicant and, if the applicant is a partnership, association, corporation, or other business entity, of every member, officer, and director thereof;
    2. All names, including, but not limited to, website domain names (URLs), under which the applicant will conduct business in Georgia;
    3. For mortgage brokers and mortgage lenders, the address of the main office or principal place of business where books and records are located and any other locations at which the applicant will engage in any business activity covered by the provisions of this article, together with the mailing address where the department shall send all correspondence, orders, or notices. Any changes in this mailing address shall be delivered in writing to the department before the change is effective;
    4. For mortgage brokers and mortgage lenders, the complete name and address of the applicant's initial registered agent and registered office for service of process in Georgia. If the applicant is a Georgia corporation, this registered agent shall be the same as the agent recorded with the Secretary of State. Any changes in the registered agent or registered office shall be delivered in writing to the department and the Secretary of State, if applicable, before the change is effective. The registered agent may, but is not required to, be an officer of the applicant, and the registered office shall be a Georgia location where the registered agent may be served;
    5. For mortgage brokers and mortgage lenders, the general plan and character of the business;
    6. For mortgage brokers and mortgage lenders, a financial statement of the applicant;
    7. For mortgage brokers and mortgage lenders, such other data, financial statements, and pertinent information as the department may require with respect to the applicant, its directors, trustees, officers, members, agents, or ultimate equitable owners of 10 percent or more of the applicant; and
    8. For mortgage brokers and mortgage loan originators, evidence of satisfaction of experience or education requirements, as required by regulations of the department.
  3. All applications filed under this Code section shall be filed together with:
    1. Investigation and supervision fees established by regulation;
    2. The items required by Code Section 7-1-1003.2 ; and
    3. Other information as may be required by the department. (Code 1981, § 7-1-1003 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 1994, p. 570, § 3; Ga. L. 1996, p. 848, § 16; Ga. L. 1999, p. 674, § 31; Ga. L. 2000, p. 174, § 25; Ga. L. 2001, p. 970, § 10; Ga. L. 2005, p. 826, § 30/SB 82; Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2015, p. 344, § 33/HB 184.)

The 2015 amendment, effective July 1, 2015, deleted ". The investigation fee shall not be refundable; provided, however, that any supervision fee paid at the time of the application shall be refunded if the license is not granted" following "by regulation" in paragraph (c)(1).

JUDICIAL DECISIONS

Commercial property - Earlier version of O.C.G.A. § 7-1-1003(c)(2) did not include loans secured by commercial property represented to be residential; therefore, a purchaser of commercial property was unable to recover a bond to partially satisfy a judgment against a fraudulent mortgage broker. Accerbi v. Hartford Fire Ins. Co., F. Supp. 2d (S.D. Ga. Sept. 26, 2005).

Acts not covered by bond. - Trial court erred in granting a purchaser summary judgment and in denying an insurer summary judgment in the purchaser's action to recover against a bond the insurer issued to a mortgage lender under the Georgia Residential Mortgage Act, O.C.G.A. § 7-1-1000 et seq., because the acts that gave rise to the judgment the purchaser obtained against the lender occurred before the bond was in effect, and the lender's failure to pay the judgment was not an act that authorized recovery against the bond; the bond did not contain a specific covenant extending liability to acts prior to the bond's execution. Hartford Fire Ins. Co. v. iFreedom Direct Corp., 312 Ga. App. 262 , 718 S.E.2d 103 (2011), cert. denied, No. S12C0408, 2012 Ga. LEXIS 246 (Ga. 2012).

7-1-1003.1. Physical place of business.

If the applicant for a mortgage broker license or a renewal of such license does not have a physical place of business in Georgia, a license or renewal shall only be issued if the applicant's home state does not require that in order to be licensed a mortgage broker shall have a physical place of business in such home state. In either case, an applicant shall have a registered agent and a registered office in this state.

(Code 1981, § 7-1-1003.1 , enacted by Ga. L. 1998, p. 590, § 1; Ga. L. 1999, p. 674, § 32; Ga. L. 2009, p. 252, § 1/HB 312.)

7-1-1003.2. Financial requirements for licensing and registration; bond requirements.

  1. Each licensed or registered mortgage broker shall provide the department with a bond. The bond for a mortgage broker shall be in the principal sum of $150,000.00 or such greater sum as the department may require as set forth by regulation based on an amount that reflects the dollar amount of loans originated, and the bond shall meet the other requirements of subsection (d) of this Code section.
  2. Except as otherwise provided in subsection (d) of this Code section, the department shall not license or register any mortgage lender unless the applicant or registrant provides the department with a bond. The bond for a mortgage lender shall be in the principal sum of $250,000.00 or such greater sum as the department may require as set forth by regulation based on an amount that reflects the dollar amount of loans originated, and which bond shall meet the other requirements of subsection (d) of this Code section.
  3. Each mortgage loan originator shall be covered by the surety bond of his or her sponsoring licensed or registered mortgage broker or lender. In the event that the mortgage loan originator is an employee of a licensed or registered mortgage broker or lender or under an exclusive written independent contractor agreement as described in paragraph (17) of Code Section 7-1-1001, the surety bond of such licensed or registered mortgage broker or lender may be used in lieu of the mortgage loan originator's surety bond requirement.
  4. General bond requirements:
    1. The bond requirements for mortgage loan originators, mortgage brokers, and mortgage lenders are continuous in nature and shall be maintained at all times as a condition of licensure;
    2. The corporate surety bond shall be for a term and in a form satisfactory to the department, shall be issued by a bonding company or insurance company authorized to do business in this state and approved by the department, and shall run to the State of Georgia for the benefit of any person damaged by noncompliance of a licensee with this article, the "Georgia Residential Mortgage Act," or with any condition of such bond. Damages under the bond shall include moneys owed to the department for fees, fines, or penalties. Such bond shall be continuously maintained thereafter in full force. Such bond shall be conditioned upon the applicant or the licensee conducting his or her licensed business in conformity with this article and all applicable laws;
    3. When an action is commenced on a licensee's bond, the department may require the filing of a new bond; and
    4. Immediately upon recovery upon any action on the bond, the licensee shall file a new bond.
  5. Any person including the department who may be damaged by noncompliance of a licensee with any condition of a bond or this article, the "Georgia Residential Mortgage Act," may proceed on such bond against the principal or surety thereon, or both, to recover damages. (Code 1981, § 7-1-1003.2 , enacted by Ga. L. 2000, p. 174, § 26; Ga. L. 2001, p. 970, § 11; Ga. L. 2003, p. 843, § 18; Ga. L. 2004, p. 458, § 11; Ga. L. 2005, p. 826, § 31/SB 82; Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2011, p. 518, § 10/HB 239; Ga. L. 2017, p. 193, § 24/HB 143.)

The 2017 amendment, effective December 31, 2017, substituted "$150,000.00" for "$50,000.00 " in the second sentence of subsection (a); and substituted "$250,000.00" for "$150,000.00" in the second sentence of subsection (b).

Law reviews. - For article, "Business Associations," see 53 Mercer L. Rev. 109 (2001).

JUDICIAL DECISIONS

Acts not covered by bond. - Trial court erred in granting a purchaser summary judgment and in denying an insurer summary judgment in the purchaser's action to recover against a bond the insurer issued to a mortgage lender under the Georgia Residential Mortgage Act, O.C.G.A. § 7-1-1000 et seq., because the acts that gave rise to the judgment the purchaser obtained against the lender occurred before the bond was in effect, and the lender's failure to pay the judgment was not an act that authorized recovery against the bond; the bond did not contain a specific covenant extending liability to acts prior to the bond's execution. Hartford Fire Ins. Co. v. iFreedom Direct Corp., 312 Ga. App. 262 , 718 S.E.2d 103 (2011), cert. denied, No. S12C0408, 2012 Ga. LEXIS 246 (Ga. 2012).

Bond was performance bond, giving surety ability to collaterally attack underlying judgment. - Sureties on a performance bond for a mortgage lender under O.C.G.A. § 7-1-1003.2(b) of the Georgia Residential Mortgage Act were not liable on the bond for a default judgment against the lender because the underlying action should have been barred by res judicata due to a prior suit brought by the same borrower in federal court. Federer v. Zurich Am. Ins. Co., F.3d (11th Cir. July 11, 2017)(Unpublished).

7-1-1003.3. Application for registration.

An application to register as a mortgage lender or broker under this article shall be made annually in writing, under oath, on a form provided by the department, subject to requirements specified by rules and regulations of the department.

(Code 1981, § 7-1-1003.3 , enacted by Ga. L. 2000, p. 174, § 26; Ga. L. 2004, p. 458, § 12; Ga. L. 2009, p. 252, § 1/HB 312.)

7-1-1003.4. Notification statement.

Reserved. Repealed by Ga. L. 2009, p. 252, § 1/HB 312, effective July 1, 2009.

Editor's notes. - This Code section was based on Code 1981, § 7-1-1003.4 , enacted by Ga. L. 2000, p. 174, § 26.

7-1-1003.5. Nation-wide Multistate Licensing System and Registry.

  1. The department is authorized to:
    1. Participate in the Nation-wide Multistate Licensing System and Registry in order to facilitate the sharing of information and standardization of the licensing and application processes for mortgage loan originators, mortgage brokers, and mortgage lenders by electronic or other means;
    2. Enter into operating agreements, information sharing agreements, interstate cooperative agreements, and other contracts necessary for the department's participation in the Nation-wide Multistate Licensing System and Registry;
    3. Request that the Nation-wide Multistate Licensing System and Registry adopt an appropriate privacy, data security, and security breach notification policy that is in full compliance with existing state and federal law;
    4. Disclose or cause to be disclosed without liability via the Nation-wide Multistate Licensing System and Registry applicant and licensee information, including, but not limited to, violations of this article and enforcement actions to facilitate regulatory oversight of mortgage loan originators, mortgage brokers, and mortgage lenders across state jurisdictional lines;
    5. Establish and adopt, by rule or regulation, requirements for participation by applicants and licensees in the Nation-wide Multistate Licensing System and Registry upon the department's determination that each new or amended requirement is consistent with both the public interest and the purposes of this article; and
    6. Pay all fees received from licensees and applicants related to applications, licenses, and renewals to the Office of the State Treasurer; provided, however, that the department may net such fees to recover the cost of participation in the Nation-wide Multistate Licensing System and Registry.
  2. Irrespective of its participation in the Nation-wide Multistate Licensing System and Registry, the department retains full and exclusive authority over determinations whether to grant, renew, suspend, or revoke licenses issued to mortgage loan originators, mortgage brokers, and mortgage lenders under this article. Nothing in this Code section shall be construed to reduce this authority. (Code 1981, § 7-1-1003.5 , enacted by Ga. L. 2008, p. 539, § 1/HB 921; Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2010, p. 863, § 2/SB 296; Ga. L. 2011, p. 518, § 11/HB 239; Ga. L. 2012, p. 775, § 7/HB 942; Ga. L. 2016, p. 390, § 6-1/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted "Nation-wide Multistate Licensing System and Registry" for "Nationwide Mortgage Licensing System and Registry" throughout this Code section.

7-1-1003.6. Privileged or confidential nature of information; exception.

  1. Except as otherwise provided in the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008, the requirements under any federal law or Georgia state law regarding the privacy or confidentiality of any information or material provided to the Nation-wide Multistate Licensing System and Registry and any privilege arising under federal or state law, including the rules of any federal or state court, with respect to such information or material, shall continue to apply to such information or material after the information or material has been disclosed to the Nation-wide Multistate Licensing System and Registry. Such information and material may be shared with all state and federal regulatory agencies or law enforcement authorities without the loss of privilege or the loss of confidentiality protection provided by federal or state law.
  2. Information or material that is subject to privilege or confidentiality under subsection (a) of this Code section shall not be subject to:
    1. Disclosure under any federal or state law governing the disclosure to the public of information held by an officer or an agency of the federal government or the respective state; or
    2. Subpoena or discovery, or admission into evidence, in any private civil action unless with respect to any privilege held by the Nation-wide Multistate Licensing System and Registry regarding such information or material, the person to whom such information or material pertains waives, in whole or in part, in the discretion of such person that privilege.
  3. This Code section shall not apply with respect to the information or material relating to the employment history of, and publicly adjudicated disciplinary and enforcement actions against, licensees that are included in the Nation-wide Multistate Licensing System and Registry for access by the public. (Code 1981, § 7-1-1003.6 , enacted by Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2011, p. 518, § 12/HB 239; Ga. L. 2016, p. 390, § 6-1/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted "Nation-wide Multistate Licensing System and Registry" for "Nationwide Mortgage Licensing System and Registry" throughout this Code section.

Code Commission notes. - Pursuant to Code Section 28-9-5, in 2009, in subsection (a), "confidentiality" was substituted for "confidentially" in the first sentence, and in subsection (b), "to privilege or confidentiality" was substituted for "to a privilege or confidentially" in the introductory language.

7-1-1003.7. Approval of mortgage industry related courses; application; renewal applications; audits.

  1. Any education provider which offers mortgage industry related courses designed to satisfy education requirements as provided in subsection (c) of Code Section 7-1-1004 and associated department rules shall be approved by the department.
  2. An application under this Code section shall be made in writing, under oath, and in such form as the department may prescribe. The application shall include the following:
    1. The name and address of the applicant and, if the entity is not a sole proprietorship, the name of every member, officer, principal, or director thereof;
    2. The name under which the applicant will conduct business in Georgia;
    3. A proposed certificate program or course of study which lists each subject to be taught and credit or classroom hours for each course designed to satisfy education requirements;
    4. Qualifications and credentials of any and all instructors teaching courses named in paragraph (3) of this subsection; and
    5. Other information as may be required by the department.
  3. The initial application shall be filed with the department along with fees established by rule, no portion of which shall be refunded or prorated. Upon receipt of an application, the department shall conduct such investigation as it deems necessary to determine that the applicant and the individuals who direct the affairs or establish policy for the applicant, including the officers, directors, or the equivalent, are of good character and ethical reputation; that the applicant and such persons meet the requirements of subsection (h) of Code Section 7-1-1004; that the applicant and such persons demonstrate reasonable financial responsibility; that the applicant has and maintains a registered agent for service in this state; and that the applicant and such persons are qualified by education and experience to present courses directly related to the mortgage brokering process.
  4. All education providers approved under this Code section shall be required to file a renewal application on an annual basis in writing, under oath, and in such a form as the department may prescribe. A fee established by the department shall be paid with each renewal application, which fee shall not be refunded or prorated. Failure to file a renewal application shall result in the education provider being removed from the department list of approved mortgage education providers.
  5. The department may audit or investigate course offerings of the applicant or approved mortgage education provider as it deems necessary and without cost to the department. (Code 1981, § 7-1-1003.7 , enacted by Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2010, p. 878, § 7/HB 1387; Ga. L. 2011, p. 518, § 13/HB 239.)

7-1-1004. Investigation of applicant and its officers; audit; education, experience, and other requirements relative to licensees and registrants.

  1. Upon receipt of an application for license or registration, the department shall conduct such investigation as it deems necessary to determine that the mortgage broker and mortgage lender applicant and the individuals who direct the affairs or establish policy for the mortgage broker and mortgage lender applicant, including the officers, directors, or the equivalent, are of good character and ethical reputation; that the mortgage broker and mortgage lender applicant is not disqualified for licensure as a result of adverse administrative civil or criminal findings in any jurisdiction; that the mortgage broker and mortgage lender applicant and such persons meet the requirements of subsection (h) of this Code section; that the mortgage broker and mortgage lender applicant and such persons demonstrate reasonable financial responsibility; that the mortgage broker and mortgage lender applicant has reasonable policies and procedures to receive and process customer grievances and inquiries promptly and fairly; and that the mortgage broker and mortgage lender applicant has and maintains a registered agent for service in this state.
  2. The department shall not license or register any mortgage broker and mortgage lender applicant unless it is satisfied that the mortgage broker and mortgage lender applicant may be expected to operate its mortgage lending or brokerage activities in compliance with the laws of this state and in a manner which protects the contractual and property rights of the citizens of this state.
  3. The department may establish by rule or regulation minimum education or experience requirements for an applicant for a mortgage broker license or renewal of such a license.
  4. Upon receipt of an application for a mortgage loan originator license, the department shall conduct such investigation as it deems necessary to determine that the mortgage loan originator applicant:
    1. Has never had a mortgage loan originator license revoked in any governmental jurisdiction, except that a subsequent formal vacation of such revocation shall not be deemed a revocation;
    2. Has not been convicted of, or pleaded guilty or nolo contendere to, a felony in a domestic, foreign, or military court; provided, however, that any pardon of a conviction shall not be a conviction for purposes of this subsection;
    3. Has demonstrated financial responsibility, character, and general fitness such as to command the confidence of the community and to warrant a determination that the mortgage loan originator will operate honestly, fairly, and efficiently within the purposes of this article;
    4. Has completed the prelicensing education requirement described in subsection (e) of this Code section; and
    5. Has passed a written test that meets the test requirement described in subsection (f) of this Code section.
    1. An individual shall complete at least 20 hours of prelicensing education courses reviewed and approved by the Nation-wide Multistate Licensing System and Registry based upon reasonable standards. Review and approval of a prelicensing education course shall include review and approval of the course provider. The 20 hours of prelicensing education shall include at least:
      1. Three hours of federal law and regulations;
      2. Three hours of ethics, which shall include instruction on fraud, consumer protection, and fair lending issues; and
      3. Two hours of training related to lending standards for the nontraditional mortgage product marketplace.
    2. Nothing in this subsection shall preclude any prelicensing education course, as approved by the Nation-wide Multistate Licensing System and Registry, that is provided by the employer of the mortgage loan originator applicant or an entity which is affiliated with the applicant by an agency contract, or any subsidiary or affiliate of such employer or entity.
    3. Prelicensing education may be offered either in a classroom, online, or by any other means approved by the Nation-wide Multistate Licensing System and Registry.
    4. The prelicensing education requirements approved by the Nation-wide Multistate Licensing System and Registry in paragraph (1) of this subsection for any state shall be accepted as credit towards completion of prelicensing education requirements in Georgia.
    5. A person previously licensed under this article applying to be licensed again shall prove that he or she has completed all of the continuing education requirements for the year in which the license was last held.
    6. The department is authorized to enact rules and regulations related to the expiration of prelicensing education.
    1. In order to meet the written test requirement referred to in subsection (d) of this Code section for mortgage loan originators, an individual shall pass, in accordance with the standards established under this subsection, a qualified written test developed by the Nation-wide Multistate Licensing System and Registry and administered by a test provider approved by the Nation-wide Multistate Licensing System and Registry based upon reasonable standards.
    2. A written test shall not be treated as a qualified written test for purposes of this subsection unless the test adequately measures the applicant's knowledge and comprehension in appropriate subject areas, including:
      1. Ethics;
      2. Federal law and regulation pertaining to mortgage origination;
      3. State law and regulation pertaining to mortgage origination; and
      4. Federal and state law and regulation, including instruction on fraud, consumer protection, the nontraditional mortgage marketplace, and fair lending issues.
    3. Nothing in this subsection shall prohibit a test provider approved by the Nation-wide Multistate Licensing System and Registry from providing a test at the location of the employer of the applicant or the location of any subsidiary or affiliate of the employer of the applicant or the location of any entity with which the applicant holds an exclusive arrangement to conduct the business of a mortgage loan originator.
      1. An individual shall not be considered to have passed a qualified written test unless the individual achieves a test score of not less than 75 percent correct answers to questions.
      2. An individual may retake a test three consecutive times with each consecutive taking occurring at least 30 days after the preceding test.
      3. After failing three consecutive tests, an individual shall wait at least six months before taking the test again.
      4. A licensed mortgage loan originator who fails to maintain a valid license for a period of five years or longer shall retake the test, not taking into account any time during which such individual is a registered mortgage loan originator.
    1. In order to meet the annual continuing education requirements referred to in paragraph (2) of subsection (e) of Code Section 7-1-1005, a licensed mortgage loan originator shall complete at least eight hours of education approved in accordance with paragraph (2) of this subsection which shall include at least:

      (A) Three hours of federal law and regulations;

      (B) Two hours of ethics, which shall include instruction on fraud, consumer protection, and fair lending issues; and

      (C) Two hours of training related to lending standards for the nontraditional mortgage product marketplace.

    2. For purposes of paragraph (1) of this subsection, continuing education courses shall be reviewed and approved by the Nation-wide Multistate Licensing System and Registry based upon reasonable standards. Review and approval of a continuing education course shall include review and approval of the course provider.
    3. Nothing in this subsection shall preclude any education course from approval by the Nation-wide Multistate Licensing System and Registry that is provided by the employer of the mortgage loan originator or any entity which is affiliated with the mortgage loan originator by an agency contact, or any subsidiary or affiliate of such employer or entity.
    4. Continuing education may be offered either in a classroom, online, or by any other means approved by the Nation-wide Multistate Licensing System and Registry.
    5. A licensed mortgage loan originator, except for as provided for in paragraph (9) of this subsection and subsection (f) of Code Section 7-1-1005, shall only receive credit for a continuing education course in the year in which the course is taken and shall not take the same approved course in the same or successive years to meet the annual requirements for continuing education.
    6. A licensed mortgage loan originator who is an approved instructor of an approved continuing education course may receive credit for the licensed mortgage loan originator's own annual continuing education requirement at the rate of two hours of credit for every one hour taught.
    7. An individual having successfully completed the education requirements approved by the Nation-wide Multistate Licensing System and Registry in paragraph (1) of this subsection for any state shall be accepted as credit towards completion of continuing education requirements in Georgia.
    8. A licensed mortgage loan originator who subsequently becomes unlicensed shall complete the continuing education requirements for the last year in which the license was held prior to issuance of a new or renewed license or the prelicensing education in the event the prelicensing education has expired pursuant to the rules and regulations of the department.
    9. An individual meeting the requirements of subsection (e) of Code Section 7-1-1005 may make up any deficiency in continuing education as established by rule or regulation of the department.
  5. The department shall not issue or may revoke a license or registration if it finds that the mortgage loan originator, mortgage broker, or mortgage lender applicant or licensee, or any person who is a director, officer, partner, agent, employee, or ultimate equitable owner of 10 percent or more of the mortgage broker or mortgage lender applicant, registrant, or licensee or any individual who directs the affairs or establishes policy for the mortgage broker or mortgage lender applicant, registrant, or licensee, has been convicted of a felony in any jurisdiction or of a crime which, if committed within this state, would constitute a felony under the laws of this state. Other than a mortgage loan originator, for the purposes of this article, a person shall be deemed to have been convicted of a crime if such person shall have pleaded guilty or nolo contendere to a charge thereof before a court or federal magistrate or shall have been found guilty thereof by the decision or judgment of a court or federal magistrate or by the verdict of a jury, irrespective of the pronouncement of sentence or the suspension thereof, and regardless of whether first offender treatment without adjudication of guilt pursuant to the charge was entered, or an adjudication or sentence was otherwise withheld or not entered on the charge, unless and until such plea of guilty, or such decision, judgment, or verdict, shall have been set aside, reversed, or otherwise abrogated by lawful judicial process or until probation, sentence, or both probation and sentence of a first offender have been successfully completed and documented, or unless the person convicted of the crime shall have received a pardon therefor from the President of the United States or the governor or other pardoning authority in the jurisdiction where the conviction occurred or shall have received an official certification or pardon granted by the state's pardoning body in the jurisdiction where the conviction occurred. For purposes of this article, a mortgage loan originator shall be deemed to have been convicted of a crime if he or she has pleaded guilty to, been found guilty of, or entered a first offender or nolo contendere plea to a felony in a domestic, foreign, or military court; provided, however, that any pardon of a conviction shall not be a conviction.
  6. The department shall be authorized to obtain conviction data with respect to any mortgage loan originator, mortgage broker, or mortgage lender applicant or any person who is a director, officer, partner, agent, employee, or ultimate equitable owner of 10 percent or more of the mortgage broker or mortgage lender applicant and any individual who directs the affairs of the company or establishes policy. The department may directly submit to the Georgia Crime Information Center two complete sets of fingerprints of such applicant or such person, together with the required records search fees and such other information as may be required. Fees for background checks that the department administers shall be sent to the department by applicants and licensees together with the fingerprints. Mortgage broker and mortgage lender applicants, licensees, and registrants shall have the primary responsibility for obtaining background checks of covered employees which are defined as employees who work in this state and also have the authority to enter, delete, or verify any information on any mortgage loan application form or document. The department shall, however, retain the right to obtain conviction data on covered employees.
  7. In connection with an application for licensing with respect to any mortgage loan originator applicant, mortgage broker, or lender applicant, at the direction of the department, the applicant shall, at a minimum, furnish to the Nation-wide Multistate Licensing System and Registry information concerning the applicant's identity, including:
    1. Fingerprints for submission to the Federal Bureau of Investigation and any governmental agency or entity authorized to receive such information for a state, national, and international criminal history background check;
    2. Personal history and experience in a form prescribed by the Nation-wide Multistate Licensing System and Registry, including the submission of authorization for the Nation-wide Multistate Licensing System and Registry and the department to obtain:
      1. An independent credit report obtained from a consumer reporting agency described in section 603(p) of the Fair Credit Reporting Act, 15 U.S.C. Section 1681a(f); and
      2. Information related to any administrative, civil, or criminal findings by any governmental jurisdiction;
    3. For the purposes set forth in this subsection and in order to reduce the points of contact which the Federal Bureau of Investigation may have to maintain for purposes of such section, the department may use the Nation-wide Multistate Licensing System and Registry as a channeling agent for requesting information from and distributing information to the Department of Justice or any governmental agency; and
    4. For the purposes of this subsection and in order to reduce the points of contact which the department may have to maintain for purposes of such subsection, the department may use the Nation-wide Multistate Licensing System and Registry as a channeling agent for requesting and distributing information to and from any source so directed by the department.
  8. Every mortgage broker and mortgage lender licensee, registrant, and applicant shall be authorized and required to obtain background checks on covered employees. Such background checks shall be handled by the Georgia Crime Information Center pursuant to Code Section 35-3-34 and the rules and regulations of the Georgia Crime Information Center. Licensees, registrants, and applicants shall be responsible for any applicable fees charged by the center. A background check shall be initiated for a person in the employ of a licensee, registrant, or applicant within ten days of the date of initial hire and be completed with satisfactory results within the first 90 days of employment. This provision shall not apply to directors, officers, partners, agents, or ultimate equitable owners of 10 percent or more or to persons who direct the company's affairs or establish policy, whose background shall have been investigated through the department before taking office, beginning employment, or securing ownership. Upon receipt of information from the Georgia Crime Information Center that is incomplete or that indicates an employee has a criminal record in any state other than Georgia, the employer shall submit to the department two complete sets of fingerprints of such person, together with the applicable fees and any other required information. The department shall submit such fingerprints as provided in subsection (i) of this Code section.
  9. Upon receipt of fingerprints, fees, and other required information, the Georgia Crime Information Center shall promptly transmit one set of fingerprints to the Federal Bureau of Investigation for a search of bureau records and an appropriate report and shall retain the other set and promptly conduct a search of its own records and records to which it has access. The Georgia Crime Information Center shall notify the department in writing of any derogatory finding, including, but not limited to, any conviction data regarding the fingerprint records check, or if there is no such finding. All conviction data received by the department or by the applicant, registrant, or licensee shall be used by the party requesting such data for the exclusive purpose of carrying out the responsibilities of this article, shall not be a public record, shall be privileged, and shall not be disclosed to any other person or agency except to any person or agency which otherwise has a legal right to inspect the file. The department shall be entitled to review any applicant's, registrant's, or licensee's files to determine whether the required background checks have been run and whether all covered employees are qualified. The department shall be authorized to discuss the status of employee background checks with licensees. All such records shall be maintained by the department and the applicant or licensee or registrant pursuant to laws regarding such records and the rules and regulations of the Federal Bureau of Investigation and the Georgia Crime Information Center, as applicable. As used in this subsection, "conviction data" means a record of a finding, verdict, or plea of guilty or plea of nolo contendere with regard to any crime, regardless of whether an appeal of the conviction has been sought, subject to the conditions set forth in subsection (h) of this Code section. Violation of this Code section may subject a licensee or registrant to the revocation of its license or registration.
  10. In connection with an application for licensing or registration under this Code section, the department may use the Nation-wide Multistate Licensing System and Registry, when such service is available, as a channeling agent for the submission of fingerprints to the Federal Bureau of Investigation and any governmental agency or entity authorized to receive such information for a state, national, and international criminal history background check. The department is authorized to set forth rules and regulations in order to implement the provisions of this subsection.
  11. The department may deny or revoke a license or registration or otherwise restrict a license or registration if it finds that the mortgage broker or mortgage lender applicant or any person who is a director, officer, partner, or ultimate equitable owner of 10 percent or more or person who directs the company's affairs or who establishes policy of the applicant has been in one or more of these roles as a mortgage lender, broker, or registrant whose license or registration has been denied, revoked, or suspended within five years of the date of the application.
  12. The department shall not issue a license or registration to and may revoke a license or registration from a mortgage broker or mortgage lender applicant, licensee, or registrant if such person:
    1. Has been the recipient of a final cease and desist order issued within the preceding five years if such order was based on a violation of subsection (h) of this Code section or Code Section 7-1-1002 or 7-1-1013;
    2. Employs any other person against whom a final cease and desist order has been issued within the preceding five years if such order was based on a violation of subsection (h) of this Code section or Code Section 7-1-1002 or 7-1-1013; or
    3. Has had his or her license revoked within five years of the date such person was hired or employs any other person who has had his or her license revoked within five years of the date such person was hired.
  13. Each mortgage broker and mortgage lender applicant, licensee, and registrant shall, before hiring an employee, examine the department's public records to determine that such employee is not subject to the type of cease and desist order described in subsection (o) of this Code section.
  14. Within 90 days after receipt of a completed application and payment of licensing fees prescribed by this article, the department shall either grant or deny the request for license or registration.
  15. A person shall not be indemnified for any act covered by this article or for any fine or penalty incurred pursuant to this article as a result of any violation of the law or regulations contained in this article, due to the legal form, corporate structure, or choice of organization of such person, including, but not limited to, a limited liability company. (Code 1981, § 7-1-1004 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 1994, p. 570, § 4; Ga. L. 1996, p. 848, § 17; Ga. L. 1998, p. 795, § 29; Ga. L. 1999, p. 674, § 33; Ga. L. 2000, p. 174, § 27; Ga. L. 2001, p. 4, § 7; Ga. L. 2001, p. 970, § 12; Ga. L. 2002, p. 1220, § 11; Ga. L. 2003, p. 843, § 19; Ga. L. 2004, p. 458, § 13; Ga. L. 2004, p. 631, § 7; Ga. L. 2005, p. 826, § 32/SB 82; Ga. L. 2007, p. 502, § 34/SB 70; Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2010, p. 878, § 7/HB 1387; Ga. L. 2011, p. 518, § 14/HB 239; Ga. L. 2011, p. 752, § 7/HB 142; Ga. L. 2016, p. 390, §§ 6-1, 6-2/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted "Nation-wide Multistate Licensing System and Registry" for "Nationwide Mortgage Licensing System and Registry" throughout this Code section; added paragraph (e)(6); added "or the prelicensing education in the event the prelicensing education has expired pursuant to the rules and regulations of the department" at the end of paragraph (g)(8); and deleted "paragraphs (1) and (3) of" preceding "subsection (e)" in paragraph (g)(9).

Code Commission notes. - Pursuant to Code Section 28-9-5, in 2009, "paragraph (1) of this subsection" was substituted for "paragraph (1) of this Code section" in paragraph (e)(4).

Law reviews. - For article, "Administrative Law," see 53 Mercer L. Rev. 81 (2001). For article, "Business Associations," see 53 Mercer L. Rev. 109 (2001).

JUDICIAL DECISIONS

Standing to challenge constitutionality. - After proceedings to revoke the license of a mortgage lending company for allegedly having an impermissible relationship with an individual in violation of O.C.G.A. § 7-1-1004(e) , the individual, a convicted felon, had standing to bring an independent declaratory judgment action questioning the constitutionality of the subsection. Agan v. State, 272 Ga. 540 , 533 S.E.2d 60 (2000).

7-1-1004.1. Reports of condition.

Each mortgage broker and mortgage lender shall submit to the Nation-wide Multistate Licensing System and Registry reports of condition, which shall be in such form and shall contain such information as the department and the Nation-wide Multistate Licensing System and Registry may require.

(Code 1981, § 7-1-1004.1 , enacted by Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2016, p. 390, § 6-1/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted "Nation-wide Multistate Licensing System and Registry" for "Nationwide Mortgage Licensing System and Registry" twice in this Code section.

7-1-1004.2. Licensees' ability to challenge information.

The department shall establish a process whereby licensees may challenge information entered into the Nation-wide Multistate Licensing System and Registry by the department.

(Code 1981, § 7-1-1004.2 , enacted by Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2016, p. 390, § 6-1/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted "Nation-wide Multistate Licensing System and Registry" for "Nationwide Mortgage Licensing System and Registry" in this Code section.

7-1-1004.3. Visibility requirement for unique identifier of individuals originating residential mortgage loan.

The unique identifier of any person originating a residential mortgage loan shall be clearly shown on all residential mortgage loan application forms, solicitations, or advertisements, including business cards, websites, and any other documents as established by rule, regulation, or order of the department.

(Code 1981, § 7-1-1004.3 , enacted by Ga. L. 2009, p. 252, § 1/HB 312.)

7-1-1005. Renewal of licenses and registrations; expiration.

  1. Except as otherwise specifically provided in this article, all licenses and registrations issued pursuant to this article shall expire on December 31 of each year, and application for renewal shall be made annually on or before December 1 of each year.
  2. Any licensee or registrant making proper application on or before December 1 for the renewal of a license or registration for the following calendar year shall be permitted to continue to operate pending final approval or disapproval of the application if the application for the license or registration is not acted upon prior to January 1. For purposes of this subsection, a "proper application" shall include a requirement that all documentation requesting a renewal has been completed, the requisite continuing education has been successfully obtained, and payment has been made of all outstanding fines and applicable fees required by this article.
  3. No investigation fee shall be payable in connection with the renewal application, but an annual license or registration fee established by regulation of the department to defray the cost of supervision shall be paid with each renewal application, which fee shall not be refunded.
  4. Any person holding a license or registration pursuant to this article who fails to file a proper application for a license or registration renewal for the following license year on or before December 1 and who files an application after December 1 may be required to pay, in addition to the license or registration fees, a fine in an amount to be established by regulations promulgated by the department.
  5. The minimum standards for license renewal for mortgage loan originators shall include:
    1. The mortgage loan originator continues to meet the minimum standards for license issuance;
    2. The mortgage loan originator has satisfied the annual continuing education requirements;
    3. The mortgage loan originator has paid all required fees for renewal of the license; and
    4. The mortgage loan originator is in compliance with any and all written orders issued by the department.
  6. The department may adopt procedures for the reinstatement of expired licenses consistent with the standards established by the Nation-wide Multistate Licensing System and Registry. (Code 1981, § 7-1-1005 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 1994, p. 570, § 5; Ga. L. 2000, p. 174, § 28; Ga. L. 2001, p. 970, § 13; Ga. L. 2005, p. 826, § 33/SB 82; Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2011, p. 518, § 15/HB 239; Ga. L. 2016, p. 390, § 6-1/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted "Nation-wide Multistate Licensing System and Registry" for "Nationwide Mortgage Licensing System and Registry" in subsection (f).

Law reviews. - For article, "Business Associations," see 53 Mercer L. Rev. 109 (2001).

7-1-1006. Contents of license; posting of license; transferring of license; transacting business under other name; change of address; opening a new additional office without prior approval; approval of branch manager.

  1. Each license issued under this article shall state the name of the licensee.
  2. A licensee shall post a copy of such license in a conspicuous place in each place of business of the licensee.
  3. A license shall not be transferred or assigned.
  4. No licensee shall transact business under any name or names other than those designated in the records of the department.
  5. For mortgage brokers and mortgage lenders, each licensee shall notify the department in writing of any change in the address of the principal place of business or of any additional location of business in Georgia, any change in registered agent or registered office, any change of executive officer, contact person for consumer complaints, or ultimate equitable owner of 10 percent or more of any corporation or other entity licensed under this article, or of any material change in the licensee's financial statement. Notice of changes shall be received by the department no later than 30 business days after the change is effective.
  6. No mortgage broker or mortgage lender shall open a new additional office in Georgia without prior approval of the department. Applications for such additional office shall be made in writing on a form prescribed by the department and shall be accompanied by payment of a $350.00 nonrefundable application fee. The application shall be approved unless the department finds that the applicant has not conducted business under this article efficiently, fairly, in the public interest, and in accordance with law. The application shall be deemed approved if notice to the contrary has not been mailed by the department to the applicant within 45 days of the date the application is received by the department.
  7. All branch managers in Georgia shall be approved by the department. A mortgage broker or mortgage lender may place a new branch manager subject to the department's approval but shall file for approval within 15 days of the placement and shall remove the person immediately should the department deny approval. (Code 1981, § 7-1-1006 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 1994, p. 97, § 7; Ga. L. 1994, p. 570, § 6; Ga. L. 1999, p. 674, § 34; Ga. L. 2000, p. 174, § 29; Ga. L. 2005, p. 826, § 34/SB 82; Ga. L. 2007, p. 502, § 35/SB 70; Ga. L. 2009, p. 252, § 1/HB 312.)

JUDICIAL DECISIONS

Cited in Hartford Fire Ins. Co. v. iFreedom Direct Corp., 312 Ga. App. 262 , 718 S.E.2d 103 (2011).

7-1-1007. Licensee to give notice of certain actions brought against it by a creditor or borrower; notice to the department of cancellation of bond.

  1. A licensee shall give notice to the department by registered or certified mail or statutory overnight delivery of any action which may be brought against it by any creditor or borrower where such action is brought under this article, involves a claim against the bond filed with the department for the purposes of compliance with Code Section 7-1-1003.2 or 7-1-1004, or involves a claim for damages in excess of $25,000.00 for a mortgage broker or mortgage loan originator and $250,000.00 for a lender and of any judgment which may be entered against it by any creditor or any borrower or prospective borrower, with details sufficient to identify the action or judgment, within 30 days after the commencement of any such action or the entry of any such judgment.
  2. A corporate surety shall, within ten days after it pays any claim to any claimant, give notice to the department by registered or certified mail or statutory overnight delivery of such payment with details sufficient to identify the claimant and the claim or judgment so paid. Whenever the principal sum of such bond is reduced by one or more recoveries or payments thereon, the mortgage loan originator, mortgage broker, or mortgage lender shall furnish a new or additional bond so that the total or aggregate principal sum of such bond or bonds shall equal the sum required under Code Section 7-1-1003.2 or 7-1-1004 or shall furnish an endorsement duly executed by the corporate surety reinstating the bond to the required principal sum thereof.
  3. A bond filed with the department for the purpose of compliance with Code Section 7-1-1003.2 or 7-1-1004 shall not be canceled by either the mortgage loan originator, mortgage broker, or mortgage lender or the corporate surety except upon notice to the department by registered or certified mail, statutory overnight delivery with return receipt requested, or electronically through the Nationwide Multistate Licensing System and Registry, the cancellation to be effective not less than 30 days after receipt by the department of such notice and only with respect to any breach of condition occurring after the effective date of such cancellation.
  4. A licensee or registrant shall, within ten days after knowledge of the event, report in writing to the department:
    1. Any knowledge or discovery of an act prohibited by Code Section 7-1-1013 ;
    2. The discharge of any employee for dishonest or fraudulent acts; and
    3. Any administrative, civil, or criminal action initiated against the licensee, registrant, or any of its control persons by any government entity. Any person reporting such an event shall be protected from civil liability as provided in Code Section 7-1-1009 . (Code 1981, § 7-1-1007 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 1999, p. 674, § 35; Ga. L. 2000, p. 1589, § 3; Ga. L. 2002, p. 1220, § 12; Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2017, p. 193, § 25/HB 143.)

The 2017 amendment, effective June 1, 2017, in the middle of subsection (c), substituted "certified mail, statutory" for "certified mail or statutory", and inserted "or electronically through the Nationwide Multistate Licensing System and Registry,".

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1993, "ten days" was substituted for "10 days" in the second sentence in subsection (a) (now first sentence of subsection (b)).

Pursuant to Code Section 28-9-5, in 1999, "ten" was substituted for "10" in the introductory paragraph of subsection (d).

Editor's notes. - Ga. L. 2000, p. 1589, § 16, not codified by the General Assembly, provides that the amendment to this Code section is applicable with respect to notices delivered on or after July 1, 2000.

7-1-1008. Acquisition of 10 percent or more of the voting shares or of the ownership of any other entity licensed or registered to conduct business under this article.

  1. Except as provided in this Code section, no person shall acquire directly or indirectly 10 percent or more of the voting shares of a corporation or 10 percent or more of the ownership of any other entity licensed or registered to conduct business as a mortgage broker or mortgage lender under this article unless it first:
    1. Files an application with the department in such form as the department may prescribe from time to time;
    2. Delivers such other information to the department as the department may require concerning the financial responsibility, background, experience, and activities of the applicant, its directors and officers, if a corporation, and its members, if applicable, and of any proposed new directors, officers, or members of the licensee or registrant; and
    3. Pays such application fee as the department may prescribe.
  2. Upon the filing and investigation of an application, the department shall permit the applicant to acquire the interest in the mortgage broker or mortgage lender licensee or registrant if it finds that the applicant and its members, if applicable, its directors and officers, if a corporation, and any proposed new directors and officers have the financial responsibility, character, reputation, experience, and general fitness to warrant belief that the business will be operated efficiently and fairly, in the public interest, and in accordance with law. The department shall grant or deny the application within 60 days from the date a completed application accompanied by the required fee is filed unless the period is extended by order of the department reciting the reasons for the extension. If the application is denied, the department shall notify the applicant of the denial and the reasons for the denial.
  3. The provisions of this Code section shall not apply to:
    1. The acquisition of an interest in a licensee or registrant directly or indirectly, including an acquisition by merger or consolidation by or with a person licensed or registered by this article or a person exempt from this article under Code Section 7-1-1001 ;
    2. The acquisition of an interest in a mortgage broker or mortgage lender licensee or registrant directly or indirectly, including an acquisition by merger or consolidation by or with a person affiliated through common ownership with the licensee or registrant; or
    3. The acquisition of an interest in a mortgage broker or mortgage lender licensee or registrant by a person by bequest, descent, or survivorship or by operation of law. The person acquiring an interest in a mortgage broker or mortgage lender licensee or registrant in a transaction which is exempt from filing an application by this subsection shall send written notice to the department of such acquisition within 30 days of the closing of such transaction. (Code 1981, § 7-1-1008 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 1994, p. 570, § 7; Ga. L. 2007, p. 502, § 36/SB 70; Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2011, p. 518, § 16/HB 239.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1993, "from" was substituted for "form" in paragraph (c)(1).

7-1-1009. Maintenance of books, accounts, and records; investigation and examination of licensees and registrants by department; confidentiality; exemptions from civil liability.

  1. Mortgage brokers and mortgage lenders required to be licensed or registered under this article shall maintain at their offices or such other location as the department shall permit such books, accounts, and records as the department may reasonably require in order to determine whether such mortgage brokers and mortgage lenders are complying with the provisions of this article and rules and regulations adopted in furtherance thereof. Such books, accounts, and records shall be maintained separately and distinctly from any other personal or unrelated business matters in which the mortgage brokers and mortgage lenders are involved.
  2. The department may, by its designated officers and employees, as often as it deems necessary, but at least once every 24 months, investigate and examine the affairs, business, premises, and records of any mortgage broker or mortgage lender required to be licensed or registered under this article insofar as such affairs, business, premises, and records pertain to any business for which a license or registration is required by this article. Notwithstanding the provisions of this subsection, the department has the discretion to examine a mortgage broker or mortgage lender less frequently, provided that its record of complaints, comments, or other information demonstrates that mortgage broker's or mortgage lender's ability to meet the standards of Code Sections 7-1-1003, 7-1-1003.2, and 7-1-1004. In the case of registrants, the department shall not be required to conduct such examinations if it determines that the registrant has been adequately examined by another bank regulatory agency. In order to avoid unnecessary duplication of examinations, the department may accept examination reports performed and produced by other state or federal agencies, unless the department determines that the examinations are not available or do not provide information necessary to fulfill the responsibilities of the department under this article.
  3. In addition to any authority allowed under this article, the department shall be authorized to conduct investigations and examinations of mortgage loan originators as follows:
    1. For purposes of initial licensing, license renewal, license suspension, license conditioning, license revocation or termination, or general or specific inquiry or investigation to determine compliance with this article, the department shall have the authority to access, receive, and use any books, accounts, records, files, documents, information, or evidence, including, but not limited to:
      1. Criminal, civil, and administrative history information, including nonconviction data;
      2. Personal history and experience information, including independent credit reports obtained from a consumer reporting agency described in section 603(p) of the Fair Credit Reporting Act, 15 U.S.C. Section 1681a(f); and
      3. Any other documents, information, or evidence the department deems relevant to the inquiry or investigation regardless of the location, possession, control, or custody of such documents, information, or evidence;
    2. For the purposes of investigating violations or complaints, or for the purposes of examination, the department may review, investigate, or examine any mortgage loan originator licensee, individual, or person subject to this article as often as necessary in order to carry out the purposes of this article. The department may direct, subpoena, or order the attendance of and examine under oath all persons whose testimony may be required about the loans or the business or subject matter of any such examination or investigation and may direct, subpoena, or order such person to produce books, accounts, records, files, and any other documents the department deems relevant to the inquiry;
    3. Each mortgage loan originator licensee, individual, or person subject to this article shall make available to the department upon request the books and records relating to the activities of a mortgage loan originator;
    4. Each mortgage loan originator subject to this article shall make or compile reports or prepare other information as directed by the commissioner in order to carry out the purposes of this subsection, including, but not limited to:
      1. Accounting compilations;
      2. Information lists and data concerning loan transactions in a format prescribed by the department; or
      3. Use, hire, contract, or employ public or privately available analytical systems, methods, or software to examine or investigate a mortgage loan originator;
    5. In making any examination or investigation authorized by this article, the department may control access to any documents and records of the licensee or person under investigation. In order to carry out the purposes of this Code section, the department may:
      1. Enter into agreements or relationships with other government officials or regulatory associations in order to improve efficiencies and reduce regulatory burden by sharing resources, standardized or uniform methods or procedures, and documents, records, information, or evidence obtained under this Code section;
      2. Accept and rely on examination or investigation reports made by other government officials, within or without this state; and
      3. Accept audit reports made by an independent certified public accountant for the licensee, individual, or person subject to this article in the course of that part of the examination covering the same general subject matter as the audit and may incorporate the audit report in the report of examination, report of investigation, or other writing of the department;
    6. The authority to investigate provided for in this subsection shall remain in effect whether such licensee, individual, or person subject to this article acts or claims to act under any licensing or registration law of this state or claims to act without such authority; and
    7. No mortgage loan originator licensee, individual, or person subject to investigation or examination under this article shall knowingly withhold, abstract, remove, mutilate, destroy, or secrete any books, records, computer records, or other information.
  4. The department, at its discretion, may:
    1. Make such public or private investigations within or outside of this state as it deems necessary to determine whether any person has violated or is about to violate this article or any rule, regulation, or order under this article, to aid in the enforcement of this article, or to assist in the prescribing of rules and regulations pursuant to this article;
    2. Require or permit any person to file a statement in writing, under oath or otherwise as the department determines, as to all the facts and circumstances concerning the matter to be investigated;
    3. Disclose information concerning any violation of this article or any rule, regulation, or order under this article, provided the information is derived from a final order of the department;
    4. Disclose the imposition of an administrative fine or penalty under this article; and
    5. Conduct an on-site examination without prior notice, with the licensee or registrant to pay the reasonably incurred costs for such examination, including out-of-state travel expenses, and the department shall be authorized to net such out-of-state expenses against the payments from the licensee or registrant.
    1. For the purpose of conducting any investigation as provided in this Code section, the department shall have the power to administer oaths, to call any party to testify under oath in the course of such investigations, to require the attendance of witnesses, to require the production of books, records, and papers, and to take the depositions of witnesses; and for such purposes, the department is authorized to issue a subpoena for any witness or for the production of documentary evidence. Such subpoenas may be served by certified mail or statutory overnight delivery, return receipt requested, to the addressee's business mailing address, by examiners appointed by the department, or shall be directed for service to the sheriff of the county where such witness resides or is found or where the person in custody of any books, records, or paper resides or is found. The required fees and mileage of the sheriff, witness, or person shall be paid from the funds in the state treasury for the use of the department in the same manner that other expenses of the department are paid.
    2. The department may issue and apply to enforce subpoenas in this state at the request of a government agency regulating mortgage lenders or brokers of another state if the activities constituting the alleged violation for which the information is sought would be a violation of this article if the activities had occurred in this state.
  5. In case of refusal to obey a subpoena issued under this article to any person, a superior court of appropriate jurisdiction, upon application by the department, may issue to the person an order requiring him or her to appear before the court to show cause why he or she should not be held in contempt for refusal to obey the subpoena. Failure to obey a subpoena may be punished as contempt by the court.
  6. Examinations and investigations conducted under this article and information obtained by the department in the course of its duties under this article are confidential, except as provided in this subsection, pursuant to the provisions of Code Section 7-1-70. In addition to the exceptions set forth in subsection (b) of Code Section 7-1-70 and in paragraphs (3) and (4) of subsection (d) of this Code section, the department is authorized to share information obtained under this article with other state and federal regulatory agencies or law enforcement authorities. In the case of such sharing, the safeguards to confidentiality already in place within such agencies or authorities shall be deemed adequate. The commissioner or an examiner specifically designated may disclose such limited information as is necessary to conduct a civil or administrative investigation or proceeding. Information contained in the records of the department which is not confidential and may be made available to the public either on the department's website, upon receipt by the department of a written request, or in the Nation-wide Multistate Licensing System and Registry shall include:
    1. For mortgage brokers and mortgage lenders, the name, business address, and telephone, facsimile, and license numbers of a licensee or registrant;
    2. For mortgage brokers and mortgage lenders, the names and titles of the principal officers;
    3. For mortgage brokers and mortgage lenders, the name of the owner or owners thereof;
    4. For mortgage brokers and mortgage lenders, the business address of a licensee's or registrant's agent for service; and
    5. The terms of or a copy of any bond filed by a licensee or registrant.
  7. In the absence of malice, fraud, or bad faith, a person shall not be subject to civil liability arising from the filing of a complaint with the department or furnishing other information required by this Code section or required by the department under the authority granted in this article. No civil cause of action of any nature shall arise against such person:
    1. For any information relating to suspected prohibited acts furnished to or received from law enforcement officials, their agents, or employees or to or from other regulatory or licensing authorities;
    2. For any such information furnished to or received from other persons subject to the provisions of this title; or
    3. For any such information furnished in complaints filed with the department.
  8. The commissioner or any employee or agent shall not be subject to civil liability, and no civil cause of action of any nature exists against such persons arising out of the performance of activities or duties under this article or by publication of any report of activities under this Code section. (Code 1981, § 7-1-1009 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 1996, p. 848, § 18; Ga. L. 1998, p. 795, § 30; Ga. L. 1999, p. 674, § 36; Ga. L. 2000, p. 174, § 30; Ga. L. 2000, p. 1589, § 3; Ga. L. 2001, p. 970, § 14; Ga. L. 2003, p. 843, § 20; Ga. L. 2007, p. 502, § 37/SB 70; Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2010, p. 878, § 7/HB 1387; Ga. L. 2017, p. 193, § 26/HB 143; Ga. L. 2018, p. 214, § 25/HB 780.)

The 2017 amendment, effective June 1, 2017, in subsection (d), deleted "and" at the end of paragraph (d)(3), substituted "; and" for a period at the end of paragraph (d)(4), and added paragraph (d)(5).

The 2018 amendment, effective May 3, 2018, in the last sentence of the introductory paragraph of subsection (g), substituted "website, upon" for "website or upon" and inserted ", or in the Nation-wide Multistate Licensing System and Registry" near the end. See Editor's notes for applicability.

Editor's notes. - Ga. L. 2000, p. 1589, § 16, not codified by the General Assembly, provides that the amendment to this Code section is applicable with respect to notices delivered on or after July 1, 2000.

Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."

Law reviews. - For article, "Business Associations," see 53 Mercer L. Rev. 109 (2001).

7-1-1010. Annual financial statements.

  1. If a mortgage broker is a United States Department of Housing and Urban Development loan correspondent, such broker shall also submit to the department the audit that is required for the United States Department of Housing and Urban Development. The department may require the mortgage broker to have made an audit of the books and affairs of the licensed or registered business and submit to the department an audited financial statement if the department finds that such an audit is necessary to determine whether the mortgage broker is complying with the provisions of this article and the rules and regulations adopted in furtherance of this article.
  2. Each mortgage lender licensed or registered under this article shall at least once each year have made an audit of the books and affairs of the licensed or registered business and submit to the department at renewal an audited financial statement, except that a mortgage lender licensed or registered under this article which is a subsidiary shall comply with this provision by annually providing a consolidated audited financial statement of its parent company and a financial statement, which may be unaudited, of the licensee or registrant which is prepared in accordance with generally accepted accounting principles. A lender who utilizes a bond in lieu of an audit need not supply such audit, unless specially required by the department. An audit shall be less than 15 months old to be acceptable. The department may by regulation establish additional minimum standards for audits and reports under this Code section. (Code 1981, § 7-1-1010 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 1994, p. 570, § 8; Ga. L. 1996, p. 848, § 19; Ga. L. 1999, p. 674, § 37; Ga. L. 2000, p. 174, § 31; Ga. L. 2004, p. 458, § 14; Ga. L. 2009, p. 252, § 1/HB 312.)

7-1-1011. Annual fees.

  1. The department may, by regulation, prescribe annual fees to be paid by licensees and registrants, which fees shall be set at levels necessary to defray costs and expenses incurred by the state in providing the examinations and supervision required by this article and its federally mandated participation in the Nation-wide Multistate Licensing System and Registry, and which fees may vary according to whether a person is a licensee or registrant or is a mortgage loan originator, mortgage broker, or a mortgage lender.
    1. As used in this subsection, the term "collecting agent" means the person listed as the secured party on a security deed or other loan document that establishes a lien on the residential real property taken as collateral at the time of the closing of the mortgage loan transaction.
    2. There shall be imposed on the closing of every mortgage loan subject to regulation under this article which, as defined in Code Section 7-1-1000 , includes all mortgage loans, whether or not closed by a mortgage broker or mortgage lender licensee or registrant, a fee of $10.00. The fee shall be paid by the borrower to the collecting agent at the time of closing of the mortgage loan transaction. The collecting agent shall remit the fee to the department at the time and in the manner specified by regulation of the department. Revenue collected by the department pursuant to this subsection shall be deposited in the general fund of the state.
    3. The fee imposed by this subsection shall be a debt from the borrower to the collecting agent until such assessment is paid and shall be recoverable at law in the same manner as authorized for the recovery of other debts. Any collecting agent who neglects, fails, or refuses to collect the fee imposed by this subsection shall be liable for the payment of the fee. (Code 1981, § 7-1-1011 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 1994, p. 570, § 9; Ga. L. 1995, p. 673, § 34; Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2010, p. 9, § 1-18/HB 1055; Ga. L. 2016, p. 390, § 6-1/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted "Nation-wide Multistate Licensing System and Registry" for "Nationwide Mortgage Licensing System and Registry" in subsection (a).

7-1-1012. Rules and regulations.

Without limitation on the power conferred by Article 1 of this chapter, the department may make reasonable rules and regulations, not inconsistent with law, for the enforcement of this article, to effectuate the purposes of this article, and to clarify the meaning of terms.

(Code 1981, § 7-1-1012 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 2001, p. 970, § 15; Ga. L. 2009, p. 252, § 1/HB 312.)

7-1-1013. Prohibition of certain acts.

It shall be prohibited for any person transacting a mortgage business in or from this state, including any person required to be licensed or registered under this article and any person exempted from the licensing or registration requirements of this article under Code Section 7-1-1001, to:

  1. Misrepresent the material facts, make false statements or promises, or submit false statements or documents likely to influence, persuade, or induce an applicant for a mortgage loan, a mortgagee, or a mortgagor to take a mortgage loan, or, through agents or otherwise, pursue a course of misrepresentation by use of fraudulent or unauthorized documents or other means to the department or anyone;
  2. Misrepresent or conceal or cause another to misrepresent or conceal material factors, terms, or conditions of a transaction to which a mortgage lender or broker is a party, pertinent to an applicant or application for a mortgage loan or a mortgagor;
  3. Fail to disburse funds in accordance with a written commitment or agreement to make a mortgage loan;
  4. Improperly refuse to issue a satisfaction of a mortgage loan;
  5. Fail to account for or deliver to any person any personal property obtained in connection with a mortgage loan such as money, funds, deposit, check, draft, mortgage, or other document or thing of value which has come into the possession of a licensee or registrant and which is not the property of the licensee or registrant, or which the mortgage lender or broker is not in law or at equity entitled to retain;
  6. Engage in any transaction, practice, or course of business which is not in good faith or fair dealing, or which operates a fraud upon any person, in connection with the attempted or actual making of, purchase of, transfer of, or sale of any mortgage loan;
  7. Engage in any fraudulent home mortgage underwriting practices;
  8. Induce, require, or otherwise permit the applicant for a mortgage loan or mortgagor to sign a security deed, note, loan application, or other pertinent financial disclosure documents with any blank spaces to be filled in after it has been signed, except blank spaces relating to recording or other incidental information not available at the time of signing;
  9. Make, directly or indirectly, any residential mortgage loan with the intent to foreclose on the borrower's property. For purposes of this paragraph, there shall be a presumption that a person has made a residential mortgage loan with the intent to foreclose on the borrower's property if the following circumstances can be demonstrated:
    1. Lack of substantial benefit to the borrower;
    2. Lack of probability of full payment of the loan by the borrower; and
    3. A significant proportion of similarly foreclosed loans by such person;
  10. Provide an extension of credit or collect a mortgage debt by extortionate means; or
  11. Purposely withhold, delete, destroy, or alter information requested by an examiner of the department or make false statements or material misrepresentations to the department or the Nation-wide Multistate Licensing System and Registry or in connection with any investigation conducted by the department or another governmental agency. (Code 1981, § 7-1-1013 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 1996, p. 848, § 20; Ga. L. 1999, p. 674, § 38; Ga. L. 2000, p. 174, § 32; Ga. L. 2005, p. 826, § 35/SB 82; Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2016, p. 390, § 6-1/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted "Nation-wide Multistate Licensing System and Registry" for "Nationwide Mortgage Licensing System and Registry" in paragraph (11).

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1993, "paragraph" was substituted for "subsection" in paragraph (9).

JUDICIAL DECISIONS

Section does not apply to foreclosure proceedings. - Plain language of O.C.G.A. § 7-1-1013 limits the statute's applicability to the actions taken to make, purchase, transfer, or sell mortgage loans. The Georgia Residential Mortgage Act, O.C.G.A. § 7-1-1000 et seq., is not applicable in foreclosure proceedings. Roylston v. Bank of Am., N.A., 290 Ga. App. 556 , 660 S.E.2d 412 (2008).

Acts not covered by bond. - Trial court erred in granting a purchaser summary judgment and in denying an insurer summary judgment in the purchaser's action to recover against a bond the insurer issued to a mortgage lender under the Georgia Residential Mortgage Act, O.C.G.A. § 7-1-1000 et seq., because the acts that gave rise to the judgment the purchaser obtained against the lender occurred before the bond was in effect, and the lender's failure to pay the judgment was not an act that authorized recovery against the bond; the bond did not contain a specific covenant extending liability to acts prior to the bond's execution. Hartford Fire Ins. Co. v. iFreedom Direct Corp., 312 Ga. App. 262 , 718 S.E.2d 103 (2011), cert. denied, No. S12C0408, 2012 Ga. LEXIS 246 (Ga. 2012).

Act foreclosed a borrower's claim under the Fair Business Practices Act. - Homeowner's Fair Business Practices Act (FBPA) claim against the homeowner's mortgage lender arising out of foreclosure of the homeowner's home failed because the Georgia Residential Mortgage Act, O.C.G.A. § 7-1-1000 , et seq., specifically regulates misrepresentation by use of fraudulent or unauthorized documents or other means relating to mortgages, O.C.G.A. § 7-1-1013(1) , precluding a claim under the FBPA, pursuant to O.C.G.A. § 10-1-396 . Stewart v. SunTrust Mortg., Inc., 331 Ga. App. 635 , 770 S.E.2d 892 (2015).

7-1-1014. Regulations governing disclosure required to applicants for mortgage loans.

In addition to such other rules, regulations, and policies as the department may promulgate to effectuate the purposes of this article, the department shall promulgate regulations governing the disclosure required to be made to applicants for mortgage loans, including, without limitation, the following requirements:

  1. Any person required to be licensed or registered under this article shall provide to each applicant for a mortgage loan prior to accepting an application fee or any third-party fee such as a property appraisal fee, credit report fee, or any other similar fee a disclosure of the fees payable and the conditions under which such fees may be refundable;
  2. Any mortgage lender required to be licensed or registered under this article shall make available to each applicant for a mortgage loan at or before the time a commitment to make a mortgage loan is given a written disclosure of the fees to be paid in connection with the commitment and the loan, or the manner in which such fees shall be determined and the conditions under which such fees may be refundable; and
  3. Any mortgage lender required to be licensed or registered under this article shall disclose to each borrower of a mortgage loan that failure to meet every condition of the mortgage loan may result in the loss of the borrower's property through foreclosure. The borrower shall be required to sign the disclosure at or before the time of the closing of the mortgage loan. The department may prescribe standards regarding the accuracy of required disclosures and may provide for applicable administrative or civil penalties or fines for failure to provide the disclosures or to meet the prescribed standards. (Code 1981, § 7-1-1014 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 1994, p. 570, § 10; Ga. L. 2001, p. 970, § 16; Ga. L. 2009, p. 252, § 1/HB 312.)

JUDICIAL DECISIONS

Cited in Hartford Fire Ins. Co. v. iFreedom Direct Corp., 312 Ga. App. 262 , 718 S.E.2d 103 (2011).

7-1-1015. Rules relative to escrow accounts.

The department may promulgate rules with respect to the placement in escrow accounts by any person required to be licensed or registered by this article of any money, fund, deposit, check, or draft entrusted to it by any persons dealing with it as a residential mortgage loan originator, mortgage broker, mortgage lender, or servicer.

(Code 1981, § 7-1-1015 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 2009, p. 252, § 1/HB 312.)

7-1-1016. Regulations relative to advertising.

In addition to such other rules, regulations, and policies as the department may promulgate to effectuate the purpose of this article, the department shall prescribe regulations governing the advertising of mortgage loans, including, without limitation, the following requirements:

    1. Advertisements for loans regulated under this article shall not be false, misleading, or deceptive. No person whose activities are regulated under this article shall advertise in any manner so as to indicate or imply that its interest rates or charges for loans are in any way "recommended," "approved," "set," or "established" by the state or this article.
    2. An advertisement shall not include an individual's loan number, loan amount, or other publicly available information unless it is clearly and conspicuously stated in boldface type at the beginning of the advertisement that the person disseminating it is not authorized by, in sponsorship with, or otherwise affiliated with the individual's lender, which shall be identified by name. Such an advertisement shall also state that the loan information contained therein was not provided by the recipient's lender;
  1. All advertisements, including websites, disseminated by a licensee or a registrant in this state by any means shall contain the name, license number, Nation-wide Multistate Licensing System and Registry unique identifier, and an office address of such licensee or registrant, which shall conform to a name and address on record with the department; and
  2. No mortgage broker or mortgage lender licensee shall advertise its services in Georgia in any media disseminated in this state, whether print or electronic, without the words "Georgia Residential Mortgage Licensee" or, for those advertisers licensed in more than one state, a listing of Georgia as a state in which the advertiser is licensed. (Code 1981, § 7-1-1016 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 1994, p. 570, § 11; Ga. L. 2002, p. 1220, § 13; Ga. L. 2007, p. 502, § 38/SB 70; Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2016, p. 390, § 6-1/HB 811.)

The 2016 amendment, effective July 1, 2016, substituted "Nation-wide Multistate Licensing System and Registry" for "Nationwide Mortgage Licensing System and Registry" in paragraph (2) of this Code section.

JUDICIAL DECISIONS

Cited in Hartford Fire Ins. Co. v. iFreedom Direct Corp., 312 Ga. App. 262 , 718 S.E.2d 103 (2011).

7-1-1017. Suspension or revocation of licenses, registrations, or mortgage broker education approval; notice; judicial review; effect on preexisting contract.

    1. The department may suspend or revoke an original or renewal license, registration, or mortgage broker education approval on any ground on which it might refuse to issue an original license, registration, or approval or for a violation of any provision of this article or of Chapter 6A of this title or any rule or regulation issued under this article or under Chapter 6A of this title, including failure to provide fees on a timely basis, or for failure of the licensee or registrant to pay, within 30 days after it becomes final, a judgment recovered in any court within this state by a claimant or creditor in an action arising out of the licensee's or registrant's business in this state as a mortgage loan originator, mortgage lender, or mortgage broker or for violation of a final order previously issued by the department.
    2. Where an applicant or licensee has been found not in compliance with an order for child support as provided in Code Section 19-6-28.1 or 19-11-9.3, such action shall be sufficient grounds for refusal of a license or suspension of a license. In such actions, the hearing and appeal procedures provided for in those Code sections shall be the only such procedures required under this article. The department shall be permitted to share, without liability, information on its applications or other forms with appropriate state agencies to assist them in recovering child support when required by law.
    3. Where an applicant or licensee has been found to be a borrower in default as provided in Code Section 20-3-295, such action shall be sufficient grounds for refusal of a license or suspension of a license. In such actions, the hearing and appeal procedures provided for in Code Section 20-3-295 shall be the only such procedures required under this article.
    1. Notice of the department's intention to enter an order denying an application for a license or registration under this article or of an order suspending or revoking a license or registration under this article shall be given to the applicant, licensee, or registrant in writing, sent by registered or certified mail or statutory overnight delivery addressed to the principal place of business of such applicant, licensee, or registrant. Within 20 days of the date of the notice of intention to enter an order of denial, suspension, or revocation under this article, the applicant, licensee, or registrant may request in writing a hearing to contest the order. If a hearing is not requested in writing within 20 days of the date of such notice of intention, the department shall enter a final order regarding the denial, suspension, or revocation. Any final order of the department denying, suspending, or revoking a license or registration shall state the grounds upon which it is based and shall be effective on the date of issuance. A copy thereof shall be forwarded promptly by registered or certified mail or statutory overnight delivery addressed to the principal place of business of such applicant, licensee, or registrant. If a person refuses to accept service of the notice or order by registered or certified mail or statutory overnight delivery, the notice or order shall be served by the commissioner or the commissioner's authorized representative under any other method of lawful service; and the person shall be personally liable to the commissioner for a sum equal to the actual costs incurred to serve the notice or order. This liability shall be paid upon notice and demand by the commissioner or the commissioner's representative and shall be assessed and collected in the same manner as other fees or fines administered by the commissioner.
    2. Notwithstanding the provisions of paragraph (1) of this subsection, the department may issue a notice of intent to suspend license to a mortgage loan originator when such mortgage loan originator is no longer sponsored by a licensed or registered mortgage broker or lender. If the mortgage loan originator is sponsored by a licensed or registered mortgage broker or lender within 30 days of the date of issuance of the notice of intent to suspend, such notice shall be rescinded. If the mortgage loan originator is not sponsored by a licensed or registered mortgage broker or lender within 30 days of the date of such issuance, the mortgage loan originator license shall automatically expire after 30 days and the person shall not act as a mortgage loan originator unless a new license application is submitted, all applicable fees are paid, and a license is issued by the department.
  1. A licensee or registrant may, at the discretion of and with the consent of the department, agree to a voluntary suspension of its license or registration for a period of time to be agreed upon by the parties. Such order of suspension shall be considered a final order and shall be forwarded to the licensee or registrant in the same manner as any other final order. Grounds for such a voluntary suspension shall be the same as provided in subsection (a) of this Code section, and the licensee or registrant may waive its right to an administrative hearing before issuance of the suspension. With the consent of the department, a licensee or registrant may voluntarily surrender its license or registration. A voluntary surrender of a license or registration shall have the same effect as a revocation of said license or registration. A voluntary surrender of a license shall be regarded as a final order of the department.
  2. A decision of the department denying a license or registration application, original or renewal, shall be conclusive, except that it may be subject to judicial review under Code Section 7-1-90. A decision of the department suspending or revoking a license or registration shall be subject to judicial review in the same manner as a decision of the department to take possession of the assets and business of a bank under Code Section 7-1-155.
  3. Except as otherwise provided by law, a revocation, suspension, or surrender of a license or registration shall not impair or affect the obligation of a preexisting contract between the licensee and another person.
  4. Nothing in this article shall preclude a mortgage broker or mortgage lender whose license or registration has been suspended or revoked from continuing to service mortgage loans pursuant to servicing contracts in existence at the time of the suspension or revocation for a period not to exceed six months after the date of the final order of the department suspending or revoking the license or registration.
  5. Whenever a person subject to an order of the department fails to comply with the terms of such order which has been properly issued, the department upon notice of three days to such person may, through the Attorney General, petition the principal court for an order directing such person to obey the order of the department within the period of time fixed by the court. Upon the filing of such petition, the court shall allow a motion to show cause why such motion should not be granted. Whenever, after a hearing upon the merits or after failure of such person to appear when ordered, it shall appear that the order of the department was properly issued, the court shall grant the petition of the department.
  6. Whenever the department initiates an administrative action against a current licensee or an applicant, the department may pursue that action to its conclusion despite the fact that a licensee may withdraw its license or fail to renew it or an applicant may withdraw its application. (Code 1981, § 7-1-1017 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 1994, p. 570, § 12; Ga. L. 1996, p. 453, § 2; Ga. L. 1997, p. 485, § 32; Ga. L. 1998, p. 795, § 31; Ga. L. 1998, p. 1094, § 4; Ga. L. 2000, p. 1589, § 3; Ga. L. 2003, p. 843, § 21; Ga. L. 2005, p. 826, § 36/SB 82; Ga. L. 2007, p. 502, § 39/SB 70; Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2011, p. 518, § 17/HB 239; Ga. L. 2015, p. 344, § 34/HB 184.)

The 2015 amendment, effective July 1, 2015, designated the existing provisions of subsection (b) as paragraph (b)(1) and added paragraph (b)(2).

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1998, Ga. L. 1998, p. 795, § 31 and Ga. L. 1998, p. 1094, § 4, both amended this Code section. These amendments conflicted in the last sentence of paragraph (2) of subsection (a). This sentence was added in 1997 by Ga. L. 1997, p. 485, § 32. It was determined that the omission of the last sentence of paragraph (2) of subsection (a) by Ga. L. 1998, p. 1094, § 4 was inadvertent and thus the amendments were construed together to read as set out above.

Editor's notes. - Ga. L. 2000, p. 1589, § 16, not codified by the General Assembly, provides that the 2000 amendment applied with respect to notices delivered on or after July 1, 2000.

JUDICIAL DECISIONS

Failure to pay judgment. - Strictly limited to the plain meaning of the language employed in the Georgia Residential Mortgage Act, O.C.G.A. § 7-1-1017(a)(1), does not mandate that a mortgage lender pay a judgment within 30 days, but rather, the statute simply gives the Georgia Department of Banking and Finance the discretion to suspend or revoke a mortgage lender's license for failure to pay, within 30 days of it becoming final, a judgment arising from the lender's mortgage business; this statutorily-created administrative remedy cannot be extended beyond its plain terms to create an additional private cause of action against a mortgage lender's bond based on a failure to pay a judgment. Hartford Fire Ins. Co. v. iFreedom Direct Corp., 312 Ga. App. 262 , 718 S.E.2d 103 (2011), cert. denied, No. S12C0408, 2012 Ga. LEXIS 246 (Ga. 2012).

Alternative language used in the Georgia Residential Mortgage Act, O.C.G.A. § 7-1-1017(a)(1), stating that the Georgia Department of Banking and Finance may revoke a license for a violation of the Act or failure to pay a final judgment, clearly shows that violating the Act and failing to pay a judgment are separate and distinct matters. Hartford Fire Ins. Co. v. iFreedom Direct Corp., 312 Ga. App. 262 , 718 S.E.2d 103 (2011), cert. denied, No. S12C0408, 2012 Ga. LEXIS 246 (Ga. 2012).

Acts not covered by bond. - Trial court erred in granting a purchaser summary judgment and in denying an insurer summary judgment in the purchaser's action to recover against a bond the insurer issued to a mortgage lender under the Georgia Residential Mortgage Act, O.C.G.A. § 7-1-1000 et seq., because the acts that gave rise to the judgment the purchaser obtained against the lender occurred before the bond was in effect, and the lender's failure to pay the judgment was not an act that authorized recovery against the bond; the bond did not contain a specific covenant extending liability to acts prior to the bond's execution. Hartford Fire Ins. Co. v. iFreedom Direct Corp., 312 Ga. App. 262 , 718 S.E.2d 103 (2011), cert. denied, No. S12C0408, 2012 Ga. LEXIS 246 (Ga. 2012).

7-1-1018. Cease and desist orders; enforcement procedure; civil penalty; fines.

  1. Whenever it shall appear to the department that any person required to be licensed or registered under this article or employed by a licensee or who would be covered by the prohibitions in Code Section 7-1-1013 has violated any law of this state or any order or regulation of the department, the department may issue an initial written order requiring such person to cease and desist immediately from such unauthorized practices. Such cease and desist order shall be final 20 days after it is issued unless the person to whom it is issued makes a written request within such 20 day period for a hearing. The hearing shall be conducted in accordance with Chapter 13 of Title 50, the "Georgia Administrative Procedure Act." A cease and desist order to an unlicensed person that orders such person to cease doing a mortgage business without the appropriate license shall be final 30 days from the date of issuance, and there shall be no opportunity for an administrative hearing. If the proper license or evidence of exemption or valid employment status during the time of the alleged offense is delivered to the department within the 30 day period, the order shall be rescinded by the department. If a cease and desist order is issued to a person who has been sent a notice of bond cancellation and if the bond is reinstated or replaced and such documentation is delivered to the department within the 30 day period following the date of issuance of the order, the order shall be rescinded. If the notice of reinstatement of the bond is not received within the 30 days, the license shall expire at the end of the 30 day period, and the person shall be required to make a new application for license and pay the applicable fees. In the case of an unlawful purchase of mortgage loans, such initial cease and desist order to a purchaser shall constitute the knowledge required under subsection (b) of Code Section 7-1-1002 for any subsequent violations. Any cease and desist order sent to the person at both his or her personal and business addresses pursuant to this Code section that is returned to the department as "refused" or "unclaimed" shall be deemed as received and sufficiently served.
  2. Whenever a person shall fail to comply with the terms of an order of the department which has been properly issued under the circumstances, the department, upon notice of three days to such person, may, through the Attorney General, petition the principal court for an order directing such person to obey the order of the department within the period of time as shall be fixed by the court. Upon the filing of such petition, the court shall allow a motion to show cause why it should not be granted. Whenever, after a hearing upon the merits or after failure of such person to appear when ordered, it shall appear that the order of the department was properly issued, the court shall grant the petition of the department.
  3. Any person who violates the terms of any order issued pursuant to this Code section shall be liable for a civil penalty not to exceed $1,000.00 per violation per day unless otherwise agreed to by the department. In determining the amount of penalty, the department shall take into account the appropriateness of the penalty relative to the size of the financial resources of such person, the good faith efforts of such person to comply with the order, the gravity of the violation, the history of previous violations by such person, and such other factors or circumstances as shall have contributed to the violation. The department may at its discretion compromise, modify, or refund any penalty which is subject to imposition or has been imposed pursuant to this Code section. Any person assessed as provided in this subsection shall have the right to request a hearing into the matter within ten days after notification of the assessment has been served upon the person involved; otherwise, such penalty shall be final except as to judicial review as provided in Code Section 7-1-90.
  4. Initial judicial review of the decision of the department entered pursuant to this Code section or Code Section 7-1-1017 shall be available solely in the superior court of the county of domicile of the department.
  5. All penalties and fines recovered by the department as authorized by subsection (g) of this Code section shall be paid into the state treasury to the credit of the general fund; provided, however, that the department at its discretion may remit such amounts recovered, net of the cost of recovery, if it makes an accounting of all such costs and expenses of recovery in the same manner as prescribed for judgments received through derivative actions pursuant to the provisions of Code Section 7-1-441.
  6. For purposes of this Code section, the term "person" also includes any officer, director, employee, agent, or other person participating in the conduct of the affairs of the person subject to the orders issued pursuant to this Code section.
  7. In addition to any other administrative penalties authorized by this article, the department may, by regulation, prescribe administrative fines for violations of this article and of any rules promulgated by the department pursuant to this article. (Code 1981, § 7-1-1018 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 1994, p. 570, § 13; Ga. L. 1995, p. 673, § 35; Ga. L. 1997, p. 485, § 33; Ga. L. 1999, p. 674, § 39; Ga. L. 2000, p. 174, § 33; Ga. L. 2001, p. 4, § 7; Ga. L. 2003, p. 843, § 22; Ga. L. 2004, p. 631, § 7; Ga. L. 2005, p. 826, § 37/SB 82; Ga. L. 2007, p. 502, § 40/SB 70; Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2011, p. 518, § 18/HB 239; Ga. L. 2013, p. 141, § 7/HB 79.)

The 2013 amendment, effective April 24, 2013, part of an Act to revise, modernize, and correct the Code, substituted "such person to cease" for "them to cease" in the fourth sentence of subsection (a).

7-1-1019. Criminal penalties.

Any person and the several members, officers, directors, agents, and employees thereof who:

  1. Shall violate the provisions of subsection (a) or (a.1) of Code Section 7-1-1002, by the willful transaction of a mortgage business without a license or exemption, shall be guilty of a felony punishable as provided in Code Section 7-1-845; or
  2. Shall violate any of the other provisions of this article shall be guilty of a misdemeanor and shall be punished by imprisonment for not more than one year or by a fine of not more than $1,000.00, or by both fine and imprisonment. (Code 1981, § 7-1-1019 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 1994, p. 97, § 7; Ga. L. 1999, p. 674, § 40; Ga. L. 2009, p. 252, § 1/HB 312; Ga. L. 2015, p. 5, § 7/HB 90.)

The 2015 amendment, effective March 13, 2015, part of an Act to revise, modernize, and correct the Code, substituted "subsection (a) or (a.1)" for "subsection (a)" in paragraph (1).

7-1-1020. Construction.

Nothing in this article shall limit any statutory or common law right of any person to bring any action in any court for any act involved in the mortgage business or the right of the state to punish any person for any violation of any law. Without limiting the generality of the foregoing, nothing in this article shall be construed as limiting in any manner the application of Part 2 of Article 15 of Chapter 1 of Title 10, the "Fair Business Practices Act of 1975."

(Code 1981, § 7-1-1020 , enacted by Ga. L. 1993, p. 543, § 1; Ga. L. 2009, p. 252, § 1/HB 312.)

7-1-1021. Regulations governing lock-in and commitment agreements.

The department may promulgate regulations governing the use and contents of lock-in agreements and commitment agreements.

(Code 1981, § 7-1-1021 , enacted by Ga. L. 1994, p. 570, § 14; Ga. L. 2009, p. 252, § 1/HB 312.)

CHAPTER 2 CREDIT UNION DEPOSIT INSURANCE CORPORATION

Sec.

Cross references. - Credit unions generally, § 7-1-630 et seq.

7-2-1. Incorporation procedures.

  1. Within one year after July 1, 1974, the duly authorized representatives of not less than three credit unions chartered and existing under the laws of this state may petition the Secretary of State for incorporation of a nonprofit credit union deposit insurance corporation, hereinafter referred to as the "corporation." Such petition shall be accompanied by articles of incorporation in triplicate which shall include the following:
    1. The name of the proposed corporation, which shall include the words "deposit insurance corporation," and no corporation other than one incorporated pursuant to this chapter shall use the words in sequence "deposit insurance corporation";
    2. The location of its initial registered office;
    3. The purpose and nature of the business of the corporation, which shall be to aid and assist any member financial institution which is in liquidation or facing liquidation due to insolvency in order that the deposits and shares of any member shall be insured or guaranteed against loss in such amounts as may from time to time be established by the board of directors of the corporation pursuant to this chapter;
    4. Membership in the corporation, which shall be limited, except as otherwise expressly provided, to financial institutions, approved for membership by the directors of the corporation upon recommendation of the Department of Banking and Finance of this state, hereinafter referred to as the "department"; and
    5. The term of existence of the corporation, which shall be perpetual unless otherwise limited.
  2. Upon receipt of the articles, the Secretary of State shall forward one copy to the department.
  3. Before the articles are approved by the department, an appropriate investigation shall be made by the department for the purpose of determining:
    1. Whether the articles conform to this chapter;
    2. The general character and fitness of the petitioners;
    3. The economic advisability of establishing the proposed corporation; and
    4. Whether such corporation would cause undue harm to a corporation already existent under this chapter.

      Upon approval of the articles in writing by the department, such written approval shall be delivered to the Secretary of State.

  4. Upon receipt of the approval of the department, the Secretary of State shall thereupon issue a certificate of incorporation to the petitioners.

    (Ga. L. 1974, p. 545, § 1; Ga. L. 1981, p. 1241, § 1; Ga. L. 1984, p. 952, § 1.)

Law reviews. - For comment, "If It Quacks Like a Duck: In Light of Today's Financial Environment, Should Credit Unions Continue to Enjoy Tax Exemptions?," see 28 Ga. St. U.L. Rev. 1367 (2012).

RESEARCH REFERENCES

Am. Jur. 2d. - 18A Am. Jur. 2d, Corporations, § 247.

C.J.S. - 18 C.J.S., Corporations, § 47 et seq.

7-2-2. Amendments to articles.

Amendments to the articles of incorporation, adopted by a vote of two-thirds of the member financial institutions present at an annual meeting or a special meeting called for that purpose, shall be filed with the Secretary of State in the same manner as the original articles and shall become effective upon approval by the department and subsequent notification of the Secretary of State.

(Ga. L. 1974, p. 545, § 2; Ga. L. 1984, p. 952, § 2.)

RESEARCH REFERENCES

Am. Jur. 2d. - 18 Am. Jur. 2d, Corporations, § 92 et seq.

C.J.S. - 18 C.J.S., Corporations, §§ 57, 58.

7-2-3. Adoption and amendment of bylaws.

  1. At its organizational meeting, the membership of the corporation shall adopt bylaws to govern the operations of the corporation. These bylaws shall be submitted to the department for approval and, if found to be consistent with this chapter, conducive to the purposes for which the corporation was formed, and equitable to all members, the bylaws shall be approved by the department.
  2. The original bylaws shall be adopted by and may thereafter be amended by a vote of at least a majority of the members present and voting at any regular meeting or special meeting called for such purpose. Bylaws may also be amended by the vote of at least two-thirds of the members of the board of directors of the corporation. Amendments adopted by the board may be rescinded at the next regular or special meeting of the members in the same manner as is provided for adoption of amendments by the members.

    (Ga. L. 1974, p. 545, § 3; Ga. L. 1989, p. 1690, § 1.)

RESEARCH REFERENCES

Am. Jur. 2d. - 18A Am. Jur. 2d, Corporations, §§ 314 et seq., 327, 328.

C.J.S. - 18 C.J.S., Corporations, § 154 et seq.

7-2-4. Powers.

The corporation may:

  1. Enter into contracts, including contracts for reinsurance;
  2. Sue and be sued;
  3. Adopt, use, and display a corporate seal;
  4. Advance funds, in accordance with agreed terms and conditions, to aid member financial institutions to operate and to meet liquidity requirements;
  5. Assume control of the property and business of any member financial institution upon the written direction of the department and operate the financial institution in accordance with the recommendations of the department;
  6. Assist in the merger, consolidation, or liquidation of member financial institutions;
  7. Receive money or other property from its member financial institutions or from any corporation, association, or person;
  8. Invest its funds in such manner as permitted to credit unions under the laws of this state and in such other manner as may be approved by the department;
  9. Borrow money from any source upon such terms and conditions as the board of directors may determine;
  10. Purchase in its own name, hold, and convey property of any nature necessary for the convenient transaction of its business;
  11. Receive by assignment or purchase from its members any property of any nature owned by those members;
  12. Sell, assign, mortgage, encumber, or transfer property of any nature;
  13. Declare and pay dividends on membership fees with the approval of the department; and
  14. Adopt and amend bylaws, rules, and regulations carrying out the purposes of the corporation.

    (Ga. L. 1974, p. 545, § 4; Ga. L. 1984, p. 952, § 3.)

JUDICIAL DECISIONS

Cited in Kilpatrick Marine Piling v. Fireman's Fund Ins. Co., 795 F.2d 940 (11th Cir. 1986).

OPINIONS OF THE ATTORNEY GENERAL

Scope of power to assist in liquidation of member. - Power of a credit union deposit insurance corporation to assist in liquidation of a member credit union, while otherwise general, does not extend to actions which are inconsistent with the credit union's primary purpose, protection of deposits and shares of credit union members. 1977 Op. Att'y Gen. No. 77-7.

Preferring unsecured creditor violates § 7-1-202(a) . - Credit union deposit insurance corporation, acting as receiver or deputy receiver of a member credit union, cannot purchase an unsecured note with assets of a credit union since such purchase would give an unsecured creditor priority over depositors and other more senior claimants, in violation of former Code 1933, § 41A-813 (see now O.C.G.A. § 7-1-202(a) ). 1977 Op. Att'y Gen. No. 77-7.

RESEARCH REFERENCES

Am. Jur. 2d. - 18B Am. Jur. 2d, Corporations, §§ 1990 et seq., 2085.

C.J.S. - 19 C.J.S., Corporations, § 651 et seq.

7-2-5. Membership - Acquisition and termination.

  1. Any financial institution, as defined in Code Section 7-1-4 or chartered under the laws of the United States or of any state or territory of the United States, may become a member of the corporation upon application by its directors, recommendation of the department, and approval of the directors of the corporation.
  2. Before making its recommendation, the department shall consider:
    1. The history, financial condition, and management policies of the applicant;
    2. The economic advisability of insuring the applicant without undue risk to the fund;
    3. The general character and fitness of the applicant's management; and
    4. The convenience and needs of the members to be served by the applicant.
  3. Membership in the corporation may be terminated upon 30 days' written notice to the corporation and after providing evidence satisfactory to the department that alternate, comparable insurance of deposits has been obtained by the financial institution. Upon termination of membership, the financial institution shall be entitled to the refunds set forth in subsection (d) of Code Section 7-2-7.

    (Ga. L. 1974, p. 545, § 5; Ga. L. 1984, p. 952, § 4.)

7-2-6. Membership - Financial institutions which are ineligible to be federally insured or which were chartered prior to July 1, 1981.

Reserved. Repealed by Ga. L. 1993, p. 917, § 10, effective April 13, 1993.

Editor's notes. - This Code section was based on Ga. L. 1974, p. 545, § 1; Ga. L. 1981, p. 1241, § 3; and Ga. L. 1981, Ex. Sess., p. 8.

7-2-6.1. Powers and privileges of members.

Any financial institution insured by the corporation shall have the same powers and privileges as any other state-chartered financial institution of the same class even though such other financial institution is insured under some other state or federal program. Such equality of powers shall not relieve the financial institution, whether insured under this chapter or under an alternative state or federal program, from taking appropriate action to amend its articles of incorporation or bylaws or from obtaining appropriate regulatory approvals before exercising such powers and privileges.

(Ga. L. 1981, p. 1241, § 4.)

7-2-7. Membership fees; refunds of fees, assessments, and premiums; distribution of undivided corporate earnings preceding voluntary cessation of business.

  1. Each financial institution accepted for membership shall be required to pay a membership fee of 1 percent of the deposits and shares of the financial institution up to $1 million, plus one-half of 1 percent of the deposits and shares from $1 million to $5 million, plus one-fourth of 1 percent of the deposits and shares over $5 million. Payment of the membership fee may be made in three equal installments, the first installment being due upon the approval of the application of the member financial institution and being in an amount of not less than $10.00 and the remaining two installments being due annually thereafter in amounts of not less than $10.00 each year.
  2. The membership fee shall be maintained on an annual basis in the same ratio to deposits and shares as the original membership fee bore to the total of deposits and shares at the time the financial institution initially joined the corporation. Such annual adjustments to the membership fee shall be paid or refunded concurrently with the payment of the annual insurance premium and shall be calculated upon the same deposit and share base as is used in the calculation of the annual premium. The board of directors of the corporation with the approval of the department may authorize a different membership fee structure from that set forth in this Code section.
  3. Membership fees, when paid by the individual member financial institution, may be charged to its regular reserve account or undivided earnings or may be established as an asset or charged in such other manner as may be approved by the department.
  4. The membership fee of each member financial institution may be refunded in whole or in part to the extent that the unencumbered funds of the corporation exceed 2 percent of the aggregate total deposits and shares of the member financial institutions as determined by the most recent call report of condition submitted to the department. Special assessments levied pursuant to subsection (b) of Code Section 7-2-8 may be repaid in such manner as may be approved by the directors of the corporation with approval by the department. Refunds may be paid only to members of the corporation at the time of declaration by the directors of the corporation in proportion to their paid-in membership fees.
  5. Upon termination or revocation of membership, other than through involuntary liquidation, the financial institution shall be entitled to refunds as follows:
    1. Membership fees in full within 30 days;
    2. Pro rata portion of annual premium which is unearned by the corporation in full within 30 days; and
    3. Any special assessment in accordance with its terms, provided the department may direct that such refunds be disbursed over a period of not more than 24 months at the request of the corporation where such disbursement will not cause an undue financial burden for the member financial institution.
  6. Any financial institution which terminates its membership voluntarily within the 24 months immediately preceding any voluntary cessation of business by the corporation shall be entitled to a pro rata distribution of the undivided earnings of the corporation. Such distribution shall be the lesser of an amount equal to that portion of the retained earnings at the end of the fiscal year immediately preceding the termination of membership determined by the proportion of the terminating members' membership fees to the total membership fees at the end of such fiscal year or the amount which would have been distributed had membership been retained until the final distribution.

    (Ga. L. 1974, p. 545, § 6; Ga. L. 1981, p. 1241, § 2; Ga. L. 1984, p. 952, § 5; Ga. L. 1989, p. 1690, § 2.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1985, "of" was substituted for "or" following "revocation" in subsection (e).

7-2-8. Premiums and special assessments; distribution of assets on liquidation.

  1. A regular annual premium, not to exceed one-twelfth of 1 percent of the deposits and shares of the member financial institution, shall be levied by the directors of the corporation. Such premium may be raised, lowered, waived, or refunded, in whole or in part, with prior approval by the department, in the event that the total funds held by the corporation justify or require such change. The corporation may charge its financial institutions variable rate premiums based upon determination of risk to the fund, provided that such risk rating is made according to formulas adopted by the directors of the corporation and approved by the department.
  2. In the event of potential impairment of the corporation's funds, special assessments may be levied by the directors of the corporation with the prior approval of the department, provided that such special assessments shall not exceed, in the aggregate, 1 percent of the deposits and shares of each member financial institution. Such special assessments shall be in the form of loans from the member financial institution to the corporation.
  3. Membership fees, annual premiums, and special assessments shall be based upon deposits and shares of member financial institutions as reported to the department in its most recent call report of condition and shall be payable within 30 days of the date on which the corporation notifies its members of any such premium or assessment.
  4. Annual premiums paid under this Code section shall be charged to the operating expenses of each member financial institution.
  5. In the event of liquidation of the corporation, all assets remaining after the payment or provision for payment of all debts and taxes and expenses of liquidation, including distributions to former members as provided for in Code Section 7-2-7, shall be distributed to the then existing member financial institutions in proportion to their membership fees paid into the corporation.

    (Ga. L. 1974, p. 545, § 7; Ga. L. 1984, p. 952, § 6; Ga. L. 1989, p. 1690, § 3.)

RESEARCH REFERENCES

Am. Jur. 2d. - 19 Am. Jur. 2d, Corporations, § 2873.

C.J.S. - 19 C.J.S., Corporations, § 958 et seq.

7-2-9. Insurance of deposits and shares.

  1. Upon receipt of the first installment of the prescribed membership fee from the financial institutions which have agreed to become members of the corporation as provided in this chapter, the corporation may commence its insurance of the deposits and shares of the member financial institutions.
  2. Each insured financial institution may advise its members and advertise that its deposits and shares are insured by the corporation, in such manner established by the directors of the corporation and approved by the department, upon receipt of a notification from the corporation that it has been accepted for membership in the corporation by its directors and upon payment of any required premiums or fees.
  3. The amount of insurance coverage on deposits and shares provided by the corporation may be increased from time to time by the directors of the corporation with the approval of the department; provided, however, that in no event may the insurance be increased to an amount greater than the largest amount insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration.
  4. The corporation may insure or partially insure the uninsured shares and deposits of any financial institution primarily insured by it or some other governmental or private insurance program, at a cost to be determined by the directors of the corporation with the approval of the department, provided the department approves the financial institution for such coverage. Financial institutions having excess deposit insurance coverage shall not be required to be members of the corporation by virtue of such insurance coverage.
  5. No other forms of insurance except that authorized by this Code section may be sold or offered by the corporation.

    (Ga. L. 1974, p. 545, § 8; Ga. L. 1984, p. 952, § 7; Ga. L. 1985, p. 149, § 7; Ga. L. 1993, p. 917, § 11.)

7-2-10. Conduct of business by incorporators and directors.

The corporation's business shall be conducted by the incorporators, who shall serve until the organizational meeting of the corporation, at which time not less than three directors shall be elected by the members of the corporation in accordance with the bylaws. Thereafter, the corporation's business shall be conducted by the directors.

(Ga. L. 1974, p. 545, § 9.)

RESEARCH REFERENCES

Am. Jur. 2d. - 18B Am. Jur. 2d, Corporations, §§ 1345, 1483 et seq.

C.J.S. - 19 C.J.S., Corporations, §§ 543 et seq.

7-2-11. Exclusive supervision by department; rules and regulations.

  1. The corporation shall not be deemed an insurance company within the meaning of the laws of the State of Georgia relating to insurance or providing for the supervision of insurance companies, but it shall be subject to the exclusive supervision of the department. The department shall exercise the same powers and authority over the corporation as is now or hereafter exercised over banks and credit unions under its jurisdiction and shall issue such rules and regulations as shall be necessary to carry out its responsibilities under this chapter.
  2. Any other company which is engaged in the insurance of deposits in financial institutions in this state when approved by the department based upon the criteria set forth in subsection (c) of Code Section 7-2-1 shall be subject to the jurisdiction of the department to the extent of its deposit insurance activities and to the same extent as a corporation organized pursuant to this chapter. Nothing contained in this chapter shall amend, modify, or otherwise restrict any authority or jurisdiction possessed by the Commissioner of Insurance prior to July 1, 1984. In the event a conflict exists between this chapter and Title 33, known as the "Georgia Insurance Code," Title 33 shall control.

    (Ga. L. 1974, p. 545, § 10; Ga. L. 1984, p. 952, § 8; Ga. L. 1985, p. 149, § 7; Ga. L. 2016, p. 390, § 7-23/HB 811; Ga. L. 2017, p. 774, § 7/HB 323.)

The 2016 amendment, effective July 1, 2016, substituted "banks, and credit unions" for "banks, credit unions, and building and loan associations" in the second sentence of subsection (a).

The 2017 amendment, effective May 9, 2017, part of an Act to revise, modernize, and correct the Code, revised punctuation in subsection (a).

RESEARCH REFERENCES

Am. Jur. 2d. - 10 Am. Jur. 2d, Banks and Financial Institutions, § 20 et seq.

C.J.S. - 9 C.J.S., Banks and Banking, §§ 5, 7.

7-2-12. Copies of members' reports sent to corporation; additional examinations or audits; ordering corrective action or revoking membership.

  1. The department shall forward to the corporation copies or summaries of all examination reports of member financial institutions. In the event a summary is provided, the corporation may request a complete and full report.
  2. The corporation may request the department to conduct additional examinations or to order independent audits of the records of member financial institutions. The department shall cooperate with the corporation upon such a request but shall use its discretion in determining the scope and timing of such additional examinations or audits.
  3. If the directors of the corporation ascertain evidence of carelessness, unsound practices, or mismanagement of any member financial institution which appears to affect adversely the solvency of the financial institution or threatens undue loss to the corporation, the directors may order that corrective action be taken or revoke the membership of the financial institution in the corporation or recommend to the department that the financial institution be liquidated. The department shall be provided a copy of any such order or letter of revocation. In the event of revocation of its membership, the financial institution shall notify all of its members of such revocation and that the deposits and shares are no longer insured by the corporation, provided that, in the event membership is revoked, insurance coverage shall continue in effect for 180 days. No refund required by subsection (e) of Code Section 7-2-7 shall be payable until after insurance coverage is terminated.
  4. If any member financial institution shall fail to pay any assessment, premium, or membership fee lawfully required under this chapter, the directors of the corporation shall notify the department, and the department shall forthwith notify the financial institution in writing. The failure of such financial institution to make such payment within 15 days after the said written notice may subject the financial institution to the sanctions set forth in subsection (c) of this Code section.

    (Ga. L. 1974, p. 545, § 11; Ga. L. 1984, p. 952, § 9.)

7-2-13. Administrative review of corporation or department decision; exhaustion of remedies.

  1. If a financial institution is aggrieved by a decision or order of the corporation or if the corporation is aggrieved by a decision or order of the department, the financial institution or the corporation, as the case may be, shall, upon appropriate petition and after due notice, be entitled to a hearing and administrative review of the action before the department, which may stay enforcement of such actions pending the administrative review.
  2. Judicial review of such decisions or orders, other than decisions or orders to revoke the membership of a financial institution, shall not be available unless the aggrieved party has sought administrative review under this Code section.

    (Ga. L. 1974, p. 545, § 12; Ga. L. 1984, p. 952, § 10.)

7-2-14. Tax exemption.

The corporation shall be exempt from all state and local taxes except real property taxes.

(Ga. L. 1974, p. 545, § 13.)

CHAPTER 3 INDUSTRIAL LOANS

Sec.

Cross references. - Exemption from securities-registration provisions of securities issued or guaranteed by industrial loan associations, § 10-5-8.

Payday loans are illegal, § 16-17-1 et seq.

Administrative Rules and Regulations. - Rules governing industrial loan department, Official Compilation of Rules and Regulations of State of Georgia, Rules of Comptroller General, Industrial Loan Department, Chapters 120-1-1.

Law reviews. - For article, "Small Loans Under Georgia Laws," see 3 Mercer L. Rev. 227 (1952). For article, "The Georgia Industrial Loan Act: An Analysis," see 7 Mercer L. Rev. 297 (1956). For article discussing the Industrial Loan Act with emphasis on defending the debtor from claims, see 24 Mercer L. Rev. 545 (1973). For article surveying 1976 to 1977 developments in application of the Industrial Loan Act, see 29 Mercer L. Rev. 41 (1977). For article surveying Georgia cases dealing with commercial law from June 1977 through May 1978, see 30 Mercer L. Rev. 15 (1978). For article discussing methods of computation of finance charges in Georgia consumer credit contracts, see 30 Mercer L. Rev. 281 (1978). For note discussing transfer fees in home loan assumptions in reference to the Georgia usury laws, see 9 Ga. L. Rev. 454 (1975). For note discussing significant judicial, legislative, and administrative developments under the Industrial Loan Act between 1973 and 1978, see 27 Emory L.J. 109 (1978). For note discussing debtor-creditor relations under the Georgia Industrial Loan Act, see 12 Ga. L. Rev. 814 (1978). For comment on Lewis v. Termplan, Inc., 124 Ga. App. 507 , 184 S.E.2d 473 (1971), see 9 Ga. St. B.J. 380 (1973). For comment on Georgia Inv. Co. v. Norman, 231 Ga. 821 , 204 S.E.2d 740 (1974), see 26 Mercer L. Rev. 321 (1974).

JUDICIAL DECISIONS

ANALYSIS

General Consideration

Purpose of the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) is to eliminate abuses arising from unregulated entities engaging in small loan business. Commercial Credit Plan, Inc. v. Parker, 152 Ga. App. 409 , 263 S.E.2d 220 (1979).

Purpose of the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) is to provide a source of regulated lending funds since such need existed for those who had been borrowing at usurious rates from loan sharks, street shylocks, and wage-buyers. Freeman v. Decatur Loan & Fin. Corp., 140 Ga. App. 682 , 231 S.E.2d 409 (1976).

Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) was designed to require creditors to make certain uniform disclosures in consumer credit transactions in order to assure a meaningful disclosure of credit terms so that consumers will be able to compare more readily the various credit terms available to the consumers and avoid uninformed use of credit. Grubb v. Oliver Enters., Inc., 358 F. Supp. 970 (N.D. Ga. 1972).

Georgia Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., must be strictly construed. General Fin. Corp. v. Sprouse, 577 F.2d 989 (5th Cir. 1978).

Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., is in derogation of common law and must be strictly construed. Diggs v. Swift Loan & Fin. Co., 154 Ga. App. 389 , 268 S.E.2d 433 (1980).

Chapter to be read liberally and broadly. - Wording and legislative history of the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) make clear that it is to be read liberally and broadly to prevent even the most subtle or indirect methods of assessing usurious rates. Williams v. Public Fin. Corp., 598 F.2d 349 (5th Cir. 1979).

Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) makes certain financial transactions legal which would otherwise be usurious under former Code 1933, § 57-101 (see now O.C.G.A. § 7-4-2 ). Lewis v. Termplan, Inc., 124 Ga. App. 507 , 184 S.E.2d 473 (1971).

Chapter operates uniformly and in same manner as usury statute. - Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) operates generally upon entire class of subjects with which the statute deals, uniformly throughout the state and in the same manner generally as the usury statute. Talley v. Sun Fin. Co., 223 Ga. 419 , 156 S.E.2d 55 (1967).

Chapter prevails over Uniform Commercial Code. - Georgia Industrial Loan Act, O.C.G.A § 7-3-1 et seq., is applicable to security agreements and in the event its provisions conflict with the Georgia Uniform Commercial Code, the Industrial Loan Act governs. General Fin. Corp. v. Sprouse, 577 F.2d 989 (5th Cir. 1978).

Effect of § 7-3-29 on judicial and other interpretations of this chapter. - O.C.G.A. § 7-3-29 evidences a recognition on the part of the General Assembly that O.C.G.A. Ch. 3, T. 7 is ambiguous in certain sections. It in no way discourages judicial or other valid authority from seeking interpretations of the chapter which further its purpose, despite prior inconsistent interpretations. Ford v. Termplan, Inc., 528 F. Supp. 1016 (N.D. Ga. 1981).

Judicial construction of the Retail Installment and Home Solicitation Sales Act, O.C.G.A. Art. 1, Ch. 1, T. 10, enacted at a different time, is weak evidence of legislative intent in enacting O.C.G.A. Ch. 3, T. 7. Ford v. Termplan, Inc., 528 F. Supp. 1016 (N.D. Ga. 1981).

Retail Installment and Home Solicitation Act, Art. 1, Ch. 1, T. 10 and O.C.G.A. Ch. 3, T. 7 differ in purpose and effect and provisions of one act are not controlling in interpretation of the other. Liberty Loan Corp. v. Childs, 140 Ga. App. 473 , 231 S.E.2d 352 (1976), cert. dismissed, 239 Ga. 220 , 236 S.E.2d 373 (1977).

Action under Truth-in-Lending Act does not affect attack under this chapter. - Statutory damages sought by defendants in federal court as a violation of the Truth-in-Lending Act, 15 U.S.C. § 1601 et seq., is a legal tort action authorized by federal law; and it is in no wise an estoppel of defendants to contend the loan contract was void under O.C.G.A. Ch. 3, T. 7. Hobbiest Fin. Corp. v. Spivey, 135 Ga. App. 353 , 217 S.E.2d 613 (1975).

Truth-in-Lending Act inapplicable to loans violating this chapter. - Federal Truth-in-Lending Act, 15 U.S.C. § 1601 et seq., does apply to loans which also violate O.C.G.A. Ch. 3, T. 7. Williams v. Public Fin. Corp., 598 F.2d 349 (5th Cir. 1979).

Violation of chapter as affirmative defense. - Party asserting defense of violation of O.C.G.A. Ch. 3, T. 7 has burden of showing that defense affirmatively by record. Grier v. Employees Fin. Servs., 158 Ga. App. 813 , 282 S.E.2d 342 (1981).

Rule of 78's can be used to compute interest rebates. - O.C.G.A. Ch. 3, T. 7 authorizes the lender to use the Rule of 78's to compute interest rebates in refinancing cases and does not require lenders to compute such rebates on a pro rata basis. Varner v. Century Fin. Corp., 253 Ga. 27 , 317 S.E.2d 178 (1984).

Loans which had undergone refinancing were not void under O.C.G.A. Ch. 3, T. 7 merely because the prepaid interest attributable to the original loans was rebated under the terms of those agreements according to the Rule of 78's, instead of by a pro rata method. Varner v. Century Fin. Co., 738 F.2d 1143 (11th Cir. 1984).

Penalty for omission in original agreement. - A 1979 debt was not uncollectible because the original 1977 agreement violated O.C.G.A. Ch. 3, T. 7 by failing to provide for rebates of unearned credit insurance premiums. However, as a penalty for this violation, the loan company had to forfeit all interest and charges accrued in connection with the 1977 agreement. Varner v. Century Fin. Co., 738 F.2d 1143 (11th Cir. 1984).

Clause rendering entire balance due upon default is void. - Contract clause that renders entire unpaid balance due and payable upon default of payment is void and unenforceable as providing for acceleration of unearned interest. Blazer Fin. Servs. v. Dukes, 141 Ga. App. 663 , 234 S.E.2d 149 (1977).

Effect of accelerating debt on insurance coverage. - In the absence of any requirement that a lender cancel credit insurance coverage upon acceleration of a debt, there is no violation of this chapter when a lender, pursuant to properly drafted loan documents and in accord with this chapter, accelerates a debt but does not refund insurance premiums on insurance coverage still in effect. Williams v. Charter Credit Co., 179 Ga. App. 721 , 347 S.E.2d 635 (1986).

Cited in Haire v. Allied Fin. Co., 99 Ga. App. 649 , 109 S.E.2d 291 (1959); Liberty Loan Corp. v. Crowder, 116 Ga. App. 280 , 157 S.E.2d 52 (1967); Camilla Loan Co. v. Sheffield, 116 Ga. App. 626 , 158 S.E.2d 698 (1967); Reynolds v. Service Loan & Fin. Co., 116 Ga. App. 740 , 158 S.E.2d 309 (1967); Gentry v. Consol. Credit Corp., 124 Ga. App. 597 , 184 S.E.2d 692 (1971); Mason v. Service Loan & Fin. Co., 128 Ga. App. 828 , 198 S.E.2d 391 (1973); Roberts v. Allied Fin. Co., 129 Ga. App. 10 , 198 S.E.2d 416 (1973); Lee v. G.A.C. Fin. Corp., 130 Ga. App. 44 , 202 S.E.2d 221 (1973); Hinsley v. Liberty Loan Corp., 133 Ga. App. 344 , 211 S.E.2d 3 (1974); Hodges v. Community Loan & Inv. Corp., 234 Ga. 427 , 216 S.E.2d 274 (1975); Harris v. Avco Fin. Corp., 135 Ga. App. 267 , 218 S.E.2d 83 (1975); Earwood v. Liberty Loan Corp., 136 Ga. App. 799 , 222 S.E.2d 204 (1975); Mays v. Safeway Fin. Co., 139 Ga. App. 229 , 228 S.E.2d 319 (1976); Perry v. Landmark Fin. Corp., 141 Ga. App. 62 , 232 S.E.2d 399 (1977); Aycock v. HFC, 142 Ga. App. 207 , 235 S.E.2d 578 (1977); Clark v. Transouth Fin. Corp., 142 Ga. App. 389 , 236 S.E.2d 135 (1977); Bramblett v. Whitfield Fin. Co., 143 Ga. App. 853 , 240 S.E.2d 230 (1977); Cooper v. Public Fin. Corp., 144 Ga. App. 572 , 241 S.E.2d 839 (1978); Lowe v. Termplan, Inc., 144 Ga. App. 671 , 242 S.E.2d 268 (1978); Hilley v. Finance Am. Corp., 145 Ga. App. 284 , 243 S.E.2d 587 (1978); Lee v. Beneficial Fin. Co., 159 Ga. App. 205 , 282 S.E.2d 770 (1981); Ricks v. Liberty Loan Corp., 146 Ga. App. 594 , 247 S.E.2d 133 (1978); Carter v. Swift Loan & Fin. of Columbus, Inc., 148 Ga. App. 358 , 251 S.E.2d 379 (1978); Motor Fin. Co. v. Harris, 150 Ga. App. 762 , 258 S.E.2d 628 (1979); Finance Am. Corp. v. Drake, 151 Ga. App. 383 , 259 S.E.2d 739 (1979); Cody v. Community Loan Corp., 606 F.2d 499 (5th Cir. 1979); Sanders v. Liberty Loan Corp., 153 Ga. App. 859 , 267 S.E.2d 286 (1980); Gainesville Fin. Servs., Inc. v. McDougal, 154 Ga. App. 820 , 270 S.E.2d 40 (1980); Sanders v. Liberty Loan Corp., 246 Ga. 292 , 271 S.E.2d 218 (1980); Southern Disct. Co. v. Ector, 155 Ga. App. 521 , 271 S.E.2d 661 (1980); Wimbush v. Fayette Fin. Co., 156 Ga. App. 500 , 275 S.E.2d 99 (1980); Sanders v. Liberty Loan Corp., 156 Ga. App. 628 , 276 S.E.2d 49 (1980); Williams v. Public Fin. Corp., 609 F.2d 1179 (5th Cir. 1980); Friend v. Aetna Fin. Co., 622 F.2d 1217 (5th Cir. 1980); Whitfield v. Termplan, Inc., 651 F.2d 383 (5th Cir. 1981); In re Moses, 9 Bankr. 370 (Bankr. N.D. Ga. 1981); Smith v. American Fin. Sys., 14 Bankr. 712 (Bankr. N.D. Ga. 1981); Clyde v. Liberty Loan Corp., 249 Ga. 78 , 287 S.E.2d 551 (1982); Gibbs v. Jack Daniel Auto Sales, Inc., 163 Ga. App. 479 , 294 S.E.2d 696 (1982); Varner v. Century Fin. Co., 720 F.2d 1228 (11th Cir. 1983); Scott v. Aetna Fin. Co., 201 Ga. App. 81 , 410 S.E.2d 203 (1991).

License Requirement

License is condition precedent to recovery upon obligation incurred under chapter. - It must appear from the allegations of the petition that the payee in the note representing the transaction under the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) was duly licensed to operate thereunder when the obligation was incurred, i.e., when the note was executed. This is required in order to show that plaintiff sues upon a lawful obligation. Bayne v. Sun Fin. Co. No. 1, 114 Ga. App. 27 , 150 S.E.2d 311 (1966).

It is settled that one who seeks to recover money loaned under provisions of the Industrial Loan Act, (see now O.C.G.A. § 7-3-1 ), must plead and prove that the person was licensed to do business under the act at time the loan was made. Service Loan & Fin. Corp. v. McDaniel, 115 Ga. App. 548 , 154 S.E.2d 823 (1967).

It is a condition precedent to recovery on a note otherwise usurious that the obligee named therein was at the time of execution of the note duly licensed under the provisions of the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.). Hardy v. R & S Fin. Co., 116 Ga. App. 451 , 157 S.E.2d 777 (1967).

As a condition precedent to recovery upon an obligation incurred under provisions of the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) it must appear that the obligee was licensed under that Act to engage in the business of making loans, etc., thereunder. Southern Disct. Co. v. Cooper, 130 Ga. App. 223 , 203 S.E.2d 237 (1973)There can be no recovery upon obligation incurred under the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) without proof that the obligee in the note sued upon was duly licensed at the time the obligation was incurred. HFC v. Johnson, 119 Ga. App. 49 , 165 S.E.2d 864 (1969); Scoggins v. Whitfield Fin. Co., 242 Ga. 416 , 249 S.E.2d 222 (1978).

Bayne v. Sun Fin. Co. No. 1, 114 Ga. App. 27 , 150 S.E.2d 311 (1966).

Failure to plead fact of licensing is an amendable defect. Service Loan & Fin. Corp. v. McDaniel, 115 Ga. App. 548 , 154 S.E.2d 823 (1967).

Application

Question is whether contract could be used to exact illegal charges. - Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) was designed to protect debtors who are often unaware of the debtors'legal rights or complicated rules of construction. The relevant question is not simply whether a violation exists in the contract, when evaluated under general rules of contract construction, but whether the lender might be able to employ certain provisions of the contract to exact illegal charges from unsuspecting debtors. General Fin. Corp. v. Sprouse, 577 F.2d 989 (5th Cir. 1978).

When the plaintiff contracted for collection of unearned interest, which violates the obligation is void. Guyton v. Martin Fin. Corp., 135 Ga. App. 62 , 217 S.E.2d 390 (1975).

When loan is void, lender forfeits principal, interest, and other charges. - Lender forfeits not only interest and other charges, but forfeits principal as well when the loan is found to be null and void under the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.). Hobbiest Fin. Corp. v. Spivey, 135 Ga. App. 353 , 217 S.E.2d 613 (1975).

Action for money had and received not sustainable where predicated upon a contract void under the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.). Anderson v. G.A.C. Fin. Corp., 135 Ga. App. 116 , 217 S.E.2d 605 (1975).

Reaffirmance of obligation void under the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) is also void. Pinkett v. Credithrift of Am., Inc., 430 F. Supp. 113 (N.D. Ga. 1977).

Lender cannot recover money lent on refinancing of loan which violates the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.). Williams v. Public Fin. Corp., 598 F.2d 349 (5th Cir. 1979).

Plaintiff must show chapter applicable. - Plaintiff lender bears burden of establishing that the plaintiff comes within the terms of the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.). Gray v. Quality Fin. Co., 130 Ga. App. 762 , 204 S.E.2d 483 (1974).

Administrative interpretation of chapter is entitled to consideration by court. - Administrative interpretation of this chapter given by the Georgia Industrial Loan Commissioner is entitled to consideration in determination by the court of the manner in which fees and charges allowed by law should be calculated. Belton v. Columbus Fin. & Thrift Co., 127 Ga. App. 770 , 195 S.E.2d 195 (1972); FinanceAmerica Corp. v. Drake, 154 Ga. App. 811 , 270 S.E.2d 449 (1980).

Administrative rulings will be adopted when the rulings conform to meaning which court deems proper. Belton v. Columbus Fin. & Thrift Co., 127 Ga. App. 770 , 195 S.E.2d 195 (1972).

Remedy same for illegal loans and loans based on illegal consideration. - Under Georgia law, public policy dictates that loans based partly on illegal consideration are void and money paid pursuant to such contracts need not be repaid, and since this is the same remedy as provided in this chapter for loans which violate it, the distinction between illegal loans and loans based in part on illegal consideration is of no importance. Williams v. Public Fin. Corp., 598 F.2d 349 (5th Cir. 1979).

OPINIONS OF THE ATTORNEY GENERAL

One who lends money on wages and salaries is subject to provisions of the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.). 1954-56 Op. Att'y Gen. p. 385.

Lenders not subject to license requirement. - Person not engaged in business of making loans, but who makes occasional loans in amounts less than $2,500.00 (now $3,000.00) repayable in monthly, quarterly, or annual installments, may charge interest at 6 percent (now 8 percent) per annum for the entire period of loan and take security therefor, and is not required to obtain a license under this chapter. 1954-56 Op. Att'y Gen. p. 392.

Federal savings and loan associations are exempt from chapter. - Consumer loans for amounts less than $3,000.00, with interest charged in excess of 9 percent simple interest, are governed by this chapter, but this chapter grants specific exemptions from its provisions to "banks, trust companies, real estate loan or mortgage companies, federal and Georgia building and loan associations" under former Code 1933, §§ 25-221 and 25-318 (see now O.C.G.A. § 7-3-6 ). Although federal savings and loan associations are not specifically named as such, they are included in the list of exemptions under that section and, therefore, wholly owned subsidiaries of federal savings and loan associations, created pursuant to federal statute and regulation, are not required to obtain a license under this chapter in order to make loans of less than $3,000.00 at interest rates permitted by Georgia usury statutes. 1978 Op. Att'y Gen. No. 78-12.

Unauthorized transactions. - Georgia Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., and the rules and regulations promulgated thereunder do not allow Industrial Loan Act licensees to transact noncredit insurance through employees or otherwise. 1984 Op. Att'y Gen. No. 84-60.

Former Code 1933, §§ 25-211 and 25-310 (see now O.C.G.A. § 7-3-22 ) empowers commissioner to investigate loans and business of any person violating the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.). 1948-49 Op. Att'y Gen. p. 15.

Industrial loan licensed employee may conduct the business of insurance provided that the person is duly licensed as an insurance agent and provided that the customer is not misled into thinking that the customer's ability to procure a loan is contingent upon the customer's agreement to purchase this insurance or otherwise to transact business in the industrial loan office. 1984 Op. Att'y Gen. No. U84-54.

RESEARCH REFERENCES

Violation of the Truth-In-Lending Act and Regulation Z, 73 POF3d 275.

Class Action for Failure to Disclose Under the Truth-In-Lending Act and Regulation Z, 76 POF3d 193.

ALR. - Constitutionality of statutes regulating the business of making small loans, 69 A.L.R. 581 ; 125 A.L.R. 743 ; 149 A.L.R. 1424 .

Construction and application of provisions of small loan acts as regards maximum amount of loan, 99 A.L.R. 923 .

Usury as affected by acceleration clause, 66 A.L.R.3d 650.

7-3-1. Short title.

This chapter shall be known and may be cited as the "Georgia Industrial Loan Act."

(Ga. L. 1955, p. 431, § 1; Ga. L. 1997, p. 143, § 7.)

JUDICIAL DECISIONS

Cited in Clay v. Oxendine, 285 Ga. App. 50 , 645 S.E.2d 553 (2007); Ga. Cash Am. v. Greene, 318 Ga. App. 355 , 734 S.E.2d 67 (2012); W. Sky Fin., LLC v. State of Ga. ex rel. Olens, 300 Ga. 340 , 793 S.E.2d 357 (2016).

OPINIONS OF THE ATTORNEY GENERAL

"Payday loans" are subject to the Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., notwithstanding the lender's use of token consideration such as catalog coupons or purchase-leaseback arrangements. 2002 Op. Att'y Gen. No. 2002-3.

RESEARCH REFERENCES

ALR. - State regulation of payday loans, 29 A.L.R.6th 461.

What constitutes Truth in Lending Act violation which "was not intentional and resulted from bona fide error not withstanding maintenance of procedures reasonably adapted to avoid any such error" within meaning of § 130(c) of Act (15 USCA § 1640(c)), 153 A.L.R. Fed. 193.

Validity, construction, and application of Truth in Lending Act (TILA) and regulations promulgated thereunder - United States Supreme Court cases, 67 A.L.R. Fed. 2d 567.

7-3-2. Purpose of chapter.

The purpose of this chapter is to authorize and provide regulation of the business of making loans of $3,000.00 or less and to bring within the regulation of this chapter and within its provisions all loans of $3,000.00 or less, whether or not made by a person organized or operating under the provisions and authority of some other statute, except those persons and loans expressly exempted by the terms of this chapter. Even though authorized by other statutes of force, such loans and the persons making them, unless expressly exempted, shall be within the operation of this chapter in accordance with its terms.

(Ga. L. 1955, p. 431, § 2; Ga. L. 1975, p. 393, § 1.)

JUDICIAL DECISIONS

Funding agreements were investment contracts, not loans. - After the defendants entered into separate funding agreements with the plaintiffs, the defendant's motion to dismiss a putative class action for damages premised on violations of the Georgia Industrial Loan Act (GILA), O.C.G.A. § 7-3-1 et seq., was properly granted, but the defendant's motion with regard to the Payday Lending Act (PLA), O.C.G.A. § 16-17-1 et seq., was improperly denied as the funding agreements were not loans, but rather were investments in the plaintiffs' litigation, because the repayment requirement was completely contingent upon the recovery of proceeds from the plaintiffs' related legal claims; thus, instead of being loans that were regulated by the GILA and the PLA, the funding agreements were investment contracts to which the GILA and the PLA did not apply. Cherokee Funding LLC v. Ruth, 342 Ga. App. 404 , 802 S.E.2d 865 (2017).

Cited in Colter v. Consolidated Credit Corp., 115 Ga. App. 408 , 154 S.E.2d 713 (1967); Bragg v. HFC, 140 Ga. App. 75 , 230 S.E.2d 55 (1976); Marshall v. Fulton Nat'l Bank, 145 Ga. App. 190 , 243 S.E.2d 266 (1978); General Fin. Corp. v. Sprouse, 577 F.2d 989 (5th Cir. 1978); Gainesville Fin. Servs., Inc. v. McDougal, 154 Ga. App. 820 , 270 S.E.2d 40 (1980); FinanceAmerica Corp. v. Drake, 154 Ga. App. 811 , 270 S.E.2d 449 (1980).

OPINIONS OF THE ATTORNEY GENERAL

Purpose of chapter; banks not subject to regulation by it. - Purpose of the Georgia Industrial Loan Act (see O.C.G.A. § 7-3-1 et seq.) is to provide regulation for otherwise unregulated entities engaged in business of making small loans. Banks are otherwise regulated and are, therefore, not subject to regulation under that Act. 1979 Op. Att'y Gen. No. 79-33.

RESEARCH REFERENCES

Am. Jur. 2d. - 53A Am. Jur. 2d, Moneylenders and Pawnbrokers, § 1 et seq.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, §§ 407, 408.

ALR. - Construction and application of provisions of small loan acts as regards maximum amount of loan, 99 A.L.R. 923 .

Construction and application of provisions of small loan statutes prohibiting the splitting up or dividing of a loan, or the existence of indebtedness under more than one contract of loan at the same time, 141 A.L.R. 912 .

7-3-3. Definitions.

As used in this chapter, the term:

  1. "Commissioner" means the Industrial Loan Commissioner.
  2. "License" means a single license issued or required under this chapter.
  3. "Licensee" means a person to whom one or more licenses under this chapter have been issued.
  4. "Loan" means any advance of money in an amount of $3,000.00 or less under a contract requiring repayment and any and all renewals or refinancing thereof or any part thereof.
  5. "Person" means individuals, copartnerships, associations, corporations, and all other legal and commercial entities.

    (Ga. L. 1955, p. 431, § 4; Ga. L. 1975, p. 393, § 1; Ga. L. 1989, p. 14, § 7; Ga. L. 1997, p. 143, § 7.)

JUDICIAL DECISIONS

Licensee. - Trial court properly dismissed a declaratory judgment action brought by a bank and a cash advance lender, which was operating as an agent for the bank, to stop the Georgia Industrial Loan Commissioner from conducting an investigation of their lending activities because the Commissioner was authorized to conduct an investigation of the two entities' loan activities, in spite of the lender's claim that the bank and the lender were operating under the authority of federal banking law. BankWest, Inc. v. Oxendine, 266 Ga. App. 771 , 598 S.E.2d 343 (2004).

"Loan". - Tax preparer's payment to a taxpayer of a discounted sum in exchange for the right to a refund was not a "loan" but instead constituted a "sale" by the taxpayer of a chose in action. Cullen v. Bragg, 180 Ga. App. 866 , 350 S.E.2d 798 (1986).

Sale/leaseback transactions engaged in by consumer cash advance businesses violated the anti-payday lending statute, O.C.G.A. § 16-17-1 et seq., and the Georgia Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., since the state proved that the purported lease back of personal property to the consumer was not based on the actual appraised market value of the personal property but directly corresponded to the loan amount; the state proved that the businesses were requiring customers to be released from the loan agreement by paying the principal amount advanced to them plus a 25 to 27 percent fee, which amounted to an annual percentage rate of 650 to 702 percent. Clay v. Oxendine, 285 Ga. App. 50 , 645 S.E.2d 553 (2007), cert. denied, No. S07C1247, 2007 Ga. LEXIS 556 (Ga. 2007).

Funding agreements were investment contracts, not loans. - After the defendants entered into separate funding agreements with the plaintiffs, the defendant's motion to dismiss a putative class action for damages premised on violations of the Georgia Industrial Loan Act (GILA), O.C.G.A. § 7-3-1 et seq., was properly granted, but the defendant's motion with regard to the Payday Lending Act (PLA), O.C.G.A. § 16-17-1 et seq., was improperly denied as the funding agreements were not loans, but rather were investments in the plaintiffs' litigation, because the repayment requirement was completely contingent upon the recovery of proceeds from the plaintiffs' related legal claims; thus, instead of being loans that were regulated by the GILA and the PLA, the funding agreements were investment contracts to which the GILA and the PLA did not apply. Cherokee Funding LLC v. Ruth, 342 Ga. App. 404 , 802 S.E.2d 865 (2017).

Cited in Robinson v. Colonial Disct. Co., 106 Ga. App. 274 , 126 S.E.2d 824 (1962).

OPINIONS OF THE ATTORNEY GENERAL

Industrial loan license is required to make "payday loans" of $3000 or less, unless the lender is exempt under O.C.G.A. § 7-3-6 . "Payday loans" are subject to the Georgia Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., notwithstanding the lender's use of token consideration such as catalog coupons or purchase-leaseback arrangements. 2002 Op. Att'y Gen. No. 2002-3.

7-3-4. Applicability of chapter - Generally; effect on existing lenders.

This chapter shall apply to all persons, as defined in Code Section 7-3-3, unless expressly exempted in this chapter, engaged in the business of making loans in amounts of $3,000.00 or less. On and after May 3, 1955, no person within the operation of this chapter shall charge, contract for, or receive, directly or indirectly, on or in connection with any loan, any interest, charges, fees, compensation, or consideration which is greater than the rates for same provided in this chapter or engage in the business of making such loans of $3,000.00 or less without a license from the Commissioner as provided in this chapter. Persons engaged in the business of making loans of $3,000.00 or less who are not exempted from the operation of this chapter may engage in such business and may make such loans lawfully under this chapter provided they comply with this chapter.

(Ga. L. 1955, p. 431, § 3; Ga. L. 1975, p. 393, § 1; Ga. L. 1989, p. 14, § 7.)

JUDICIAL DECISIONS

Creditors not to receive illegal charges directly or indirectly. - Creditors are admonished by the Georgia Industrial Loan Act, (see now O.C.G.A. § 7-3-1 et seq.), to draft loan contracts in such a way that illegal charges will not be received either directly or indirectly. General Fin. Corp. v. Sprouse, 577 F.2d 989 (5th Cir. 1978).

Loan violates the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) if the loan refinances a loan which itself violates that Act. Williams v. Public Fin. Corp., 598 F.2d 349 (5th Cir. 1979).

Lender cannot recover money lent on refinancing of loan which violates the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.). Williams v. Public Fin. Corp., 598 F.2d 349 (5th Cir. 1979).

Cited in Robinson v. Colonial Disct. Co., 106 Ga. App. 274 , 126 S.E.2d 824 (1962); Securities Inv. Co. v. Pearson, 111 Ga. App. 761 , 143 S.E.2d 36 (1965); Marshall v. Fulton Nat'l Bank, 145 Ga. App. 190 , 243 S.E.2d 266 (1978); Clay v. Oxendine, 285 Ga. App. 50 , 645 S.E.2d 553 (2007).

RESEARCH REFERENCES

ALR. - Construction and application of provisions of small loan acts as regards maximum amount of loan, 99 A.L.R. 923 .

Construction and application of provisions of small loan statutes prohibiting the splitting up or dividing of a loan, or the existence of indebtedness under more than one contract of loan at the same time, 141 A.L.R. 912 .

7-3-5. Applicability of chapter - Transactions by which money is paid others.

A loan and brokerage transaction or any other transaction by which money is paid or agreed to be paid others by the borrower in order to obtain the loan shall be subject in all respects to this chapter, if it involves a transaction of $3,000.00 or less and is not otherwise specifically exempted by the terms of this chapter; and the interest and money paid or agreed to be paid others by the borrower in order to obtain the loan shall not exceed the charges authorized by this chapter, and the application of Code Section 7-4-8 is modified accordingly.

(Ga. L. 1957, p. 331, § 3.)

JUDICIAL DECISIONS

Cited in Vezzani v. Tallant, 121 Ga. App. 67 , 172 S.E.2d 858 (1970).

7-3-6. Exemptions from chapter.

This chapter shall not apply to businesses organized or operating under the authority of any law of this state or of the United States relating to banks, trust companies, real estate loan or mortgage companies, federal savings and loan associations, credit unions, and pawnbrokers or to the transactions of such businesses, which businesses are expressly excluded from regulation under this chapter and exempted from the operation of its provisions. This chapter also shall not apply to the University System of Georgia or its educational units, to private colleges and universities in this state and associations thereof, or to student loan transactions of such educational entities, which educational entities and student loan transactions thereof are expressly excluded from regulation under this chapter and exempted from the operation of its provisions. It is expressly provided that no bank, trust company, national bank, insurance company, or real estate loan or mortgage company authorized to do business in this state shall be required to obtain a license under this chapter nor shall the University System of Georgia or its educational units or private colleges and universities in this state and associations thereof be required to obtain a license under this chapter. It is further provided that persons making loans and charging interest thereon at a rate of not more than 8 percent simple interest per annum shall not be subject to this chapter or required to obtain a license under this chapter.

(Ga. L. 1904, p. 79, § 18; Ga. L. 1920, p. 215, § 19; Code 1933, §§ 25-221, 25-318; Ga. L. 1955, p. 431, § 5; Ga. L. 1985, p. 249, § 1; Ga. L. 1997, p. 143, § 7; Ga. L. 2016, p. 390, § 7-4/HB 811.)

The 2016 amendment, effective July 1, 2016, deleted "Georgia building and loan associations," following "federal savings and loan associations," in the middle of the first sentence of this Code section.

JUDICIAL DECISIONS

Purpose of Industrial Loan Act; banks not subject to its provisions. - Purpose of the Georgia Industrial Loan Act, (see now O.C.G.A. § 7-3-1 et seq.), is to eliminate abuses which grow from unregulated entities engaging in small loan business. Banks are otherwise regulated and are expressly excluded from regulation by the Georgia Industrial Loan Act and are exempt from its provisions. Marshall v. Fulton Nat'l Bank, 145 Ga. App. 190 , 243 S.E.2d 266 (1978).

Commissioner's authority to investigate. - Trial court properly dismissed a declaratory judgment action brought by a bank and a cash advance lender, which was operating as an agent for the bank, to stop the Georgia Industrial Loan Commissioner from conducting an investigation of their lending activities because the Commissioner was authorized to conduct an investigation of the two entities' loan activities, in spite of the lender's claim that the bank and the lender were operating under the authority of federal banking law. BankWest, Inc. v. Oxendine, 266 Ga. App. 771 , 598 S.E.2d 343 (2004).

Cited in Colter v. Consolidated Credit Corp., 115 Ga. App. 408 , 154 S.E.2d 713 (1967); Carreker v. National Diversified, Inc., 135 Ga. App. 511 , 218 S.E.2d 117 (1975); Clay v. Oxendine, 285 Ga. App. 50 , 645 S.E.2d 553 (2007).

OPINIONS OF THE ATTORNEY GENERAL

This section excludes state or federally chartered banks from regulation. - Georgia statutes specifically provide that state or federally chartered banks are excluded from regulation under the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) and are not required to obtain a license from the Georgia Industrial Loan Department. 1979 Op. Att'y Gen. No. 79-33.

Section 7-1-292 supports proposition that banks are exempt from regulation. - Further authority for proposition that banks were exempt from regulation under the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) and are not required to obtain a license as authority lied in the language of former Code 1933, § 41A-1313 (see now O.C.G.A § 7-1-292 ). 1979 Op. Att'y Gen. No. 79-33.

Section includes federal savings and loan associations. - Federal savings and loan association is solely an invention of federal statute, and can be formed from existing state associations, including state building and loan associations; therefore, the term "Federal and Georgia building and loan association" formerly used in the statutes referred to and included a federal savings and loan association. 1978 Op. Att'y Gen. No. 78-12.

Federal savings and loan associations are exempted under this section. - Consumer loans for amounts less than $3,000.00, with interest charged in excess of 9 percent simple interest would be governed by the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.), but the Act grants specific exemptions from its provisions to "banks, trust companies, real estate loan or mortgage companies, federal and Georgia building and loan associations". Although federal savings and loan associations are not specifically named as such, they are included in the list of exemptions; therefore, wholly owned subsidiaries of federal savings and loan associations, created pursuant to federal statute and regulation, are not required to obtain a license under the Georgia Industrial Loan Act in order to make loans of less than $3,000.00 at interest rates permitted by Georgia usury statutes. 1978 Op. Att'y Gen. No. 78-12.

Construction with usury laws. - Merchant who makes cash advances of $3,000.00 or less is subject to the provisions of the Georgia Industrial Loan Act, O.C.G.A § 7-3-1 et seq., rather than O.C.G.A § 7-4-2(a)(2), regarding legal rate of interest, unless the merchant charges 8 percent simple interest per annum or less. 1984 Op. Att'y Gen. No. 84-79.

RESEARCH REFERENCES

ALR. - Building and loan association as within statute relating to lenders of money, 99 A.L.R. 1027 .

7-3-7. Industrial Loan Commissioner; powers and duties generally; employees; deputy; training programs for licensees.

  1. There is created the office of Industrial Loan Commissioner; and the Commissioner of Insurance of the State of Georgia is designated and constituted the Industrial Loan Commissioner under this chapter and is invested with all of the powers and authority provided for such Commissioner. In addition to those powers specifically enumerated, it shall be his duty and authority to supervise generally and to exercise regulatory powers over the making of loans of $3,000.00 or less in the State of Georgia by persons governed and regulated by this chapter.
  2. The Commissioner is granted power and authority to make all rules and regulations not inconsistent with this chapter which in his judgment shall be necessary and appropriate to accomplish the purposes and objectives of this chapter, including, without limitation, the power and authority to make such rules and regulations regulating and controlling the manner in which loans of $3,000.00 or less may be made under this chapter. Such rules and regulations shall be promulgated pursuant to public hearing after notice of such hearing is advertised at least once in one newspaper in Atlanta, Georgia, having general state-wide circulation not less than ten days prior to such hearing. In addition, such rules and regulations shall be promulgated in accordance with Chapter 13 of Title 50, the "Georgia Administrative Procedure Act." Such rules and regulations so promulgated by the Commissioner in his discretion, consistent with the terms of this chapter and other applicable statutes, shall have the full force and effect of law. The Commissioner shall have authority to designate and employ and compensate agents and employees in the manner other agents and employees are employed by his department to assist him in the discharge of his duties under this chapter; and the Commissioner is authorized and empowered to delegate to an assistant or deputy authority to act in his place and stead in his absence or disability.
  3. The Commissioner is authorized to provide for training programs and seminars at such places, at such times, and in such manner as he shall deem advisable. Such programs and seminars shall be for the purpose of acquainting licensees and employees thereof with this chapter, with the rules and regulations promulgated thereunder, and with such other matters relative to the business authorized to be carried on by a licensee under this chapter as the Commissioner shall deem necessary.

    (Ga. L. 1955, p. 431, § 6; Ga. L. 1959, p. 55, § 1; Ga. L. 1963, p. 370, § 1; Ga. L. 1964, p. 288, § 1; Ga. L. 1975, p. 393, § 1; Ga. L. 1986, p. 855, § 1.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1986, "industrial loan commissioner" and "commissioner" were capitalized throughout this Code section.

Pursuant to Code Section 28-9-5, in 1987, the word "of" was inserted between "all" and "the powers" in the first sentence of subsection (a).

JUDICIAL DECISIONS

Jurisdiction of commissioner. - Since the Georgia Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., defined and prevented usury, and provided a source of regulated funds for those who had been borrowing at usurious rates from loan sharks, street shylocks, and wagebuyers, certain financial transactions involving loans, which the loan companies were involved in, came within the jurisdiction of the Act; accordingly, the industrial loan commissioner had jurisdiction over wagebuyers, contrary to the argument of the loan companies that the commissioner did not have such jurisdiction. USA Payday Cash Advance Ctrs. v. Oxendine, 262 Ga. App. 632 , 585 S.E.2d 924 (2003).

Cited in Robinson v. Colonial Disct. Co., 106 Ga. App. 274 , 126 S.E.2d 824 (1962); Brown v. Quality Fin. Co., 112 Ga. App. 369 , 145 S.E.2d 99 (1965); Plant v. Blazer Fin. Servs., Inc., 598 F.2d 1357 (5th Cir. 1979); Oglesby v. Blazer Fin. Servs., Inc., 622 F.2d 779 (5th Cir. 1980); DOT v. Del-Cook Timber Co., 248 Ga. 734 , 285 S.E.2d 913 (1982).

OPINIONS OF THE ATTORNEY GENERAL

Legislative intent to limit scope of operations of small loan lenders. - Language employed in Ga. L. 1963, p. 370, § 1, when construed with its declared purpose of regulating the making of loans of $3,000.00 or less, expresses the General Assembly's intent to limit the area or scope of operations of small loan lenders at least to some extent. 1963-65 Op. Att'y Gen. p. 716.

Section authorizes rule limiting places at which loans may be made. - Language used in Ga. L. 1963, p. 370, § 1 specifically empowering the commissioner to make rules and regulations which the commissioner considers necessary and appropriate to regulate small loans industry, including regulating and controlling of manner of making loans, sufficiently defines framework for a rule limiting places at which loans may be made. 1963-65 Op. Att'y Gen. p. 716.

Sales of credit insurance with loans are exempt from Rule 120-1-11-.03(2). - Banks that make loans of the type authorized by the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) and sell credit accident and health insurance in connection therewith need not comply with Rule 120-1-11-.03(2) of the Official Compilation, Rules and Regulations of the State of Georgia, which limits the length of waiting periods for such insurance. 1980 Op. Att'y Gen. No. 80-42.

RESEARCH REFERENCES

Am. Jur. 2d. - 54 Am. Jur. 2d, Moneylenders and Pawnbrokers, § 9.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, §§ 412, 413.

7-3-8. License required; application; fees.

All persons engaged in the business of making loans of $3,000.00 or less in the State of Georgia, unless expressly exempted therefrom, shall be required to obtain a license under this chapter. Application for license shall be made to the Commissioner in writing, under oath, on forms prescribed by the Commissioner and shall give the location from which the business is to be conducted and shall give the names of the persons connected with the business together with any other information required by the Commissioner. The application shall be accompanied by a fee of $250.00 to cover the cost of investigation of the applicant and by a license fee of $500.00. Said license shall expire on the last day of the calendar year in which granted, subject to renewal pursuant to Code Section 7-3-10. The Commissioner shall collect fees and costs as provided in this chapter and shall issue his receipt for all sums collected by him and periodically, not less than once in each quarter of each year, at such times as may be convenient, shall pay into the state treasury all sums collected by him.

(Ga. L. 1904, p. 79, §§ 1, 2, 14; Ga. L. 1920, p. 215, § 2; Code 1933, §§ 25-201, 25-202, 25-203, 25-301, 25-302; Ga. L. 1955, p. 431, § 7; Ga. L. 1964, p. 288, § 2; Ga. L. 1975, p. 393, § 1; Ga. L. 1989, p. 14, § 7; Ga. L. 1992, p. 2725, § 1.)

JUDICIAL DECISIONS

License to operate when loan was made is prerequisite to recovery on loan. - If a contract be one purportedly executed under the provisions of the Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., thus allowing interest charges otherwise usurious, it must appear affirmatively from the plaintiff's pleading as a condition precedent to recovery that the payee was duly licensed to operate thereunder when the obligation was incurred, and that the action is based on a lawful transaction under the Act. Colter v. Consolidated Credit Corp., 115 Ga. App. 408 , 154 S.E.2d 713 (1967).

Cited in Bentley v. C. & S. Loans, Inc., 109 Ga. App. 218 , 135 S.E.2d 900 (1964); Commercial Credit Plan, Inc. v. Parker, 152 Ga. App. 409 , 263 S.E.2d 220 (1979); Cmty. State Bank v. Strong, 651 F.3d 1241 (11th Cir. 2011).

RESEARCH REFERENCES

Am. Jur. 2d. - 53A Am. Jur. 2d, Moneylenders and Pawnbrokers, §§ 6 et seq., 34 et seq.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, §§ 254 et seq., 423 et seq., 446.

7-3-9. Investigation of application; issuance or denial of license; purchase of licensed location.

  1. Upon the filing of the application and the payment of the fees provided in Code Section 7-3-8, the Commissioner shall cause an investigation to be made. Notwithstanding any provision of Chapter 13 of Title 50, entitled the "Georgia Administrative Procedure Act," to the contrary, if the Commissioner has any doubt of the applicant meeting the standards of subsection (b) of this Code section, he shall issue a proposed order to be effective upon a later date without a hearing, unless any person subject to the order requests a hearing within ten days after receipt of the proposed order. Failure to make the request shall constitute a waiver of the right to a hearing pursuant to this Code section. The proposed order issued by the Commissioner shall contain or shall be accompanied by a notice of opportunity for a hearing which shall clearly explain that the hearing must be requested within ten days of receipt of the proposed order and notice. The proposed order and notice shall be served in person by the Commissioner or his agent or by registered or certified mail or statutory overnight delivery, return receipt requested. The Commissioner or such person as he designates shall hear evidence at such hearing and the hearing shall be conducted in accordance with Chapter 13 of Title 50, the "Georgia Administrative Procedure Act." The cost of such hearing and of recording and transcribing the evidence may, in the discretion of the Commissioner, be charged to the person seeking such license.
  2. If the Commissioner shall find that:
    1. The financial responsibility, character, and general fitness of the applicant are such as to command the confidence of the public and to warrant a belief that the business will not be operated unfairly or unlawfully contrary to the purposes of this chapter; and
    2. Allowing the applicant to engage in business will promote the convenience and advantage of the community in which the licensed office is to be located,

      the Commissioner shall grant such application and issue to the applicant a license which shall be authority to engage in the business of making loans pursuant to said license in accordance with this chapter.

  3. Any demand for a hearing pursuant to this Code section shall specify in what respects such person is aggrieved and the grounds to be relied upon as a basis for the relief to be demanded at the hearing. Unless postponed by mutual consent, the hearing shall be held within 30 days after receipt by the Commissioner of the demand for a hearing.
  4. In the event any person shall purchase substantially all the assets used in a particular office of any existing licensee, the purchaser shall file an application for license; but, if the licensee selling such assets shall surrender his license for such location to the Commissioner, the purchaser shall not be required, in order to obtain a license, to show that the convenience and advantage of the community in which the licensed office will be located will be promoted by the establishment or continuance of the proposed business of making loans.
  5. The Commissioner shall grant or deny an application for a license made under this chapter within 60 days from the date of the filing of such application.

    (Ga. L. 1920, p. 215, § 4; Code 1933, § 25-304; Ga. L. 1955, p. 431, § 8; Ga. L. 1957, p. 331, § 1; Ga. L. 1983, p. 479, § 1; Ga. L. 2000, p. 1589, § 3.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1986, "commissioner" was capitalized throughout this Code section.

Editor's notes. - Ga. L. 2000, p. 1589, § 16, not codified by the General Assembly, provides that the amendment to this Code section is applicable with respect to notices delivered on or after July 1, 2000.

JUDICIAL DECISIONS

Cited in Bentley v. C. & S. Loans, Inc., 109 Ga. App. 218 , 135 S.E.2d 900 (1964).

RESEARCH REFERENCES

Am. Jur. 2d. - 53A Am. Jur. 2d, Moneylenders and Pawnbrokers, §§ 6 et seq., 34 et seq.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, §§ 423, 424, 446.

7-3-10. License required for each location; display; duration; annual fee; moving office within county.

  1. No more than one place of business shall be maintained under the same license, but the Commissioner may issue more than one license to the same licensee.
  2. Each such license issued shall be conspicuously displayed in the place of business for which granted and shall remain in full force and effect until surrendered, revoked, or suspended as provided by this chapter.
  3. Every licensee shall, on or before December 20 of each year, pay to the Commissioner the sum of $500.00 for each license held by him as an annual license fee for the succeeding calendar year.
  4. If a licensee wishes to move his office within the county, he shall give the Commissioner written notice thereof, which notice shall specify the address or location to which the licensee desires to move and shall also set out, in such form as the Commissioner may require, facts and circumstances which it is contended will show that the removal to the new location will promote the convenience and advantage of that community. Thereafter, the Commissioner shall handle this request in the same manner in which he handles a new application under Code Section 7-3-9, insofar as that Code section is applicable.

    (Ga. L. 1904, p. 79, § 1; Civil Code 1910, § 3450; Ga. L. 1920, p. 215, §§ 7, 8, 9; Code 1933, §§ 25-205, 25-307, 25-308, 25-309; Ga. L. 1955, p. 431, § 9; Ga. L. 1963, p. 370, § 2; Ga. L. 1964, p. 288, § 4; Ga. L. 1989, p. 14, § 7; Ga. L. 1992, p. 2725, § 2.)

JUDICIAL DECISIONS

Cited in Brooks v. Maryville Loan & Fin. Co., 679 F.2d 837 (11th Cir. 1982).

OPINIONS OF THE ATTORNEY GENERAL

Licensee may make loans at place other than place of business. - Industrial Loan Commissioner may give special permission to certain selected licensees to make loans at places other than the place of business of the licensee provided there is a reasonable basis for classifying such licensees in a separate category to receive this special permission. 1963-65 Op. Att'y Gen. p. 716.

7-3-11. Failure to begin business or suspending activities after license issued.

In the event a licensee does not begin the operation of business under such license within a period of 120 days from the date of the issuance of such license or in the event a licensee, after having begun the operation of business under the license, remains inactive in such business for a period of 120 days, such license shall be subject to suspension or revocation by the Commissioner after notice and hearing under the procedure provided in Code Section 7-3-24 for the revocation or suspension of licenses. Any order or decision of the Commissioner on such matter shall be subject to review as provided in Code Section 7-3-24.

(Ga. L. 1964, p. 288, § 3; Ga. L. 1989, p. 14, § 7.)

RESEARCH REFERENCES

Am. Jur. 2d. - 51 Am. Jur. 2d, Licenses and Permits, § 56 et seq.

C.J.S. - 53 C.J.S., Licenses, § 80 et seq.

7-3-12. Books, records, and reports.

  1. Each licensee shall keep and use in his business sufficient books and records to enable the Commissioner to determine whether or not the licensee is complying with this chapter or any other Act under which such licensee is operating, and such licensee shall preserve such record for at least four years after making the final entry thereon. The renewal or refinancing of a loan shall not constitute a final entry.
  2. The Commissioner may, under rules and regulations promulgated by him under the procedure provided in Code Section 7-3-7, require annual reports from licensees to facilitate the performance of his duties and to regulate effectively the making of loans under this chapter.

    (Ga. L. 1904, p. 79, § 6; Civil Code 1910, §§ 3454, 3455; Ga. L. 1920, p. 215, § 11; Code 1933, §§ 25-209, 25-210, 25-310; Ga. L. 1955, p. 431, § 10; Ga. L. 1989, p. 14, § 7.)

JUDICIAL DECISIONS

Cited in Robinson v. Colonial Disct. Co., 106 Ga. App. 274 , 126 S.E.2d 824 (1962).

RESEARCH REFERENCES

Am. Jur. 2d. - 54 Am. Jur. 2d, Moneylenders and Pawnbrokers, § 23 et seq.

7-3-13. False advertising prohibited.

No person shall advertise, display, distribute, or broadcast in any manner whatsoever any false, misleading, or deceptive statement or representation with regard to the rates, terms, or conditions for loans subject to this chapter.

(Ga. L. 1920, p. 215, § 12; Code 1933, § 25-312; Ga. L. 1955, p. 431, § 14.)

7-3-14. Maximum loan amount, period, and charges.

Every licensee under this chapter may loan any sum of money not exceeding $3,000.00 for a period of 36 months and 15 days or less and may charge, contract for, collect, and receive interest and fees and may require the fulfillment of conditions on such loans as provided in this Code section:

  1. INTEREST. A licensee may charge, contract for, receive, and collect interest at a rate not to exceed 10 percent per annum of the face amount of the contract, whether repayable in one single payment or repayable in monthly or other periodic installments. On loan contracts repayable in 18 months or less, the interest may be discounted in advance; and, on contracts repayable over a greater period, the interest shall be added to the principal amount of the loan. On all contracts, interest or discount shall be computed proportionately on equal calendar months;
  2. LOAN FEE. In addition thereto, a licensee may charge, contract for, receive, or collect at the time the loan is made a fee in an amount not greater than 8 percent of the first $600.00 of the face amount of the contract plus 4 percent of the excess; provided, however, that such fee shall not be charged or collected on that part of a loan which is used to pay or apply on a prior loan or installment of a prior loan from the same licensee to the same borrower made within the immediately preceding six-month period; provided, however, if the loan balance is $300.00 or less, the said period shall be two months, not six months; provided, further, that nothing contained in this paragraph and paragraph (1) of this Code section shall be construed to permit charges, interest, or fees of any nature whatsoever in the aggregate in excess of the charges, interest, and fees which would constitute a violation of Code Section 7-4-18 and this chapter shall in no way affect Code Section 7-4-18. If a borrower prepays his or her entire loan to a licensee and within the following 15 days makes a new loan with that licensee and if this is done within the six-month period or the two-month period above described, as may be applicable, the fee may be charged only on the excess by which the face amount of the new contract exceeds the amount which the borrower repaid to that licensee within the said 15 day period;
  3. INSURANCE PREMIUMS. A licensee may charge and collect from the borrower premiums actually paid or to be paid for insurance obtained for the borrower. A licensee may accept as security on any loan or advance made under this chapter any one or any combination of the following:
    1. Insurance on tangible property against substantial risks or loss;
    2. Reasonable insurance on the life and health of the principal party; or
    3. Reasonable insurance against accident of the principal party;

      provided, however, that any such insurance shall be reasonably related to the type and value of the property insured and to the amount and term of the loan and shall be obtained from an insurance company authorized to conduct such business in the State of Georgia and at rates lawfully filed by such company with the Commissioner of Insurance and through a regular insurance agent licensed by the Commissioner of Insurance; provided, further, the amount of life, health, or accident insurance required as security for loans made under this chapter shall not exceed the amount of the loan, including charges, to be secured; and the premiums on such insurance required of the principal party obligated shall be limited to premiums reasonably based upon reliable actuarial experience and sound insurance practice; and the Commissioner is authorized and directed to promulgate rules and regulations to effectuate this provision in accordance with the spirit and intent thereof. It shall be the duty of the Commissioner from time to time under the foregoing direction, after public hearing in the manner provided in subsection (b) of Code Section 7-3-7, to determine and promulgate the rates and maximum premiums permissible to be charged for life, health, and accident insurance required as security for a loan made under this chapter and to make regulations incident thereto necessary to effectuate the same; such premiums, when thus established and as changed from time to time in the manner aforesaid, shall be the maximum effective and permissible charges under this paragraph. Premiums paid or to be paid pursuant to the authority of this paragraph shall not constitute interest. The insurance company in turn may pay to the party writing the insurance policy sold in connection with the loan a fee or commission in an amount which is reasonable in relationship to the transaction and in no event in excess of the amount of fee or commission customarily paid within the industry where comparable insurance is sold in a transaction not involving credit, as determined by the Commissioner;

  4. LATE CHARGE. A licensee may charge and collect from the borrower a late or delinquent charge of $10.00 or an amount equal to 5› for each $1.00 of any installment which is not paid within five days from the date such payment is due, whichever is greater, provided that this late or delinquent charge shall not be collected more than once for the same default; and
  5. MAINTENANCE CHARGE. In addition thereto, a licensee may contract for, charge, receive, and collect a maintenance charge of $3.00 for each month in the term of the loan contract on each loan made, whether repayable in one single payment or repayable in weekly, monthly, or other periodic installments. Refunds of unearned maintenance charges shall be made in accordance with the method prescribed in Code Section 7-3-17, and such maintenance charges will be subject to paragraph (4) of this Code section. Nothing contained in Code Section 7-4-18, as now or hereafter amended, shall be construed to apply to this paragraph; and loans made in conformity with this paragraph shall in no way constitute a violation of Code Section 7-4-18, as now or hereafter amended.

    (Ga. L. 1904, p. 79, §§ 10, 12; Civil Code 1910, §§ 3458, 3459, 3461; Ga. L. 1920, p. 215, §§ 13, 14; Code 1933, §§ 25-213, 25-214, 25-216, 25-301, 25-313, 25-315, 25-317; Ga. L. 1935, p. 394, § 1; Ga. L. 1955, p. 431, § 15; Ga. L. 1964, p. 288, § 5; Ga. L. 1975, p. 393, §§ 2, 3; Ga. L. 1977, p. 288, § 1; Ga. L. 1980, p. 509, §§ 1, 3; Ga. L. 1981, p. 621, § 1; Ga. L. 1989, p. 14, § 7; Ga. L. 1997, p. 143, § 7; Ga. L. 2001, p. 205, § 1.)

Law reviews. - For article, "Acceleration Clauses in Georgia: Consumer Installment Contracts and the Federal Truth-In-Lending Act," see 27 Mercer L. Rev. 969 (1976). For article discussing methods of computation of finance charges in Georgia consumer credit contracts, see 30 Mercer L. Rev. 281 (1978). For article, "Business Associations," see 53 Mercer L. Rev. 109 (2001).

JUDICIAL DECISIONS

ANALYSIS

General Consideration

Editor's notes. - In light of subsections (g) and (h) of O.C.G.A § 7-3-29 , decisions rendered prior to amendment of that section by Ga. L. 1980, p. 1784, §§ 1, 2 have been included in the annotations for this Code section.

Purpose. - In enacting O.C.G.A. § 7-3-14 , the General Assembly was concerned with the possible exorbitant and unmerited exaction of profits by the original lender in a renewal or refinancing. Although there is nothing to indicate that the General Assembly specifically considered the "anti-competition" problem, the clear thrust and underlying policy of this legislation is to provide some protection to debtors in small loan transactions, while there is no indication that solicitude for second lenders was even a minor policy consideration. Ford v. Termplan, Inc., 528 F. Supp. 1016 (N.D. Ga. 1981).

Policy consideration underlying usury laws. - Purpose of the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) is to define and prevent usury. One consideration underlying the usury laws is that a creditor should not avail oneself of the necessitous condition of one's debtor to exact burdensome and oppressive terms. Securities Inv. Co. v. Pearson, 111 Ga. App. 761 , 143 S.E.2d 36 (1965).

Loan may not exceed three years. - It is immaterial whether interest is charged for less than 24 months (now 36 months and 15 days); former Code 1933, § 25-315 plainly stated that the loan may not exceed two years (now three years, 15 days). Abrams v. Commercial Credit Plan, Inc., 128 Ga. App. 520 , 197 S.E.2d 384 (1973).

Section prohibits loans to a borrower which exceed $3,000.00. - When a statute provides that every licensee thereunder may loan any sum of money not exceeding $3,000.00 it means that the company cannot be a creditor to any particular person, firm, or corporation at any one time for an amount in excess of this maximum. It may make any number of loans, so long as the debtors are different persons. Securities Inv. Co. v. Pearson, 111 Ga. App. 761 , 143 S.E.2d 36 (1965).

Section 1-3-1 inapplicable to this section. - Former Code 1933, § 102-102 (see now O.C.G.A. § 1-3-1 ) applied only when days are to be counted, and when months and years are to be considered, as in former Code 1933, § 25-315, the rule was not applicable. Gray v. Quality Fin. Co., 130 Ga. App. 762 , 204 S.E.2d 483 (1974).

When state law is inconsistent with truth in lending law. - State law is inconsistent with requirements of truth in lending law if it requires creditor to make disclosures different from those required by federal law as to form, content, terminology, or time of delivery. Blalock v. Aetna Fin. Co., 511 F. Supp. 33 (N.D. Ga. 1980).

Use of out-of-state banks by loan companies. - Loan companies were not entitled to declaratory judgment relief on the companies' claim that the companies were not in violation of the Georgia Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., for certain practices the companies were allegedly engaged in because the companies were using an out-of-state bank to make the companies' loans through that bank, and, thus, were not subject to the Act as the industrial loan commissioner had not ruled on whether the practice of using an out-of-state bank exempted the companies from the Act, which meant the companies had not exhausted the administrative remedies before seeking judicial relief. USA Payday Cash Advance Ctrs. v. Oxendine, 262 Ga. App. 632 , 585 S.E.2d 924 (2003).

Refinancing by original lender. - In a refinancing by an original lender, when both sides must agree to an extension of credit and the lender presumably is not losing profits, there is no reason to depart from the general mandate of O.C.G.A. §§ 7-3-14 and 7-3-15 . O.C.G.A. Ch. 3, T. 7 already provides for "add on" interest, earned uniformly on the entire original amount of the loan, without regard to installment reductions in the outstanding balance. Ford v. Termplan, Inc., 528 F. Supp. 1016 (N.D. Ga. 1981).

Renewal by original lender less costly than by second lender. - O.C.G.A. Ch. 3, T. 7 distinguishes between original and second lenders with the result that a renewal or refinancing by an original lender is less costly than if effected by a second lender. Ford v. Termplan, Inc., 528 F. Supp. 1016 (N.D. Ga. 1981).

Summary judgment properly denied. - In a class action suit seeking to hold a lender liable for payday loans, the trial court did not err in concluding that genuine issues of material fact existed as to whether the lender was the true lender of the loans made after May 14, 2004, because evidence was presented sufficient to create a genuine issue of material fact regarding whether the lender actually received only a 49 percent economic interest for the lender's services and even if the lender did so, whether the lender nevertheless, by contrivance, device, or scheme, attempted to avoid the provisions of O.C.G.A. § 16-17-2(a) . Ga. Cash Am. v. Greene, 318 Ga. App. 355 , 734 S.E.2d 67 (2012).

Cited in Robbins v. Welfare Fin. Corp., 95 Ga. App. 90 , 96 S.E.2d 892 (1957); Haire v. Allied Fin. Co., 99 Ga. App. 649 , 109 S.E.2d 291 (1959); Robinson v. Colonial Disct. Co., 106 Ga. App. 274 , 126 S.E.2d 824 (1962); Brown v. Quality Fin. Co., 112 Ga. App. 369 , 145 S.E.2d 99 (1965); Coile v. Finance Co. of Am., 221 Ga. 863 , 148 S.E.2d 328 (1966); Clark v. Liberty Loan Corp., 116 Ga. App. 213 , 156 S.E.2d 535 (1967); Johnson v. Public Fin. Corp., 126 Ga. App. 557 , 191 S.E.2d 334 (1972); Roberts v. Allied Fin. Co., 129 Ga. App. 10 , 198 S.E.2d 416 (1973); Cullers v. Home Credit Co., 130 Ga. App. 441 , 203 S.E.2d 544 (1973); Cook v. First Nat'l Bank, 130 Ga. App. 587 , 203 S.E.2d 870 (1974); Sellers v. Alco Fin., Inc., 130 Ga. App. 769 , 204 S.E.2d 478 (1974); Gray v. Quality Fin. Co., 130 Ga. App. 762 , 204 S.E.2d 483 (1974); Douglas v. Dixie Fin. Corp., 139 Ga. App. 251 , 228 S.E.2d 144 (1976); HFC v. Middlebrooks, 139 Ga. App. 224 , 228 S.E.2d 204 (1976); Jones v. Community Loan & Inv. Corp., 544 F.2d 1228 (5th Cir. 1976); Wiggins v. Liberty Loan Corp., 143 Ga. App. 46 , 237 S.E.2d 418 (1977); Childs v. Liberty Loan Corp., 144 Ga. App. 715 , 242 S.E.2d 354 (1978); Southern Disct. Co. v. Ector, 152 Ga. App. 244 , 262 S.E.2d 457 (1979); Gresham v. Termplan, Inc., 480 F. Supp. 149 (N.D. Ga. 1979); Shelley v. Liberty Loan Corp., 153 Ga. App. 47 , 264 S.E.2d 537 (1980); Chrysler Credit Corp. v. Cooper, 7 Bankr. 537 (Bankr. N.D. Ga. 1980); Moore v. HFC, 160 Ga. App. 339 , 287 S.E.2d 72 (1981); Gresham v. Termplan, Inc., 648 F.2d 312 (5th Cir. 1981); State Farm Mut. Auto. Ins. Co. v. Bates, 542 F. Supp. 807 (N.D. Ga. 1982); Aetna Fin. Co. v. Brown, 172 Ga. App. 537 , 323 S.E.2d 720 (1984); Cmty. State Bank v. Strong, 651 F.3d 1241 (11th Cir. 2011).

Interest

Former Code 1933, § 25-315 (see now O.C.G.A. § 7-3-14(1) ) was mandatory as to interest on contracts repayable over more than 18 months. Slatter v. Aetna Fin. Co., 377 F. Supp. 806 (N.D. Ga. 1974), rev'd on other grounds sub nom. Jones v. Community Loan & Inv. Corp., 526 F.2d 642 (5th Cir.), remanded on rehearing, 544 F.2d 1228 (5th Cir. 1976), cert. denied, 431 U.S. 934, 97 S. Ct. 2642 , 53 L. Ed. 2 d 250 (1977).

Advance discounts of interest. - O.C.G.A. § 7-3-14 does not provide a flexibility period for loans qualifying for the advance discount and a loan due in 18 months and 15 days exceeds the limit authorized by the statute. United States Life Credit Corp. v. Johnson, 161 Ga. App. 864 , 290 S.E.2d 280 (1982).

Note on which interest was deducted in advance void. - When in suit by licensee against borrower the note attached to the petition shows that the loan was for a period exceeding 18 months and shows on the loan's face that interest was deducted in advance rather than added to the loan, such deduction resulted in a charge exceeding that authorized in former Code 1933, § 25-315 and rendered the note void. Community Fin. Co. v. Lloyd, 114 Ga. App. 230 , 150 S.E.2d 845 (1966).

Interest included in loan cannot be discounted in advance. - When the maximum interest for the 24-month note had already been calculated and included in the loan it could not be discounted in advance, and an attempt to accelerate and claim unearned interest on otherwise unmatured installments was usurious and an instrument authorizing its collection is void. Lawrimore v. Sun Fin. Co., 131 Ga. App. 96 , 205 S.E.2d 110 (1974) (decided prior to 1980 amendment of § 7-3-29 ).

Starting point of a loan is the date of execution regardless of when the first payment is made or when the interest begins to run; a lender could not legally discount interest on a loan in advance under O.C.G.A. § 7-3-14 , though the loan contract required repayment over an 18-month period, when the first monthly installment was due more than a month after the execution of the loan. Brown v. Termplan, Inc., 693 F.2d 1047 (11th Cir. 1982).

Former Code 1933, § 25-315 allowed interest to be charged only on an amount that was borrowed. Consolidated Credit Corp. v. Peppers, 144 Ga. App. 401 , 240 S.E.2d 922 (1977), overruled on another point, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811 , 270 S.E.2d 449 (1980).

Lender's options and duty regarding collection of loan fee and basic interest. - Lender has option with respect to how loan fee is collected and with respect to how basic interest is collected on loans repayable in 18 months or less, but must add on interest for loans repayable over a period in excess of 18 months. In this latter instance the basic interest fee will never be required to be denoted as prepaid finance charge, while in the two former instances it will depend on how lender collects the loan fee and/or basic interest. Slatter v. Aetna Fin. Co., 377 F. Supp. 806 (N.D. Ga. 1974), rev'd on other grounds sub nom. Jones v. Community Loan & Inv. Corp., 526 F.2d 642 (5th Cir.), remanded on rehearing, 544 F.2d 1228 (5th Cir. 1976), cert. denied, 431 U.S. 934, 97 S. Ct. 2642 , 53 L. Ed. 2 d 250 (1977).

Loan violated section. - Lloan instrument violated former Code 1933, § 25-315 by calculating and including more than the maximum interest which could be charged for a 24-month (now 36-month) period. Hobbiest Fin. Corp. v. Spivey, 135 Ga. App. 353 , 217 S.E.2d 613 (1975).

Sale/leaseback transactions deemed illegal payday loans. - Sale/leaseback transactions engaged in by consumer cash advance businesses violated the anti-payday lending statute, O.C.G.A. § 16-17-1 et seq., and the Georgia Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., since the state proved that the purported lease back of personal property to the consumer was not based on the actual appraised market value of the personal property but directly corresponded to the loan amount; the state proved that the businesses were requiring customers to be released from the loan agreement by paying the principal amount advanced to them plus a 25 to 27 percent fee, which amounted to an annual percentage rate of 650 to 702 percent. Clay v. Oxendine, 285 Ga. App. 50 , 645 S.E.2d 553 (2007), cert. denied, No. S07C1247, 2007 Ga. LEXIS 556 (Ga. 2007).

Maximum interest rate calculated on total amount financed plus loan fee is not usurious. Jones v. Community Loan & Inv. Corp., 526 F.2d 642 (5th Cir.), remanded on rehearing, 544 F.2d 1228 (5th Cir. 1976), cert. denied, 431 U.S. 934, 97 S. Ct. 2642 , 53 L. Ed. 2 d 250 (1977).

Collection of unearned interest is not per se improper under Georgia law. Barrett v. Vernie Jones Ford, Inc., 395 F. Supp. 904 (N.D. Ga. 1975), rev'd on other grounds sub nom. McDaniel v. Fulton Nat'l Bank, 543 F.2d 568 (5th Cir. 1976), aff'd, 578 F.2d 1185 (5th Cir. 1978).

Notes complying with section. - Notes providing for pro rata rebate of interest upon default and acceleration comply with O.C.G.A. § 7-3-14 . Scroggins v. Whitfield Fin. Co., 157 Ga. App. 655 , 278 S.E.2d 411 (1981).

Loan Fee

Section 7-3-17 O.C.G.A. §§ 7-3-14 and compared. - There is a limit on the loan fees an original lender can charge when part or all of a prior loan is repaid and has made no similar provision for a second lender. There is no reason to believe that the General Assembly evaluated its priorities in a different fashion in enacting O.C.G.A. § 7-3-17 . Ford v. Termplan, Inc., 528 F. Supp. 1016 (N.D. Ga. 1981).

Misleading listing in disclosure statement. - Disclosure statement with two identical subheadings labelled "LOAN FEE," under which two different amounts were listed, violated the federal Truth-in-Lending Act, 15 U.S.C. § 1601 et seq., because there was no indication that the prepaid finance charge was the total of these two items. Varner v. Century Fin. Co., 738 F.2d 1143 (11th Cir. 1984).

Lender is not obligated to disclose the sum of 8 percent and 4 percent fees. Carroll v. Termplan, Inc., 476 F. Supp. 727 (N.D. Ga. 1979).

Paragraph (2) is permissive as to time loan fee is collected and the repayment period is immaterial. Slatter v. Aetna Fin. Co., 377 F. Supp. 806 (N.D. Ga. 1974), rev'd on other grounds sub nom. Jones v. Community Loan & Inv. Corp., 526 F.2d 642 (5th Cir.), remanded on rehearing, 544 F.2d 1228 (5th Cir. 1976), cert. denied, 431 U.S. 934, 97 S. Ct. 2642 , 53 L. Ed. 2 d 250 (1977).

Method of determination. - While O.C.G.A. § 7-3-14(2) provides a two-tier computation for determining the maximum allowable loan fee, nothing requires that the loan fee actually charged be determined by this method, nor is a licensee required to disclose the method of computing the loan fee. Briscoe v. First Nat'l Bank & Trust Co., 167 Ga. App. 886 , 307 S.E.2d 767 (1983).

Fee exceeded that allowed by act. - Including interest in computational base used to calculate loan fee on note of more than 18 months results in fee exceeding that permitted by this act. Consolidated Credit Corp. v. Peppers, 144 Ga. App. 401 , 240 S.E.2d 922 (1977), overruled on other grounds, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811 , 270 S.E.2d 449 (1980).

Lender may charge interest on loan fees. - Since lender is entitled to fees for making loan, and does not receive the fees at that time, but by means of installment payments during the term of the loan, the lender is entitled to charge interest thereon. Lee v. Beneficial Fin. Co., 159 Ga. App. 205 , 282 S.E.2d 770 (1981).

Interest on amount borrowed not includable in computational base for loan fee. - Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., does not permit lenders to charge borrowers interest on interest by including interest on an amount borrowed in a computational base used to calculate the loan fee to be paid by borrowers. Sanders v. Liberty Loan Corp., 153 Ga. App. 859 , 267 S.E.2d 286 (1980), overruled on other grounds, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811 , 270 S.E.2d 449 (1980).

Fee authorized under former Code 1933, § 25-315 constitutes prepaid finance charge within meaning of Truth-in-Lending Act, 15 U.S.C. § 1601 et seq., and Regulation Z, 12 C.F.R. § 226.8. Grubb v. Oliver Enters., Inc., 358 F. Supp. 970 (N.D. Ga. 1972).

Loan fees under paragraph (2) must be disclosed. - In Georgia, a consumer lender may exact loan fees of not more than 8 percent of first $600.00 of face amount of contract plus 4 percent of any excess, and such charges, if made, must be disclosed in truth in lending disclosure statements as a prepaid finance charge. Ector v. Southern Disct. Co., 499 F. Supp. 284 (N.D. Ga. 1980).

Acceleration clause not providing for rebate of unearned charges is usurious and note, security deed, and foreclosure thereunder are null and void. Clyde v. Liberty Loan Corp., 249 Ga. 78 , 287 S.E.2d 551 (1982).

Face Amount of Contract

Face amount of contract means amount borrower must borrow to obtain amount desired. Consolidated Credit Corp. v. Peppers, 144 Ga. App. 401 , 240 S.E.2d 922 (1977), overruled on other grounds, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811 , 270 S.E.2d 449 (1980); Carter v. Swift Loan & Fin. of Columbus, Inc., 148 Ga. App. 358 , 251 S.E.2d 379 (1978), overruled on other grounds, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811 , 270 S.E.2d 449 (1980); Wessinger v. Kennesaw Fin. Co., 151 Ga. App. 660 , 261 S.E.2d 649 (1979), overruled on other grounds, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811, 270 S.E.2d 449 (1980); Ector v. Southern Disct. Co., 484 F. Supp. 654 (N.D. Ga. 1979).

Face amount of contract means amount borrowed in both paragraphs (1) and (2) of former Code 1933, § 25-315. FinanceAmerica Corp. v. Drake, 154 Ga. App. 811 , 270 S.E.2d 449 (1980).

Face amount of contract may be determined by adding together amounts of all constituent discounted elements that the debtor must borrow in order to have the amount the debtor desires in hand or, assuming all elements have been calculated properly, by taking the final payback figure and subtracting therefrom the amount of all nondiscounted elements. Lee v. Beneficial Fin. Co., 159 Ga. App. 205 , 282 S.E.2d 770 (1981).

Calculation of face amount of contract or amount borrowed. - Face amount of contract or amount borrowed may be determined by striking from total payback figure amount of interest to be paid under contract and amount of monthly maintenance charge. Carter v. Swift Loan & Fin. of Columbus, Inc., 148 Ga. App. 358 , 251 S.E.2d 379 (1978), overruled on other grounds, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811 , 270 S.E.2d 449 (1980); Wessinger v. Kennesaw Fin. Co., 151 Ga. App. 660 , 261 S.E.2d 649 (1979).

Phrase "FAC, face amount of contract" has the same meaning in both O.C.G.A. § 7-3-14(1) and (2) which is amount necessary for borrower to borrow in order to obtain amount desired. Lee v. Beneficial Fin. Co., 159 Ga. App. 205 , 282 S.E.2d 770 (1981).

Amount of loan fee is a constituent element of FAC, face amount of contract under both O.C.G.A. § 7-3-14(1) and (2). Lee v. Beneficial Fin. Co., 159 Ga. App. 205 , 282 S.E.2d 770 (1981).

Amount borrowed in discount loans includes principal and interest. - Amount borrowed equals total payback figure only for discount loans in which both principal and interest are borrowed. Consolidated Credit Corp. v. Peppers, 144 Ga. App. 401 , 240 S.E.2d 922 (1977), overruled on another point, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811 , 270 S.E.2d 449 (1980).

Amount necessary to borrow does not include interest. - When note is for more than 18 months, the amount necessary for the borrower to borrow does not include interest on the note. Consolidated Credit Corp. v. Peppers, 144 Ga. App. 401 , 240 S.E.2d 922 (1977), overruled on other grounds, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811 , 270 S.E.2d 449 (1980).

Interest on Georgia Industrial Loan Act loan of greater than 18 months is not discounted and it is therefore not necessary for the debtor to borrow nondiscounted interest in order to obtain the amount the debtor desires in hand; thus, the amount of that nondiscounted interest does not become an element of computational (FAC) face amount of contract base from which either interest or a loan fee is calculated. Lee v. Beneficial Fin. Co., 159 Ga. App. 205 , 282 S.E.2d 770 (1981).

Interest discounted in advance is computational element. - When interest on Georgia Industrial Loan Act loan of 18 months or less is discounted or deducted in advance and it therefore becomes necessary for the debtor to "borrow" discounted interest in order to obtain total amount the debtor desires in hand, amount of that discounted interest becomes element of computational (FAC) face amount of contract base from which interest under O.C.G.A. § 7-3-14(1) and a loan fee under O.C.G.A. § 7-3-14(2) are derived. Lee v. Beneficial Fin. Co., 159 Ga. App. 205 , 282 S.E.2d 770 (1981).

When loan is repayable in 18 months or less and when interest is discounted, the "face amount" of the contract is also synonymous with the total payback amount of the loan. Briscoe v. First Nat'l Bank & Trust Co., 167 Ga. App. 886 , 307 S.E.2d 767 (1983).

Interest is not borrowed on nondiscount loans. - Interest is not borrowed on nondiscount loans; thus, amount borrowed equals the total payback figure minus interest. Consolidated Credit Corp. v. Peppers, 144 Ga. App. 401 , 240 S.E.2d 922 (1977), overruled on other grounds, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811 , 270 S.E.2d 449 (1980).

Maintenance charge is not element of computational face amount. - Maintenance charge under O.C.G.A. § 7-3-14(5) "for each month in the term of the loan contract" is not a discountable element which can be deducted in advance so as to constitute an amount which the debtor has to borrow in order to obtain an amount the debtor desires in hand and, therefore, it does not become an element of computational (FAC) face amount of contract base. Lee v. Beneficial Fin. Co., 159 Ga. App. 205 , 282 S.E.2d 770 (1981).

Inclusion of nondiscountable interest in face amount of contract computational base results in excessive loan fee. Lee v. Beneficial Fin. Co., 159 Ga. App. 205 , 282 S.E.2d 770 (1981).

Acceleration of Interest

Acceleration clauses are not per se invalid. Bragg v. HFC, 140 Ga. App. 75 , 230 S.E.2d 55 (1976).

Acceleration clause providing for any required refund of interest is valid. - Language of loan contract to effect that default will render entire sum remaining at once due and payable is objectionable as permitting recovery of unearned interest; when, however, a complementing clause is added, limiting accelerated sum to such amount less any required refund of interest, the usurious objection no longer applies. Bragg v. HFC, 140 Ga. App. 75 , 230 S.E.2d 55 (1976).

When acceleration clause renders note usurious, note is unenforceable. - If effect of an acceleration clause is to render note as a whole usurious, the note is unenforceable in Georgia courts. Barrett v. Vernie Jones Ford, Inc., 395 F. Supp. 904 (N.D. Ga. 1975), rev'd on other grounds sub nom. McDaniel v. Fulton Nat'l Bank, 543 F.2d 568 (5th Cir. 1976), aff'd, 578 F.2d 1185 (5th Cir. 1978) (decided prior to amendment of § 7-3-29 ).

Acceleration clause which includes unearned interest voids the contract. - Acceleration clause in Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., contract which upon default permits collection of entire balance due on contract without excluding unearned interest is violative of act and voids contract. Diggs v. Swift Loan & Fin. Co., 154 Ga. App. 389 , 268 S.E.2d 433 (1980) (decided prior to 1980 amendment of § 7-3-29 ).

When acceleration of a debt, combined with a claim of unearned interest, renders obligation usurious, the obligation becomes void under provisions of the Industrial Loan Act, O.C.G.A. § 7-3-1 et seq. Barrett v. Vernie Jones Ford, Inc., 395 F. Supp. 904 (N.D. Ga. 1975), rev'd on other grounds sub nom. McDaniel v. Fulton Nat'l Bank, 543 F.2d 568 (5th Cir. 1976), aff'd, 578 F.2d 1185 (5th Cir. 1978) (decided prior to 1980 amendment of § 7-3-29 ).

Provision rendering remaining installments immediately due and payable renders obligation usurious. - Provision rendering all remaining installments at once due and collectible is a contract for collection of usurious interest which voids the obligation. Allen v. Alco Fin., Inc., 131 Ga. App. 545 , 206 S.E.2d 547 (1974) (decided prior to 1980 amendment of § 7-3-29 ).

Acceleration clause enforceable unless rendering note usurious. - Acceleration clause not providing for rebate of unearned interest is enforceable absent finding that clause, as applied, renders note violative of state usury laws. Once such finding has been made, however, the note becomes void. Barrett v. Vernie Jones Ford, Inc., 395 F. Supp. 904 (N.D. Ga. 1975), rev'd on other grounds sub nom. McDaniel v. Fulton Nat'l Bank, 543 F.2d 568 (5th Cir. 1976), aff'd, 578 F.2d 1185 (5th Cir. 1978) (decided prior to 1980 amendment of § 7-3-29 ).

Usurious collection voids obligation whether or not creditor attempts enforcement. - Provision in note authorizing usurious collection alone is sufficient to void obligation, even when creditor does not attempt enforcement. Barrett v. Vernie Jones Ford, Inc., 395 F. Supp. 904 (N.D. Ga. 1975), rev'd on other grounds sub nom. McDaniel v. Fulton Nat'l Bank, 543 F.2d 568 (5th Cir. 1976), aff'd, 578 F.2d 1185 (5th Cir. 1978) (decided prior to 1980 amendment of § 7-3-29 ).

Acceleration clause which includes unearned interest is void. - Under Georgia Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., loan agreement which provided that the lender, under certain conditions, could accelerate payment of entire unpaid balance of loan, including unearned interest, is void, not merely voidable; lender has no legally enforceable right to recover either principal or interest. Pinkett v. Credithrift of Am., Inc., 430 F. Supp. 113 (N.D. Ga. 1977) (decided prior to 1980 amendment of § 7-3-29 ).

Lender may not accelerate unearned interest if the lender wishes to recover principal and earned interest. Bragg v. HFC, 140 Ga. App. 75 , 230 S.E.2d 55 (1976) (decided prior to 1980 amendment of § 7-3-29 ).

Insurance

Insurance charges authorized under former Code 1933, § 25-315(3) do not render loan usurious. McDonald v. G.A.C. Fin. Corp., 115 Ga. App. 361 , 154 S.E.2d 825 (1967).

Subparagraph (3)(B) applies only to credit insurance. - O.C.G.A. § 7-3-14(3)(B) applies only to insurance purchased "as security on any loan," i.e., credit insurance. Dixon v. S & S Loan Serv. of Waycross, Inc., 754 F. Supp. 1567 (S.D. Ga. 1990).

Section does not prohibit writing of level term life insurance on loans made under the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.). Mason v. Service Loan & Fin. Co., 128 Ga. App. 828 , 198 S.E.2d 391 (1973).

Effect of accelerating debt on insurance coverage. - In the absence of any requirement that a lender cancel credit insurance coverage upon acceleration of a debt, there is no violation of the Industrial Loan Act (ILA), O.C.G.A. § 7-3-1 et seq., when a lender, pursuant to properly drafted loan documents and in accord with the ILA, accelerates a debt but does not refund insurance premiums on insurance coverage still in effect. Williams v. Charter Credit Co., 179 Ga. App. 721 , 347 S.E.2d 635 (1986).

Late Charges

Former Code 1933, § 25-315(4) specified the only penalty which may be collected for late payment. Lewis v. Termplan, Inc., 124 Ga. App. 507 , 184 S.E.2d 473 (1971).

OPINIONS OF THE ATTORNEY GENERAL

Former Code 1933, § 25-315 applied to banks since the statute set the maximum loan fee by regulating when the fee may be charged. 1980 Op. Att'y Gen. No. 80-116.

Section incorporated into National Bank Act and Chapter 7-1 of this title. - Effect of 12 U.S.C. § 85 and § 7-1-292 is incorporation by reference into National Bank Act and Chapter 7-1 of this title, respectively, those provisions of this chapter dealing with interest and fees which can be charged on certain designated types of loans. 1979 Op. Att'y Gen. No. 79-33.

Bank may again charge loan fees authorized by O.C.G.A. § 7-3-14(2) if loan with maturity date in excess of six months made pursuant to O.C.G.A. Ch. 3, T. 7 is renewed after the loan has been in existence in excess of six months. 1982 Op. Att'y Gen. No. 82-43.

Legislative intent regarding borrower's insurance. - Language of former Code 1933, § 25-315 made clear the legislative intent that insurance must be for the borrower's benefit; the borrower's insurance would, therefore, cover not only the amount owing on the loan, but also any equity the borrower might have in the property insured. 1963-65 Op. Att'y Gen. p. 131.

Licensee cannot charge borrower for insurance policy-writing fee. - No statutory provision permits licensee to charge borrower for policy-writing fee; language of former Code 1933, § 25-315(3) clearly prohibited any charge in connection with insurance obtained as security on a loan other than actual established premium, and former Code 1933, §§ 25-214, 25-216, and 25-313 (see now O.C.G.A. § 7-3-15 ) clearly prohibits any charges other than those set out in this chapter. 1963-65 Op. Att'y Gen. p. 428.

Late charge not considered interest and fees. - Late charge under former Code 1933, § 25-315(4), being a penalty assessment for failure to meet payment when due, was not considered as interest and fees and was not limited by 5 percent per month maximum which can be charged as interest and fees under former Code 1933, § 25-315(1) and (2). 1957 Op. Att'y Gen. p. 158.

"Loan" synonymous with "note." - "Loan" in this context should be interpreted as synonymous with "note," and thus two 90-day periods may not be cumulated to allow additional loan fee on second renewal. 1980 Op. Att'y Gen. No. 80-116.

Interest charge for partial 30-day periods permissible. - So long as interest of 10 percent per annum is not exceeded, banks may charge interest for partial 30-day periods. 1980 Op. Att'y Gen. No. 80-116.

If a second imposition of fee permitted by O.C.G.A. § 7-3-14(2) would result in a violation of usury provisions of O.C.G.A. § 7-4-18 such a second imposition would be illegal. 1982 Op. Att'y Gen. No. 82-43.

Calculation of refund of unearned maintenance charges. - Calculation of a refund of unearned maintenance charges in connection with the prepayment or refinancing of a loan transaction is to be determined by the "Rule of 78s" as required by O.C.G.A. § 7-3-14(5) . 1990 Op. Att'y Gen. No. 90-45.

RESEARCH REFERENCES

Am. Jur. 2d. - 44B Am. Jur. 2d, Interest and Usury, § 191 et seq. 54 Am. Jur. 2d, Moneylenders and Pawnbrokers, §§ 1 et seq., 46 et seq.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, §§ 428 et seq., 436, 444, 445.

ALR. - Usury: expenses or charges incident to loan of money, 21 A.L.R. 797 ; 53 A.L.R. 743 ; 63 A.L.R. 823 ; 105 A.L.R. 795 ; 52 A.L.R.2d 703.

Construction, application, and effect of provisions of small loan acts regarding fees, charges, etc., in addition to interest, 143 A.L.R. 1323 .

Retrospective application and effect of statutory provision for interest or changed rate of interest, 4 A.L.R.2d 932; 40 A.L.R.4th 147; 41 A.L.R.4th 694.

Usury: expenses or charges incident to loan of money, 52 A.L.R.2d 703.

Taking or charging interest in advance as usury, 57 A.L.R.2d 630.

Construction and application of provision of small loan statute limiting time period for loan contracts, 58 A.L.R.2d 1263.

What is "compound interest" within meaning of statutes prohibiting the charging of such interest, 10 A.L.R.3d 421.

Right of holder of commercial paper to interest or finance charges applicable to period after acceleration of maturity of obligation because of debtor's default, 63 A.L.R.3d 10.

Validity and construction of provision imposing "late charge" or similar exaction for delay in making periodic payments on note, mortgage, or installment sale contract, 63 A.L.R.3d 50.

Reformation of usurious contract, 74 A.L.R.3d 1239.

Validity and construction of state statute or rule allowing or changing rate of prejudgment interest in tort action, 40 A.L.R.4th 147.

Retrospective application and effect of state statute or rule allowing interest or changing rate of interest on judgments or verdicts, 41 A.L.R.4th 694.

7-3-15. Limitation on further charges.

No licensee shall charge, contract for, or receive any other or further amount in connection with any loans authorized by this chapter in addition to those provided in Code Section 7-3-14, except the actual lawful fees paid to a public official or agency of the state for filing, recording, or, on loans over $100.00, the amount of the lawful premiums, no greater than such fees, actually paid for insurance against the risk of nonrecording or releasing any instrument securing the loan; the court costs and attorney fees authorized by law incurred in the collection of any contract in default; and the actual and reasonable expenses of repossessing, storing, and selling any collateral pledged as security for any contract in default. No licensee shall divide into separate parts any contract for the purpose or with the effect of obtaining charges in excess of those authorized by this chapter.

(Ga. L. 1904, p. 79, §§ 10, 12; Civil Code 1910, §§ 3459, 3461; Ga. L. 1920, p. 215, § 13; Code 1933, §§ 25-214, 25-216, 25-313, 25-316; Ga. L. 1935, p. 394, § 2; Ga. L. 1955, p. 431, § 16.)

JUDICIAL DECISIONS

Editor's notes. - In light of subsections (g) and (h) of O.C.G.A. § 7-3-29 , decisions rendered prior to amendment of that section by Ga. L. 1980, p. 1784, §§ 1, 2, have been included in the annotations for this Code section.

Lender may not contract for any interest or charges not specifically authorized by the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.). General Fin. Corp. v. Sprouse, 577 F.2d 989 (5th Cir. 1978).

Waiver of homestead exemption did not constitute a further charge within meaning of former Code 1933, § 25-316. Lowe v. Termplan, Inc., 144 Ga. App. 671 , 242 S.E.2d 268 (1978).

Title fee disbursed to third party constitutes an additional charge which was prohibited by former Code 1933, § 25-316 and thus renders loan contract between the parties null and void. Kennesaw Fin. Co. v. Mirabelli, 143 Ga. App. 254 , 238 S.E.2d 256 (1977) (decided prior to 1980 amendment to § 7-3-29 ).

Notary fees to lender's employee are prohibited charges. - When loan company receives benefit from collection of notary fees at least indirectly, in that the job held by an employee is attractive and easier to fill with a qualified person by reason of additional compensation or supplement to regular salary in the form of notary fees, notary fees constitute "any other or further amount" under former Code 1933, § 25-316. Georgia Inv. Co. v. Norman, 231 Ga. 821 , 204 S.E.2d 740 (1974).

Loan including every legally permissible charge becomes usurious by notary fee. - When, after charging the borrower every charge legally permissible under the terms of the Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., a lender disburses $1.00 of the amount loaned to the borrower to an employee of lender as a notary public fee, such disbursement, not being permitted by the Act, results in usurious interest being charged to the borrower. Georgia Inv. Co. v. Norman, 231 Ga. 821 , 204 S.E.2d 740 (1974).

Acceleration of remaining installments, including unearned interest, renders contract void. - When contract provides for acceleration upon the debtor's default of all remaining installments of the loan, which installments include unearned interest, the contract was null and void under former Code 1933, § 25-316. Anderson v. G.A.C. Fin. Corp., 135 Ga. App. 116 , 217 S.E.2d 605 (1975) (decided prior to 1980 amendment of § 7-3-29 ).

Acceleration clause in Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., contract which upon default permits collection of entire balance due on contract without excluding unearned interest is violative of the Act and voids the contract. Diggs v. Swift Loan & Fin. Co., 154 Ga. App. 389 , 268 S.E.2d 433 (1980) (decided prior to 1980 amendment of § 7-3-29 ).

Provision for acceleration of unearned interest is a contract authorizing collection of more than is provided or approved by the Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., and thus authorizes a result contrary to its terms, and is in violation of the Act; the loan is void. Frazier v. Courtesy Fin. Co., 132 Ga. App. 365 , 208 S.E.2d 175 (1974) (decided prior to 1980 amendment of § 7-3-29 ).

Loan contract usurious. - Loan contract providing for eight percent interest to be paid after maturity is not in violation of interest provisions of the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.), but, when combined with an acceleration clause, exceeds the sum lawfully allowed to be charged. Hardy v. G.A.C. Fin. Corp., 131 Ga. App. 282 , 205 S.E.2d 526 , aff'd, 232 Ga. 632 , 208 S.E.2d 453 (1974).

Provision in 24-month note authorizing accelerated collection is sufficient to void the obligation. Lawrimore v. Sun Fin. Co., 131 Ga. App. 96 , 205 S.E.2d 110 (1974).

Contract provision authorizing collection of unearned interest voids obligation. - It makes no difference whether collection of the unearned interest was sought or not; provision in loan agreement authorizing collection of unearned interest alone voids obligation. Brock v. Liberty Loan Co., 135 Ga. App. 62 , 217 S.E.2d 389 (1975).

Refinancing by original lender. - In a refinancing by an original lender, when both sides must agree to an extension of credit and the lender presumably is not losing profits, there is no reason to depart from the general mandate of O.C.G.A. §§ 7-3-14 and 7-3-15 . This chapter provides for "add on" interest, earned uniformly on the entire original amount of the loan, without regard to installment reductions in the outstanding balance. Ford v. Termplan, Inc., 528 F. Supp. 1016 (N.D. Ga. 1981).

Nonfiling insurance premium validly charged. - See Pinkston v. Security Fin. Corp., 183 Bankr. 986 (Bankr. S.D. Ga. 1995).

Cited in Securities Inv. Co. v. Pearson, 111 Ga. App. 761 , 143 S.E.2d 36 (1965); Clark v. Liberty Loan Corp., 116 Ga. App. 213 , 156 S.E.2d 535 (1967); Bell v. Loosier of Albany, Inc., 137 Ga. App. 50 , 222 S.E.2d 839 (1975); Liberty Loan Corp. v. Childs, 140 Ga. App. 473 , 231 S.E.2d 352 (1976); Goodwin v. Trust Co., 144 Ga. App. 787 , 242 S.E.2d 302 (1978); Gainesville Fin. Servs., Inc. v. McDougal, 154 Ga. App. 820 , 270 S.E.2d 40 (1980); Clyde v. Liberty Loan Corp., 249 Ga. 78 , 287 S.E.2d 551 (1982); Aetna Fin. Co. v. Brown, 172 Ga. App. 537 , 323 S.E.2d 720 (1984).

OPINIONS OF THE ATTORNEY GENERAL

Effect of Uniform Commercial Code on nonrecording insurance premiums. - Nonrecording insurance premiums, subject otherwise to rate approvals and regulations by insurance department would be lawful after January 1, 1964, provided they do not exceed amount of recording fees set out in the Uniform Commercial Code. 1963-65 Op. Att'y Gen. p. 335.

Licensee may not charge borrower a policy-writing fee. - No provision in the Industrial Loan Act (see now O.C.G.A. § 7-3-15 et seq.) permits a licensee to charge a borrower a policy-writing fee; the language of former Code 1933, §§ 25-213, 25-214, 25-216, 25-301, 25-313, 25-315, and 25-317 (see now O.C.G.A. § 7-3-14(3) ) clearly prohibited any charge in connection with insurance obtained as security on a loan other than the actual established premium, and former Code 1933, § 25-316 clearly prohibited any charges other than those set out in the Act. 1963-65 Op. Att'y Gen. p. 428.

RESEARCH REFERENCES

Am. Jur. 2d. - 54 Am. Jur. 2d, Moneylenders and Pawnbrokers, § 46 et seq.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, §§ 428 et seq., 436, 444, 445.

ALR. - Usury: expenses or charges incident to loan of money, 21 A.L.R. 797 ; 53 A.L.R. 743 ; 63 A.L.R. 823 ; 105 A.L.R. 795 ; 52 A.L.R.2d 703.

Note or other obligation payable on demand for an amount in excess of amount actually loaned as usurious, 127 A.L.R. 460 .

Construction, application, and effect of provisions of small loan acts regarding fees, charges, etc., in addition to interest, 143 A.L.R. 1323 .

Usury: expenses or charges incident to loan of money, 52 A.L.R.2d 703.

What is "compound interest" within meaning of statutes prohibiting the charging of such interest, 10 A.L.R.3d 421.

Enforceability of provision in loan commitment agreement authorizing lender to charge standby fee, commitment fee, or similar deposit, 93 A.L.R.3d 1156.

7-3-16. Loans to pay contracts acquired by licensee restricted.

No loan shall be made by any licensee for the purpose of paying all or any part of the amount owed on any note, bill of sale to secure debt, title retention contract, conditional sales contract, or any other similar contract which has been purchased by or assigned or transferred to such licensee for a period of at least 90 days from the date of such purchase or transfer.

(Ga. L. 1964, p. 288, § 7.)

RESEARCH REFERENCES

Am. Jur. 2d. - 53A Am. Jur. 2d, Moneylenders and Pawnbrokers, § 9 et seq.

ALR. - Finance charge in connection with conditional sale contract as usury, 143 A.L.R. 238 .

7-3-17. Payment before maturity; refund of prepaid interest; continuing insurance.

Notwithstanding the provisions of any contract to the contrary, a borrower may at any time prepay all or any part of the unpaid balance to become payable under any installment contract. If the borrower pays the time balance in full before maturity, the licensee shall refund to him a portion of the prepaid interest, calculated in complete even months (odd days omitted), as follows: The amount of the refund shall represent at least as great a proportion of the total interest as the sum of the periodical time balance after the date of prepayment bears to the sum of all periodical time balances under the schedule of payments in the original contract. Where the amount of the refund due to anticipation of payment is less than $1.00, no refund need be made. If the borrower has been required to purchase other than insurance coverage in a blanket policy when he has paid no acquisition cost, he shall have the option to continue such insurance in force for the balance of the policy period, with all rights transferred to the borrower or his assigns, in which event no refund of insurance premiums shall be made to him.

(Ga. L. 1955, p. 431, § 17.)

Law reviews. - For article discussing methods of computation of finance charges in Georgia consumer credit contracts, see 30 Mercer L. Rev. 281 (1978).

JUDICIAL DECISIONS

Section compensates lender for profits lost when loan prepaid. - In enacting O.C.G.A. § 7-3-17 , the General Assembly made a specific exception to the general limitation of O.C.G.A. § 7-3-14 on interest and to the general prohibition in O.C.G.A. § 7-3-15 on further charges, with a view toward compensating a lender for lost profits when a debtor voluntarily repays the debtor's loan. Ford v. Termplan, Inc., 528 F. Supp. 1016 (N.D. Ga. 1981).

Section applicable to prepaid interest and insurance but makes no mention of loan fee charges. - Georgia law provides a specific refund system upon prepayment of loans. It applies to prepaid interest and insurance charges but makes no mention of a loan fee charge. Jones v. Community Loan & Inv. Corp., 526 F.2d 642 (5th Cir.), on rehearing, 544 F.2d 1228 (5th Cir. 1976), cert. denied, 431 U.S. 934, 97 S. Ct. 2642 , 53 L. Ed. 2 d 250 (1977).

Rule of 78's violates this section. - Given the purpose of the Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., the strict construction which Georgia courts have applied to it, its general limitation on interest rates charged on such small loans in O.C.G.A. § 7-3-14 , its general prohibition in O.C.G.A. § 7-3-1 5 on charges in excess of those authorized, and the commission regulations, which, according to accepted interpretive principles, appear to exclude anything but pro rata computations of interest on rebates and refinancing, it would seem that the use of the Rule of 78's to compute the interest rebate and the refinancing of a loan agreement pursuant to that Act violates O.C.G.A. § 7-3-17 . Ford v. Termplan, Inc., 528 F. Supp. 1016 (N.D. Ga. 1981).

Determination of refund by Rule of 78's is permitted. - Computation of refunds of unearned interest according to Rule of 78's when borrower pays time balance in full before maturity is permitted. Pollard v. Congress Fin. Corp., 153 Ga. App. 357 , 265 S.E.2d 296 (1980). (But see, Ford v. Termplan, Inc., 528 F. Supp. 1016 (N.D. Ga. 1981)).

Rule of 78's applicable in refinancing situation. - One statute the General Assembly has written to allow for use of the Rule of 78's in situations involving the prepayment of all or any part of the unpaid balance of an installment contract prior to maturity should be held applicable when a borrower retires one note held by a particular lender by using the proceeds of a second note from the same lender. The General Assembly's decision to allow more than a pro rata loss of interest in prepayment situations indicates the General Assembly's desire to allow a similar loss by the borrower in a refinancing situation since both transactions are initiated by the borrower and are evidences of the borrower's failure to fulfill the borrower's contractual obligation to repay the lender pursuant to the initial installment contract. That failure has caused the General Assembly to exact a penalty against the borrower in the form of allowing a creditor's use of the Rule of 78's in a prepayment situation, and in the absence of a clear statement to the contrary, the same penalty should be exacted against the refinancing borrower. Simpson v. Termplan, Inc., 535 F. Supp. 36 (N.D. Ga. 1981). (But see, Ford v. Termplan, Inc., 528 F. Supp. 1016 (N.D. Ga. 1981)).

Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., authorizes the lender to use the Rule of 78's to compute interest rebates in refinancing cases and the Act does not require lenders to compute such rebates on a pro rata basis. Varner v. Century Fin. Corp., 253 Ga. 27 , 317 S.E.2d 178 (1984). (But see, Ford v. Termplan, Inc., 528 F. Supp. 1016 (N.D. Ga. 1981)).

Nothing less than refund of all unearned interest permitted when creditor accelerates. - When there is not a prepayment, the Rule of 78's cannot be used to compute interest refund and when acceleration was made at half-way point in contract but less than 50 percent of total interest charged was refunded, nothing less than a refund of all unearned interest when the creditor accelerates can be permitted. Garrett v. G.A.C. Fin. Corp., 129 Ga. App. 96 , 198 S.E.2d 717 (1973).

Cited in Brown v. Quality Fin. Co., 112 Ga. App. 369 , 145 S.E.2d 99 (1965); Cook v. First Nat'l Bank, 130 Ga. App. 587 , 203 S.E.2d 870 (1974); Harlow v. Walton Loan Corp., 174 Ga. App. 311 , 329 S.E.2d 616 (1985).

RESEARCH REFERENCES

Am. Jur. 2d. - 53A Am. Jur. 2d, Moneylenders and Pawnbrokers, §§ 46 et seq., 51 et seq.

ALR. - Personal liability for repayment of loan or advance under contract which expressly provides for repayment from proceeds of crop or other property and contains no express promise for repayment otherwise, 111 A.L.R. 1062 .

7-3-18. Delivery of copy of contract or itemized statement; receipts.

At the time the loan is made, each licensee under this chapter shall deliver to the borrower or, if there are two or more, to one of them a copy of the loan contract or a written itemized statement in the English language showing in clear terms the date and amount of the loan, a schedule of the payments or a description thereof, the type of security for the loan, the licensee's name and address, the actual cash advanced to or on behalf of the borrower, the amount of each class of insurance carried and the premiums paid thereon, and the amount of interest and fees. Each licensee shall give a receipt for every cash payment made.

(Ga. L. 1904, p. 79, §§ 6, 7; Civil Code 1910, § 3454; Ga. L. 1920, p. 215, § 14; Code 1933, §§ 25-209, 25-314; Ga. L. 1955, p. 431, § 19.)

JUDICIAL DECISIONS

Editor's notes. - In light of the similarity of the statutory provisions, annotations decided under former Acts 1920, p. 222 are included in the annotations for this Code section.

Act is applicable to loan contracts, not merely notes. - Statutory language of the Georgia Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., refers to loan contracts and not merely notes. General Fin. Corp. v. Sprouse, 577 F.2d 989 (5th Cir. 1978).

Substantial compliance with section may suffice. - Although renewal note was not made out with as much particularity as was required by Acts 1920, p. 222, it may nevertheless affirmatively appear that there was substantial compliance with that Act and that the borrowers had been furnished relevant information. Dean v. Avco Fin. Servs., Inc., 128 Ga. App. 256 , 196 S.E.2d 415 (1973) (decided under Former Acts 1920, p. 222).

Burden was on lender to show full compliance with terms of Former Acts 1920, p. 222, otherwise the transaction was void. Dean v. Avco Fin. Servs., Inc., 128 Ga. App. 256 , 196 S.E.2d 415 (1973) (decided under Acts 1920, p. 222).

Burden is upon lender to bring in any other writings. - If there were other writings between the parties, it is incumbent upon the lender to come up with those writings or suffer judgment. HFC v. Rogers, 137 Ga. App. 315 , 223 S.E.2d 462 (1976).

Inconsistency between state disclosure requirements and Truth-in-Lending Act. - State law is inconsistent with requirements of Truth-in-Lending Act, 15 U.S.C. § 1601 et seq., to extent that it requires a creditor to make disclosures different from the federal requirements with respect to form or terminology. Gresham v. Termplan, Inc., 480 F. Supp. 149 (N.D. Ga. 1979), aff'd, 648 F.2d 312 (5th Cir. 1981).

State law is inconsistent with requirements of truth in lending law if the state law requires a creditor to make disclosures different from those required by federal law as to form, content, terminology, or time of delivery. Blalock v. Aetna Fin. Co., 511 F. Supp. 33 (N.D. Ga. 1980).

Mingling of state disclosures and federal regulations. - Mingling of inconsistent state disclosures with terminology required by federal regulations is not permissible. Gresham v. Termplan, Inc., 480 F. Supp. 149 (N.D. Ga. 1979), aff'd, 648 F.2d 312 (5th Cir. 1981).

Permissible method for making disclosures under inconsistent state and federal requirements. See Gresham v. Termplan, Inc., 480 F. Supp. 149 (N.D. Ga. 1979), aff'd, 648 F.2d 312 (5th Cir. 1981).

Clerical error in loan document as to insurance. - Clerical error on loan document as to nature of insurance did not violate the Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., when the loan document expressly provided that the agreement consisted of both the loan document and the disclosure statement. Jenkins v. Commercial Credit Plan, Inc., 204 Ga. App. 444 , 419 S.E.2d 484 , cert. denied, 204 Ga. App. 922 , 419 S.E.2d 484 (1992).

Cited in Colter v. Consolidated Credit Corp., 115 Ga. App. 408 , 154 S.E.2d 713 (1967); Colter v. Consolidated Credit Corp., 116 Ga. App. 520 , 157 S.E.2d 812 (1967); Patman v. General Fin. Corp., 128 Ga. App. 836 , 198 S.E.2d 371 (1973); Cullers v. Home Credit Co., 130 Ga. App. 441 , 203 S.E.2d 544 (1973); Dukes v. HFC, 137 Ga. App. 474 , 224 S.E.2d 107 (1976); Hawkins v. HFC, 139 Ga. App. 525 , 229 S.E.2d 13 (1976); Freeman v. Decatur Loan & Fin. Corp., 140 Ga. App. 682 , 231 S.E.2d 409 (1976); Carter v. Credithrift of Am., Inc., 143 Ga. App. 256 , 238 S.E.2d 257 (1977); Southern Discount. Co. v. Heide, 144 Ga. App. 481 , 241 S.E.2d 599 (1978); Marshall v. Fulton Nat'l Bank, 145 Ga. App. 190 , 243 S.E.2d 266 (1978); Shaver v. Aetna Fin. Co., 148 Ga. App. 740 , 252 S.E.2d 684 (1979); Ector v. Southern Disct. Co., 499 F. Supp. 284 (N.D. Ga. 1980); Scroggins v. Whitfield Fin. Co., 157 Ga. App. 655 , 278 S.E.2d 411 (1981); Gresham v. Termplan, Inc., 648 F.2d 312 (5th Cir. 1981).

RESEARCH REFERENCES

Am. Jur. 2d. - 53A Am. Jur. 2d, Moneylenders and Pawnbrokers, §§ 26 et seq., 33.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, §§ 436 et seq., 451.

ALR. - Validity, construction, and application of Truth in Lending Act (TILA) and regulations promulgated thereunder - United States Supreme Court cases, 67 A.L.R. Fed. 2d 567.

7-3-19. Tax on interest - Levy; penalty for tax to charges.

  1. In addition to all other taxes, fees, license fees, or other charges now or hereafter levied or assessed, there is levied a tax of 3 percent on the total amount of interest on any loan collected by any person licensed under this chapter from any borrower to whom such licensee has made a loan.
  2. Said tax is levied and assessed against the person so licensed and shall be paid by such person and shall not be added in any manner as an additional fee or charge against the borrower. Any person licensed under this chapter who adds such tax in any manner as an additional fee or charge against the borrower shall be liable for the recovery of triple the amount of such charge by action against the lender in any court of competent jurisdiction.
  3. As used in this Code section, the term "interest collected" means the gross amount of interest charged and collected on loan contracts, less any amount of unearned interest refunded to borrowers and such interest on such portion of uncollectable accounts that are charged off as bad debts by the licensee; except that, for those licensees whose records are kept on an accrual basis, the 3 percent tax levied in subsection (a) of this Code section shall be remitted on such portion of the interest as accrues during the taxable month.

    (Ga. L. 1955, Ex. Sess., p. 57, § 1; Ga. L. 1956, p. 86, § 2; Ga. L. 1997, p. 143, § 7.)

JUDICIAL DECISIONS

Cited in Bell v. Loosier of Albany, Inc., 137 Ga. App. 50 , 222 S.E.2d 839 (1975).

RESEARCH REFERENCES

ALR. - Constitutionality of statutes imposing duty on borrower to collect and pay over the tax imposed on the lender or owner of the obligations, 60 A.L.R. 742 .

Classification of money lenders for purposes of taxation, 93 A.L.R. 209 .

7-3-20. Tax on interest - Payment; inspection of records; rules and regulations.

The tax provided for in Code Section 7-3-19 shall be remitted to the Commissioner on or before the twentieth day of each month for the preceding calendar month. The Commissioner and his authorized agents and employees shall have the right to inspect all records of any person so licensed, and the Commissioner is authorized to promulgate rules and regulations relative to the enforcement of Code Section 7-3-19, this Code section, and Code Section 7-3-21.

(Ga. L. 1955, Ex. Sess., p. 57, § 2; Ga. L. 1956, p. 86, § 2; Ga. L. 1975, p. 1247, § 2; Ga. L. 1989, p. 14, § 7; Ga. L. 2004, p. 631, § 7.)

RESEARCH REFERENCES

Am. Jur. 2d. - 53A Am. Jur. 2d, Moneylenders and Pawnbrokers, § 19 et seq.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, § 407.

7-3-21. Tax on interest - Penalties for late or fraudulent tax payments.

In the event any person fails or refuses to remit the tax required by Code Sections 7-3-19 and 7-3-20 within the time prescribed, there shall be added to the tax a penalty equivalent to 25 percent of the tax but in no case shall the penalty so added be less than $5.00. In the event any person fraudulently remits the incorrect tax, there shall be added to the tax a penalty equivalent to 50 percent of the tax but in no case shall the penalty so added be less than $5.00. The amounts so added as penalties shall be collected as a part of the tax.

(Ga. L. 1955, Ex. Sess., p. 57, § 3.)

RESEARCH REFERENCES

Am. Jur. 2d. - 53A Am. Jur. 2d, Moneylenders and Pawnbrokers, § 19 et seq.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, § 460.

7-3-22. Examinations, investigations, and hearings.

  1. For the purpose of discovering violations of this chapter, the Commissioner or his duly authorized representative may from time to time examine the books, accounts, papers, and records of:
    1. Any licensee;
    2. Any person who advertises for, solicits, or holds himself out as willing to make loans in amounts of $3,000.00 or less; or
    3. Any person whom the Commissioner has reason to believe is violating or is about to violate the provisions of this chapter.
  2. The Commissioner may subpoena witnesses, books, accounts, papers, and records; administer oaths; hold hearings; and take testimony under oath in conducting examinations and hearings authorized under this chapter.
  3. The cost of any such examination, investigation, or hearing, in the discretion of the Commissioner, may be charged to the licensee or person examined subject to review by the superior court under Code Section 7-3-27. The examinations, investigations, or hearings provided for in this Code section may be conducted at the state capitol or, in the discretion of the Commissioner, in the county wherein the business of the licensee is located or where the person required to have a license under this chapter is engaging in the business of making loans or elsewhere, upon the consent of the parties involved.

    (Ga. L. 1904, p. 79, § 8; Civil Code 1910, § 3456; Ga. L. 1920, p. 215, § 10; Code 1933, §§ 25-211, 25-310; Ga. L. 1955, p. 431, § 11; Ga. L. 1963, p. 370, § 3; Ga. L. 1975, p. 393, § 1; Ga. L. 1989, p. 14, § 7.)

JUDICIAL DECISIONS

Commissioner's authority to investigate. - Trial court properly dismissed a declaratory judgment action brought by a bank and a cash advance lender, which was operating as an agent for the bank, to stop the Georgia Industrial Loan Commissioner from conducting an investigation of their lending activities, because the Commissioner was authorized to conduct an investigation of the two entities' loan activities, in spite of the lender's claim that the bank and the lender were operating under the authority of federal banking law. BankWest, Inc. v. Oxendine, 266 Ga. App. 771 , 598 S.E.2d 343 (2004).

OPINIONS OF THE ATTORNEY GENERAL

Scope of authority. - Former Code 1933, § 25-310 (see now O.C.G.A. § 7-3-22 ) empowered the Commissioner to investigate loans and business of anyone violating provisions of the Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.). 1948-49 Op. Att'y Gen. p. 15.

Exercise of authority discretionary. - It was the intention of the legislature to place exercise of this authority within the discretion of the Commissioner; it was clearly not mandatory upon the Commissioner to make such investigation since former Code 1933, § 25-310 stated that the Commissioner "may . . . investigate." 1948-49 Op. Att'y Gen. p. 15.

7-3-23. Cease and desist orders; enjoining violations.

In the event the Commissioner shall find cause to believe that any person is violating this chapter or the rules and regulations promulgated by the Commissioner pursuant to this chapter, he shall make such investigation and have such hearings, before him or such person as he designates, as will permit him to determine the facts and then may issue a cease and desist order if he so determines. If such cease and desist order is thereafter violated by the person against whom it is issued, such violation shall constitute a public nuisance; and the Commissioner is authorized to seek, and the superior courts shall grant, injunctions against such person's further violating this chapter or the lawful rules and regulations promulgated by the Commissioner pursuant to this chapter. Such action for injunction may be maintained notwithstanding the existence of other legal remedies or the pendency or successful completion of a criminal prosecution as for a misdemeanor.

(Ga. L. 1957, p. 331, § 2; Ga. L. 1989, p. 14, § 7; Ga. L. 1997, p. 143, § 7.)

JUDICIAL DECISIONS

Cited in Clay v. Oxendine, 285 Ga. App. 50 , 645 S.E.2d 553 (2007).

7-3-24. Suspension or revocation of license - Grounds; procedure; effect of loss of license on contracts.

  1. The Commissioner, upon ten days' written notice in the form of a show cause order to the licensee stating his contemplated action and in general the ground therefor and after giving the licensee a reasonable opportunity to be heard, subject to the right to review provided in Code Section 7-3-27, may by order in writing suspend or revoke any license issued under this chapter if the Commissioner shall find that:
    1. The licensee has failed to pay the annual license fee or any fee required under this chapter; or
    2. The licensee has violated any provision of this chapter or any rule or regulation promulgated by the Commissioner under this chapter or has violated the terms of any cease or desist order entered by the Commissioner under Code Section 7-3-23.
  2. Any such suspension or revocation shall not become final pending and subject to the right of review provided in Code Section 7-3-27, but the court shall have and is granted power to enter such order as justice shall require pending hearing of such appeal. The court upon such appeal may tax the cost, including the cost of the hearing before the Commissioner, against the losing party.
  3. No suspension, revocation, relinquishment, or expiration of any license shall invalidate, impair, or affect the legality or obligations of any preexisting contracts or prevent the enforcement and collection thereof.

    (Ga. L. 1904, p. 79, §§ 4, 9, 15; Ga. L. 1920, p. 215, § 6; Code 1933, §§ 25-212, 25-217, 25-305, 25-306; Ga. L. 1955, p. 431, § 12; Ga. L. 1963, p. 370, § 4; Ga. L. 1989, p. 14, § 7.)

JUDICIAL DECISIONS

Cited in Bentley v. C. & S. Loans, Inc., 109 Ga. App. 218 , 135 S.E.2d 900 (1964).

OPINIONS OF THE ATTORNEY GENERAL

Specific grounds or cause for revocation or suspension of a license. - See 1963-65 Op. Att'y Gen. p. 13.

RESEARCH REFERENCES

Am. Jur. 2d. - 51 Am. Jur. 2d, Licenses and Permits, § 56 et seq.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, §§ 424, 425, 446.

7-3-25. Suspension or revocation of license - Unreasonable collection tactics.

  1. Any license shall be subject to suspension or revocation, after notice and hearing as provided for in Code Section 7-3-24, in the event unreasonable collection tactics shall be willfully used by the licensee or any employee or agent thereof. Unreasonable collection tactics shall include, but not be limited to, any conduct by the licensee or any employee or agent thereof which:
    1. Causes the borrower or any member of his family to suffer bodily injury or physical harm;
    2. Constitutes a willful or intentional trespass by force of the borrower's home or his personal property without process of law;
    3. Holds up the borrower to public ridicule or unreasonably degrades him in the presence of his neighbors or business associates;
    4. Involves use of printed material which simulates or resembles a summons, warrant, or other legal process; or
    5. Although otherwise lawful, occurs at an unreasonable hour of the night. Attempts to make collections by means of personal visits, telephone calls, and the like shall be deemed to occur at an unreasonable hour of the night if they occur between the hours of 10:00 P.M. and 5:00 A.M.
  2. Any order or decision of the Commissioner on the matter of suspension or revocation shall be subject to review as provided for in Code Section 7-3-27.

    (Ga. L. 1964, p. 288, § 6; Ga. L. 1989, p. 14, § 7; Ga. L. 1997, p. 143, § 7.)

RESEARCH REFERENCES

Am. Jur. 2d. - 51 Am. Jur. 2d, Licenses and Permits, § 56 et seq.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, §§ 424, 425.

ALR. - Usury: expenses or charges incident to loan of money, 21 A.L.R. 797 ; 53 A.L.R. 743 ; 63 A.L.R. 823 ; 105 A.L.R. 795 ; 52 A.L.R.2d 703.

Usury: expenses or charges incident to loan of money, 52 A.L.R.2d 703.

Use of criminal process to collect debt as abuse of process, 27 A.L.R.3d 1202.

Unsolicited mailing, distribution, house call, or telephone call as invasion of privacy, 56 A.L.R.3d 457.

Liability of creditor for excessive attachment or garnishment, 56 A.L.R.3d 493.

Recovery by debtor, under tort of intentional or reckless infliction of emotional distress for damages resulting from debt collection methods, 87 A.L.R.3d 201.

Validity, construction, and application of state statutes prohibiting abusive or coercive debt collection practices, 87 A.L.R.3d 786.

Method employed in collecting debt due client as ground for disciplinary action against attorney, 93 A.L.R.3d 880.

Validity, construction, and application of state criminal statute forbidding use of telephone to annoy or harass, 95 A.L.R.3d 411.

What constitutes "debt" for purposes of Fair Debt Collection Practices Act (15 USCA § 1692a(5)), 159 A.L.R. Fed. 121.

7-3-26. Probation and civil penalties for violations.

In addition to all other penalties provided for under this chapter, the Commissioner shall have authority to place any licensee on probation for a period of time not to exceed one year for each and every act or violation of this chapter or of the rules and regulations of the Commissioner and may subject such licensee to a monetary penalty of up to $1,000.00 for each and every act or violation of this chapter or of the rules and regulations of the Commissioner. If the licensee knew or reasonably should have known he was in violation of this chapter or the rules and regulations of the Commissioner, the monetary penalty provided for in this Code section may be increased to an amount up to $5,000.00 for each and every act or violation.

(Ga. L. 1975, p. 1247, § 1; Ga. L. 1989, p. 14, § 7; Ga. L. 1997, p. 143, § 7.)

RESEARCH REFERENCES

Am. Jur. 2d. - 53A Am. Jur. 2d, Moneylenders and Pawnbrokers, § 34 et seq.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, § 460.

7-3-27. Judicial review of Commissioner's decisions.

The decision of the Commissioner in granting or refusing to grant a license and in revoking or suspending such license and in any other order or decision authorized in this chapter shall be final, conclusive, and binding as to all determinations of fact made by him; but any applicant or licensee who deems himself aggrieved may have such decision reviewed under Chapter 13 of Title 50, the "Georgia Administrative Procedure Act," for the review of contested cases.

(Ga. L. 1955, p. 431, § 13; Ga. L. 1982, p. 3, § 7; Ga. L. 1989, p. 14, § 7.)

RESEARCH REFERENCES

C.J.S. - 73A C.J.S., Public Administrative Law and Procedure, § 313 et seq.

ALR. - Right of public officer or board to appeal from a judicial decision affecting his or its order or decision, 117 A.L.R. 216 .

7-3-28. Code Section 7-4-4 not repealed.

Nothing in this chapter shall be construed as repealing Code Section 7-4-4.

(Ga. L. 1955, p. 431, § 22.)

7-3-29. Criminal penalties; void loans; civil penalty to borrower for violation; violation not subject of class action; defense of good faith; limitation on remedies for voidness.

  1. Any person who shall make loans under this chapter without first obtaining a license or who shall make a false statement under oath in an application for a license under this chapter or who shall do business while the license of such person under this chapter is suspended or revoked shall be guilty of a misdemeanor; and any contract made under this chapter by such person shall be null and void.
  2. Except as otherwise provided in this chapter, any duly licensed lender who fails to comply with this chapter in connection with a loan under this chapter shall be liable to the borrower or borrowers thereon for a single penalty in an amount equal to twice the amount of all interest and loan fees charged said borrower or borrowers on the most recent loan made by the lender to said borrower or borrowers; provided, however, that the liability under this subsection shall not be less than $100.00.
  3. A lender duly licensed under this chapter has no liability under subsection (b) of this Code section if, within 15 days after discovering an error or violation and prior to the institution of an action under this Code section or the receipt of written notice of the error or violation, the lender notifies the person concerned of the error or violation and makes whatever adjustments in the appropriate account are necessary to ensure that such person will not be required to pay charges in excess of those permitted by this chapter.
  4. A lender may not be held liable in any action brought under this Code section for a violation of this chapter if the lender shows by a preponderance of the evidence that the violation was not intentional and resulted from a bona fide clerical or typographical error notwithstanding the maintenance of procedures reasonably adopted to avoid any such error.
  5. A claim of violation of this chapter against a duly licensed lender may be asserted in an individual action only and may not be the subject of a class action under Code Section 9-11-23 or any other provision of law. A claim of violation of this chapter against an unlicensed lender may be asserted in a class action under Code Section 9-11-23 or any other provision of law.
  6. If a contract is made in good faith in conformity with an interpretation of this chapter by the appellate courts of this state or in a rule or regulation officially promulgated by the Commissioner after public hearings, no provision in this Code section imposing any penalty shall apply, notwithstanding that, after such contract is made, such rule or regulation is amended, rescinded, or determined by judicial or other authority to be invalid for any reason.
  7. Any lender duly licensed under this chapter who shall knowingly and willfully with intent to defraud a borrower make a contract in violation of this chapter shall be guilty of a misdemeanor, and the contract so made shall be null and void.
  8. No person may, more than one year after April 9, 1980, assert or contend offensively or defensively in any court that a contract predating April 9, 1980, is null and void or is illegal, void, invalid, or not good consideration for a renewal or refinanced contract. This subsection is a statute of repose and limitation, barring such remedies, and only such remedies, as of that date; provided, however, that after that date a borrower or borrowers on a contract predating April 9, 1980, shall be entitled to the appropriate penalty provided under subsections (a) through (g) of this Code section, but such right to said penalty shall not in any way adversely affect the validity of any renewal or refinanced contract.

    (Ga. L. 1904, p. 79, § 14; Ga. L. 1920, p. 215, §§ 13, 17, 18; Code 1933, §§ 25-217, 25-313, 25-317, 25-9902; Ga. L. 1935, p. 394, § 2; Ga. L. 1955, p. 431, § 20; Ga. L. 1978, p. 1033, § 1; Ga. L. 1980, p. 1784, §§ 1, 2; Ga. L. 1989, p. 14, § 7; Ga. L. 2004, p. 60, § 1.)

Law reviews. - For article surveying 1976 to 1977 developments in application of the Industrial Loan Act, see 29 Mercer L. Rev. 41 (1977). For article surveying Georgia cases in the area of trial practice and procedure from June 1977 through May 1978, see 30 Mercer L. Rev. 239 (1978). For article discussing methods of computation of finance charges in Georgia consumer credit contracts, see 30 Mercer L. Rev. 281 (1978). For article surveying Georgia cases in the area of commercial law from June 1979 through May 1980, see 32 Mercer L. Rev. 11 (1980). For survey article on commercial law, see 34 Mercer L. Rev. 31 (1982). For article on 2004 amendment of this Code section, see 21 Ga. St. U.L. Rev. 59 (2004). For comment on Georgia Inv. Co. v. Norman, 231 Ga. 821 , 204 S.E.2d 740 (1974), see 26 Mercer L. Rev. 321 (1974).

Cross references. - Illegal payday loans, § 16-17-1 et seq.

JUDICIAL DECISIONS

ANALYSIS

General Consideration

Editor's notes. - In light of the similarity of the statutory provisions, and in light of subsection (h) of O.C.G.A. § 7-3-29 , decisions rendered prior to amendment of this Code section by Ga. L. 1980, p. 1784, §§ 1, 2 have been retained in the annotations. Georgia Inv. Co. v. Norman, 231 Ga. 821 , 204 S.E.2d 740 (1974).

Construction. - This law, being in derogation of common law, must be strictly construed. Landmark Fin. Corp. v. Cox, 2 Bankr. 739 (S.D. Ga. 1980).

Georgia courts have strictly construed the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) since its provisions are in derogation of common law. Moore v. Beneficial Fin. Co., 158 Ga. App. 535 , 281 S.E.2d 293 (1981).

Forfeitures and penalties are not favored and statutes relating to them must be strictly construed, and in manner as favorable to person against whom forfeiture or penalty would be exacted as is consistent with fair principles of interpretation. Landmark Fin. Corp. v. Cox, 2 Bankr. 739 (S.D. Ga. 1980).

Section does not discourage judicial or other interpretation of chapter. - O.C.G.A. § 7-3-29 evinces a recognition on the part of the General Assembly that the Georgia Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., is ambiguous in certain sections. It in no way discourages judicial or other valid authority from seeking interpretations of that Act which further its purpose, despite prior inconsistent interpretations. Ford v. Termplan, Inc., 528 F. Supp. 1016 (N.D. Ga. 1981).

Contracts violating act are null and void. - As originally enacted, this section provided that contracts violating this act were null and void. Landmark Fin. Corp. v. Cox, 2 Bankr. 739 (S.D. Ga. 1980).

The 1978 additions to the penalty provision did not eliminate the null and void language. In describing the purpose of these additions, the General Assembly stated that the former provisions (see now O.C.G.A. § 7-3-29(f) ) were intended to exempt from certain penalties contracts made in reliance upon certain rules, regulations, or interpretations of the act. Landmark Fin. Corp. v. Cox, 2 Bankr. 739 (S.D. Ga. 1980).

Recovery of principal in action on "null and void" loan contract. - Lender as licensee may recover principal amount of loan in action solely on loan contract when such contract is considered "null and void" under O.C.G.A. § 7-3-29 as a result of inclusion of usurious amount of interest even though a lender does not seek recovery of principal in cause of action for money had and received. United States Life Credit Corp. v. Johnson, 248 Ga. 852 , 287 S.E.2d 1 (1982).

"Null and void" provision does not work penalty of forfeiture of principal as well as interest. Moore v. Beneficial Fin. Co., 158 Ga. App. 535 , 281 S.E.2d 293 (1981).

Former provisions (see now O.C.G.A. § 7-3-29(f) ) did not bear upon method of enforcement but rather conforms with general purpose of penalty provision to deter lender abuse. Landmark Fin. Corp. v. Cox, 2 Bankr. 739 (S.D. Ga. 1980).

Chapter is applicable to loan contracts, not merely notes. - Statutory language of the Georgia Industrial Loan Act, (see now O.C.G.A. § 7-3-1 et seq.), refers to loan contracts and not merely notes. General Fin. Corp. v. Sprouse, 577 F.2d 989 (5th Cir. 1978).

Subsection (c) of section cannot be retroactively applied to sanction loan fees which are excessive and which were contained in loan contracts made before the March 14, 1978, effective date of section. Sanders v. Liberty Loan Corp., 153 Ga. App. 859 , 267 S.E.2d 286 (1980), overruled on another point, FinanceAmerica Corp. v. Drake, 154 Ga. App. 811 , 270 S.E.2d 449 (1980).

Interaction of Chapter and Truth-in-Lending Act. - Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) penalties do not condition or limit application of federal Truth-in-Lending Act, 15 U.S.C. § 1601 et seq. Williams v. Public Fin. Corp., 609 F.2d 1179 (5th Cir. 1980).

Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) and federal Truth-in-Lending Act, 15 U.S.C. § 1601 et seq., provide separate remedies for separate wrongs. The former limits what a lender subject to its provisions can charge for use of its money; the latter is designed to penalize and deter an independent wrong arising from nondisclosure. Williams v. Public Fin. Corp., 609 F.2d 1179 (5th Cir. 1980).

Lenders violating Industrial Loan Act, (see now O.C.G.A. § 7-3-1 et seq. and federal Truth-in-Lending Act, 15 U.S.C. § 1601 et seq., are subject to penalties of both. Williams v. Public Fin. Corp., 609 F.2d 1179 (5th Cir. 1980).

Charge of notary fee is a violation of Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) and entitles borrower to have contract declared null and void. Motor Fin. Co. v. Harris, 150 Ga. App. 762 , 258 S.E.2d 628 (1979).

Violation of chapter's regulations subject lender to administrative penalties; loan remains enforceable. - Loans which violate the Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., are void under this section; United States Courts of Appeals have held that violations of the regulations subject lender only to administrative penalties, and that the loan remains enforceable. Robinson v. Central Loan & Fin. Corp., 609 F.2d 170 (5th Cir. 1980) (decided prior to 1980 amendment of this section).

Borrower may only recover money paid which exceeds actual cash advance. - Borrower may only recover moneys paid to the lender under contracts violative of the Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., in excess of cash actually advanced to the borrower. Motor Fin. Co. v. Harris, 150 Ga. App. 762 , 258 S.E.2d 628 (1979) (decided prior to 1980 amendment of this section).

No recovery permitted on loan which is usurious on face. - If note or loan contract made under Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) shows on its face that it is infected with usury it is absolutely void and there can be no recovery on it. Robinson v. Colonial Disct. Co., 106 Ga. App. 274 , 126 S.E.2d 824 (1962) (decided prior to 1980 amendment of this section).

Amendment of complaint. - When creditor demanded usurious interest, amendment to the creditor's complaint does not erase objection of usuriousness. Liberty Loan Corp. v. Childs, 140 Ga. App. 473 , 231 S.E.2d 352 (1976), cert. dismissed, 239 Ga. 220 , 236 S.E.2d 373 (1977).

Good faith offer by lender suing on loan which violated Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) to amend complaint to correct excessive time price differential had no effect on penalty provisions. Douglas v. Dixie Fin. Corp., 139 Ga. App. 251 , 228 S.E.2d 144 (1976).

Forfeiture of interest, but not principal. - Lender who violates the Georgia Industrial Loan Act (see now O.C.G.A. § 7-3-1 et seq.) shall forfeit all interest and other charges, but not the principal sum advanced to borrower. Southern Disct. Co. v. Ector, 246 Ga. 30 , 268 S.E.2d 621 (1980); United States Life Credit Corp. v. Johnson, 161 Ga. App. 864 , 290 S.E.2d 280 (1982).

Forfeiture of interest and other charges may be avoided. Southern Disct. Co. v. Ector, 246 Ga. 30 , 268 S.E.2d 621 (1980) (decided prior to 1980 amendment of this section).

Cited in Securities Inv. Co. v. Pearson, 111 Ga. App. 761 , 143 S.E.2d 36 (1965); Brown v. Quality Fin. Co., 112 Ga. App. 369 , 145 S.E.2d 99 (1965); Coile v. Finance Co. of Am., 221 Ga. 863 , 148 S.E.2d 328 (1966); Community Fin. Co. v. Lloyd, 114 Ga. App. 230 , 150 S.E.2d 845 (1966); Colter v. Consolidated Credit Corp., 115 Ga. App. 408 , 154 S.E.2d 713 (1967); Colter v. Consolidated Credit Corp., 116 Ga. App. 520 , 157 S.E.2d 812 (1967); Lewis v. Termplan, Inc., 124 Ga. App. 507 , 184 S.E.2d 473 (1971); Abrams v. Commercial Credit Plan, Inc., 128 Ga. App. 520 , 197 S.E.2d 384 (1973); Patman v. General Fin. Corp., 128 Ga. App. 836 , 198 S.E.2d 371 (1973); Mason v. Service Loan & Fin. Co., 128 Ga. App. 828 , 198 S.E.2d 391 (1973); Roberts v. Allied Fin. Co., 129 Ga. App. 10 , 198 S.E.2d 416 (1973); Garrett v. G.A.C. Fin. Corp., 129 Ga. App. 96 , 198 S.E.2d 717 (1973); Cullers v. Home Credit Co., 130 Ga. App. 441 , 203 S.E.2d 544 (1973); Cook v. First Nat'l Bank, 130 Ga. App. 587 , 203 S.E.2d 870 (1974); Sellers v. Alco Fin., Inc., 130 Ga. App. 769 , 204 S.E.2d 478 (1974); Gray v. Quality Fin. Co., 130 Ga. App. 762 , 204 S.E.2d 483 (1974); Lawrimore v. Sun Fin. Co., 131 Ga. App. 96 , 205 S.E.2d 110 (1974); Hardy v. G.A.C. Fin. Corp., 131 Ga. App. 282 , 205 S.E.2d 526 (1974); G.A.C. Fin. Corp. v. Hardy, 232 Ga. 632 , 208 S.E.2d 453 (1974); Hobbiest Fin. Corp. v. Spivey, 135 Ga. App. 353 , 217 S.E.2d 613 (1975); Carreker v. National Diversified, Inc., 135 Ga. App. 511 , 218 S.E.2d 117 (1975); Hughes Motor Co. v. First Nat'l Bank, 136 Ga. App. 295 , 220 S.E.2d 782 (1975); HFC v. Raven, 136 Ga. App. 424 , 221 S.E.2d 488 (1975); Dukes v. HFC, 137 Ga. App. 474 , 224 S.E.2d 107 (1976); Moore v. American Fin. Sys., 236 Ga. 610 , 225 S.E.2d 17 (1976); Credithrift of Am., Inc. v. Mason, 143 Ga. App. 793 , 240 S.E.2d 158 (1977); Southern Disct. Co. v. Heide, 144 Ga. App. 481 , 241 S.E.2d 599 (1978); Marshall v. Fulton Nat'l Bank, 145 Ga. App. 190 , 243 S.E.2d 266 (1978); Shaver v. Aetna Fin. Co., 148 Ga. App. 740 , 252 S.E.2d 684 (1979); Sapp v. ABC Credit & Inv. Co., 243 Ga. 151 , 253 S.E.2d 82 (1979); Wessinger v. Kennesaw Fin. Co., 151 Ga. App. 660 , 261 S.E.2d 649 (1979); Layton v. Liberty Loans, 152 Ga. App. 504 , 263 S.E.2d 167 (1979); Commercial Credit Plan, Inc. v. Parker, 152 Ga. App. 409 , 263 S.E.2d 220 (1979); Plant v. Blazer Fin. Servs., Inc., 598 F.2d 1357 (5th Cir. 1979); Gainesville Fin. Servs., Inc. v. McDougal, 154 Ga. App. 820 , 270 S.E.2d 40 (1980); Southern Disct. Co. v. Ector, 155 Ga. App. 521 , 271 S.E.2d 661 (1980); Sanders v. Liberty Loan Corp., 156 Ga. App. 628 , 276 S.E.2d 49 (1980); Whitfield v. Termplan, Inc., 651 F.2d 383 (5th Cir. 1981); Aetna Fin. Co. v. Brown, 172 Ga. App. 537 , 323 S.E.2d 720 (1984); Harlow v. Walton Loan Corp., 174 Ga. App. 311 , 329 S.E.2d 616 (1985); Ford Motor Credit Co. v. London, 175 Ga. App. 33 , 332 S.E.2d 345 (1985).

Acceleration of Interest

Acceleration clauses are not per se invalid. Bragg v. HFC, 140 Ga. App. 75 , 230 S.E.2d 55 (1976).

Collection of unearned interest is not per se improper under Georgia law. Barrett v. Vernie Jones Ford, Inc., 395 F. Supp. 904 (N.D. Ga. 1975), rev'd on other grounds sub nom. McDaniel v. Fulton Nat'l Bank, 543 F.2d 568 (5th Cir. 1976), aff'd, 578 F.2d 1185 (5th Cir. 1978).

Acceleration clause enforceable unless rendering note usurious. - Acceleration clause not providing for rebate of unearned interest is enforceable absent finding that clause, as applied, renders note violative of state usury laws. Once such finding has been made, however, the note becomes void. Barrett v. Vernie Jones Ford, Inc., 395 F. Supp. 904 (N.D. Ga. 1975), rev'd on other grounds sub nom. McDaniel v. Fulton Nat'l Bank, 543 F.2d 568 (5th Cir. 1976), aff'd, 578 F.2d 1185 (5th Cir. 1978) (decided prior to 1980 amendment of this section).

Acceleration clause which includes unearned interest voids the contract. - Provision for acceleration of unearned interest is a contract authorizing collection of more than is provided or approved by the Industrial Loan Act, (see now O.C.G.A. § 7-3-1 et seq.) and thus authorizes a result contrary to its terms, and is in violation of the Act; thus, the loan is void. Frazier v. Courtesy Fin. Co., 132 Ga. App. 365 , 208 S.E.2d 175 (1974);(decided prior to 1980 amendment of this section).

When acceleration of a debt, combined with a claim of unearned interest, renders obligation usurious, the obligation becomes void under the provisions of the Industrial Loan Act, (see now O.C.G.A. § 7-3-1 et seq.). Barrett v. Vernie Jones Ford, Inc., 395 F. Supp. 904 (N.D. Ga. 1975), rev'd on other grounds sub nom. McDaniel v. Fulton Nat'l Bank, 543 F.2d 568 (5th Cir. 1976), aff'd, 578 F.2d 1185 (5th Cir. 1978);(decided prior to 1980 amendment of this section).

Acceleration clause in Industrial Loan Act, (see now O.C.G.A. § 7-3-1 et seq.) contract which upon default permits the collection of entire balance due on contract without excluding unearned interest is violative of the Act and voids contract. Diggs v. Swift Loan & Fin. Co., 154 Ga. App. 389 , 268 S.E.2d 433 (1980) (decided prior to 1980 amendment of this section).

When acceleration clause renders note usurious, note is unenforceable. - If effect of an acceleration clause is to render note as a whole usurious, the note is unenforceable in Georgia courts. Barrett v. Vernie Jones Ford, Inc., 395 F. Supp. 904 (N.D. Ga. 1975), rev'd on other grounds sub nom. McDaniel v. Fulton Nat'l Bank, 543 F.2d 568 (5th Cir. 1976), aff'd, 578 F.2d 1185 (5th Cir. 1978) (decided prior to 1980 amendment of this section).

Invalid acceleration clause in security agreement portion of contract voids obligation. - Provision found in security agreement portion of loan contract providing for acceleration of unaccrued interest voids contract notwithstanding presence of valid acceleration provision in note portion of contract. General Fin. Corp. v. Sprouse, 577 F.2d 989 (5th Cir. 1978).

Provision authorizing usurious collection voids obligation even though not enforced. - Provision in note authorizing usurious collection alone is sufficient to void obligation even when the creditor does not attempt enforcement. Barrett v. Vernie Jones Ford, Inc., 395 F. Supp. 904 (N.D. Ga. 1975), rev'd on other grounds sub nom. McDaniel v. Fulton Nat'l Bank, 543 F.2d 568 (5th Cir. 1976), aff'd, 578 F.2d 1185 (5th Cir. 1978) (decided prior to 1980 amendment of this section).

Accelerated unearned interest usurious. - When the plaintiff accelerated and claimed unearned interest on unmatured installments, this amount was usurious. Liberty Loan Corp. v. Childs, 140 Ga. App. 473 , 231 S.E.2d 352 (1976), cert. dismissed, 239 Ga. 220 , 236 S.E.2d 373 (1977).

RESEARCH REFERENCES

Am. Jur. 2d. - 53A Am. Jur. 2d, Moneylenders and Pawnbrokers, § 34 et seq.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, § 460 et seq.

ALR. - Constitutionality of statutes regulating the business of making small loans, 69 A.L.R. 581 ; 125 A.L.R. 743 ; 149 A.L.R. 1424 .

Doctrine of in pari delicto as applied to borrower seeking affirmative relief from loan contract made in violation of small loan act, 142 A.L.R. 644 .

Usury as affected by acceleration clause, 66 A.L.R.3d 650.

What constitutes Truth in Lending Act violation which "was not intentional and resulted from bona fide error not withstanding maintenance of procedures reasonably adapted to avoid any such error" within meaning of § 130(c) of Act (15 USCA § 1640(c)), 153 A.L.R. Fed. 193.

Validity, construction, and application of Truth in Lending Act (TILA) and regulations promulgated thereunder - United States Supreme Court cases, 67 A.L.R. Fed. 2d 567.

CHAPTER 4 INTEREST AND USURY

In General.

Residential Second Mortgages.

Cross references. - Duty of Department of Banking and Finance to receive and investigate complaints and allegations regarding violations of interest and usury laws, § 7-1-99 .

Illegal payday loans, § 16-17-1 et seq.

Interest rate management agreements, T. 36, C. 82, A. 11.

Law reviews. - For article discussing developments in Georgia usury law in 1976 to 1977, see 29 Mercer L. Rev. 41 (1977). For annual survey of commercial law, see 35 Mercer L. Rev. 53 (1983). For annual survey on commercial law, see 36 Mercer L. Rev. 115 (1984). For survey article on commercial law, see 44 Mercer L. Rev. 99 (1992). For note discussing the law of usury in Georgia, see 12 Ga. L. Rev. 814 (1972). For note discussing transfer fees in home loan assumptions in reference to the Georgia usury laws, see 9 Ga. L. Rev. 454 (1975). For note, "State-Imposed Interest Rate Ceilings and Home Equity Loan Scandal in Georgia," see 11 Ga. St. U.L. Rev. 591 (1995).

JUDICIAL DECISIONS

O.C.G.A. Ch. 4, T. 7 represents clarification of public policy of state that usury is not to be tolerated, and courts should therefore be chary in permitting this policy to be thwarted. Eiberger v. West, 247 Ga. 767 , 281 S.E.2d 148 (1981).

Effect of usury statute's repeal. - Usury statute in effect at the time a loan is secured is no defense to an action by the creditor to secure repayment of the debt when the usury statute is repealed before the defense of usury is raised. Fountain v. Dixie Fin. Corp., 252 Ga. 543 , 314 S.E.2d 906 (1984).

Cited in Robinson v. Colonial Disct. Co., 106 Ga. App. 274 , 126 S.E.2d 824 (1962); Meadows v. Charlie Wood, Inc., 448 F. Supp. 717 (M.D. Ga. 1978).

RESEARCH REFERENCES

Class Action for Failure to Disclose under the Truth-In-Lending Act and Regulation Z, 76 POF3d 193.

ALR. - Affirmative liability for usurious penalty or excess interest paid under usurious contract in event of assignment or transfer, 78 A.L.R. 408 .

Usury: liability for the statutory penalty of persons other than the offending lender in a usurious loan transaction, 4 A.L.R.3d 650.

Provision for interest after maturity at a rate in excess of legal rate as usurious or otherwise illegal, 28 A.L.R.3d 449.

Usury in connection with loan calling for variable interest rate, 18 A.L.R.4th 1068.

ARTICLE 1 IN GENERAL

Law reviews. - For article, "Small Loans Under Georgia Laws," see 3 Mercer L. Rev. 227 (1952). For note, "Price-Fixing in Georgia," see 3 Mercer L. Rev. 314 (1952). For comment discussing the acceleration of a loan repayment to collect unearned interest as violative of the Georgia Industrial Loan Act (Ch. 3, T. 7), in light of Lewis v. Termplan, Inc., 124 Ga. App. 507 , 184 S.E.2d 473 (1971), see 9 Ga. St. B.J. 380 (1973).

JUDICIAL DECISIONS

Doctrine of estoppel applies when usurious note was prepared by borrower and presented to unwary lender. Eiberger v. West, 247 Ga. 767 , 281 S.E.2d 148 (1981).

Cited in Spartan Grain & Mill Co. v. Ayers, 517 F.2d 214 (5th Cir. 1975); Scheil v. Georgia Fed. Sav. & Loan Ass'n, 154 Ga. App. 714 , 269 S.E.2d 881 (1980).

RESEARCH REFERENCES

ALR. - Effect on indebtedness originally valid of usurious forbearance, renewal, or extension, 3 A.L.R. 877 .

Annual rests on book accounts, 5 A.L.R. 551 .

Negotiable instruments law as affecting defense of usury, 5 A.L.R. 1447 ; 95 A.L.R. 735 .

Waiver of usury by renewal or other executory agreement, 13 A.L.R. 1213 ; 74 A.L.R. 1184 .

Payment of or offer to pay principal and legal interest as condition of relief in equity against usurious contract, 17 A.L.R. 123 ; 70 A.L.R. 693 ; 135 A.L.R. 808 ; 166 A.L.R. 458 .

Right to interest for period before advances under a loan to be advanced to the borrower in installments, 40 A.L.R. 825 .

Rate of interest chargeable against guardians, executors or administrators, and trustees, 55 A.L.R. 950 ; 112 A.L.R. 833 ; 156 A.L.R. 936 .

Usury: expenses or charges (including taxes) incident to loan of money, 63 A.L.R. 823 ; 105 A.L.R. 795 ; 52 A.L.R.2d 703.

Right of holder of preferred claim to interest after appointment of receiver or declared bankruptcy or insolvency, where assets are insufficient to pay principal of all claims, 69 A.L.R. 1210 .

Usurious loan agreement as affecting collateral transaction or instrument not otherwise usurious, 75 A.L.R. 1344 .

Statutes in relation to interest as obnoxious to constitutional provision against impairing obligation of contracts, 87 A.L.R. 462 .

Obligations covering deferred payments of purchase money, or extension thereof, as loan or forbearance within usury laws, 91 A.L.R. 1105 .

Judgment as res judicata of usury notwithstanding question as to usury was not raised, 98 A.L.R. 1027 .

Validity, construction, and effect of express agreement releasing cause of action or defense based on exaction of usury, 99 A.L.R. 600 .

What amounts to sale of credit as distinguished from a loan as regards usury law, 104 A.L.R. 245 .

Parol evidence rule as affecting extrinsic evidence to show or to negative usury, 104 A.L.R. 1261 .

Validity and effect of provision in contract disclaiming usurious intention, or otherwise attempting in anticipation to have the contract interpreted or modified so as to avoid imputation of usury, 109 A.L.R. 1471 .

Right to equitable relief from usury as affected by laches, 111 A.L.R. 126 .

Usury as affected by provision for sinking fund, 119 A.L.R. 1490 .

Right of junior mortgagee to attack senior mortgage for usury, 121 A.L.R. 879 .

Usury as affected by repayment, or borrower's option to repay, loan before maturity, 130 A.L.R. 73 ; 75 A.L.R.2d 1265.

Campaign or concerted action in interest of public by bar association or other group against usurious or illegal practices, or for the investigation of business or other activities with which such practices may be associated, 132 A.L.R. 1177 .

Who other than borrower may avail himself of latter's right to recover back usurious payments or penalties therefor, 134 A.L.R. 1335 .

Payment of or offer to pay principal and legal interest as condition of relief in equity against usurious contract, 135 A.L.R. 808 ; 166 A.L.R. 458 .

Constitutionality, construction, and application of statutes regarding rate of interest during "emergency", 147 A.L.R. 1023 .

Usury as predicable upon transaction in form a sale or exchange of commercial paper or other choses in action, 165 A.L.R. 626 .

Construction and application of provision of "small loan" statute against payment of interest in advance, 166 A.L.R. 433 .

Rate of interest after maturity on obligation which fixes rate of interest expressly until maturity, 16 A.L.R.2d 902.

What statute of limitations governs action or claim for affirmative relief against usurious obligation or to recover usurious payment, 48 A.L.R.2d 401.

Quantum, degree, or weight of evidence to sustain usury charge, 51 A.L.R.2d 1087.

Usury: expenses or charges (including taxes) incident to loan of money, 52 A.L.R.2d 703.

Usury as affected by repayment of, or borrower's option to repay, loan before maturity, 75 A.L.R.2d 1265.

Usury: requiring borrower to pay for insurance as condition of loan, 91 A.L.R.2d 1344.

Usury: charging borrower for or with expense or trouble of procuring money loaned, 91 A.L.R.2d 1389.

Advance in price for credit sale as compared with cash sale as usury, 14 A.L.R.3d 1065.

Agreement for share in earnings of or income from property in lieu of, or in addition to, interest as usurious, 16 A.L.R.3d 475.

Borrower's initiation of, or fraud contributing to, usurious transaction as affecting rights or remedies of the parties, 16 A.L.R.3d 510.

Usury as affected by acceleration clause, 66 A.L.R.3d 650.

Contingency as to borrower's receipt of money or other property from which loan is to be repaid as rendering loan usurious, 92 A.L.R.3d 623.

Leaving part of loan on deposit with lender as usury, 92 A.L.R.3d 769.

Prejudgment interest awards in divorce cases, 62 A.L.R.4th 156.

7-4-1. "Usury" defined.

The term "usury" means reserving and taking or contracting to reserve and take, either directly or indirectly, a greater sum for the use of money than the lawful interest.

(Orig. Code 1863, § 2023; Code 1868, § 2024; Code 1882, § 2051; Civil Code 1895, § 2877; Civil Code 1910, § 3427; Code 1933, § 57-102.)

Law reviews. - For note discussing the reservation of interest at highest lawful rate as constituting usury, see 1 Ga. L. Rev. No. 2 p. 38 (1927). For note discussing whether a holder in due course takes free of claims of violations of the usury laws, see 12 Ga. L. Rev. 814 (1978).

JUDICIAL DECISIONS

ANALYSIS

General Consideration

Policy of state. - It is the policy of laws of this state to inhibit taking of usury under every and any pretense or contrivance whatsoever. McGehee v. Petree, 165 Ga. 492 , 141 S.E. 206 (1928); Public Fin. Corp. v. State, 67 Ga. App. 635 , 21 S.E.2d 476 (1942).

Construction and application of section with § 7-4-1 8. - Former Code 1933, §§ 57-102, 57-117 and 57-9901 (see now O.C.G.A. §§ 7-4-1 and 7-4-18 ) are to be construed and applied as one law. Wall v. Lewis, 192 Ga. 652 , 16 S.E.2d 430 (1941).

"Usury." - Usury is excess over legal interest charged by lender to borrower for use of lender's money. Sledd v. Pilot Life Ins. Co., 52 Ga. App. 326 , 183 S.E. 199 (1935).

Four requisites of usurious transactions. - There are four requisites of every usurious transaction: (1) a loan or forebearance of money, either express or implied; (2) upon understanding that principal shall or may be returned; (3) that for such loan or forebearance a greater profit than is authorized by law shall be paid or is agreed to be paid; and (4) that the contract was made with intent to violate the law. Bailey v. Newberry, 52 Ga. App. 693 , 184 S.E. 357 (1935).

Substance of transaction is focus in determining whether transaction is usurious. - It is duty of court to look, not at form and words, but at substance of transaction. Rushing v. Worsham & Co., 102 Ga. 825 , 30 S.E. 541 (1898); Young v. First Nat'l Bank, 22 Ga. App. 58 , 95 S.E. 381 (1918).

Usurious original transaction infects renewal. - Contract for usurious loan not purged of usury by renewal note when original contract continues. Hammond v. Buys, 1 Ga. 416 (1846).

If there was usury in the original loan which was not purged out when renewal was given, they are contaminated just as original contract was, and all payments made in interval are to be treated not as payments of usury, but payments made on original debt. Archer v. McCray, 59 Ga. 546 (1877); McGee v. Long, 83 Ga. 156 , 9 S.E. 1107 (1889); Lockwood v. Muhlberg, 124 Ga. 660 , 53 S.E. 92 (1906).

When original transaction was usurious, the usury infects any renewal note for the same debt or any part thereof, if the usury was never purged. Hartsfield Co. v. Watkins, 67 Ga. App. 411 , 20 S.E.2d 440 (1942).

Usurious contract not cured by compromise and settlement for less. - Since usury consists not only in reserving and taking but in contracting to reserve and take more than legal rate, fact that agreed excess was compromised and settled for a less amount would not free a transaction from usury. Lankford v. Holton, 187 Ga. 94 , 200 S.E. 243 (1938), later appeal, 195 Ga. 317 , 24 S.E.2d 292 (1943).

When undisputed pleadings show usurious scheme, judgment on pleadings appropriate. - When facts show without dispute a device to extract more than legal rate of interest for use of money, such question need not be submitted to the jury. Accordingly, when undisputed pleadings show such a scheme, it is not error for the trial court to grant the plaintiff's motion for judgment on the pleadings under provisions of § 12(c) of the Civil Practice Act (see now O.C.G.A. § 9-11-12(c) ). Cook v. Young, 225 Ga. 26 , 165 S.E.2d 727 (1969).

If usury is found, all usurious interest is void. Gilbert v. Cherry, 136 Ga. App. 417 , 221 S.E.2d 472 (1975).

Usury laws did not apply to an investment contract. - Trial court properly granted summary judgment to a purchaser in a breach of contract suit against a developer as the award the purchaser obtained, which included interest, was not usurious under O.C.G.A. § 7-4-1 as the developer failed to show that the contract involved was a loan to which the usury laws applied as the record established it as an investment contract. Golden Atlanta Site Dev., Inc. v. Tilson, 299 Ga. App. 646 , 683 S.E.2d 166 (2009).

Cited in Scott v. Saffold, 37 Ga. 384 (1867); Shealy v. Toole, 56 Ga. 210 (1876); Easterlin v. Rylander, 59 Ga. 292 (1877); Wofford v. Wyly, 72 Ga. 863 (1884); Neel v. Young, 78 Ga. 342 (1886); Reynolds v. Neal, 91 Ga. 609 , 18 S.E. 530 (1893); Cook v. Equitable Bldg. & Loan Ass'n, 104 Ga. 814 , 30 S.E. 911 (1898); Green v. Equitable Mtg. Co., 107 Ga. 536 , 33 S.E. 869 (1899); Stewart v. Slocumb, 120 Ga. 762 , 48 S.E. 311 (1904); McGehee v. Petree, 165 Ga. 492 , 141 S.E. 206 (1928); Graham v. Lynch, 206 Ga. 301 , 57 S.E.2d 86 (1950); McConnell v. Shropshire, 80 Ga. App. 677 , 57 S.E.2d 293 (1950); Pickens Inv. Co. v. Jones, 82 Ga. App. 850 , 62 S.E.2d 753 (1950); M.B. Dale, Inc. v. Dawson County Bank, 112 Ga. App. 560 , 145 S.E.2d 619 (1965); Vezzani v. Tallant, 121 Ga. App. 67 , 172 S.E.2d 858 (1970); Roberts v. Cameron-Brown Co., 556 F.2d 356 (5th Cir. 1977); Murdock Acceptance Corp. v. Wagnon, 587 F.2d 764 (5th Cir. 1979); Laminoirs-Trefileries-Cableries de Lens, S.A. v. Southwire Co., 484 F. Supp. 1063 (N.D. Ga. 1980); Southern Fed. Sav. & Loan Ass'n v. Lyle, 249 Ga. 284 , 290 S.E.2d 455 (1982).

Intent

Essential element is intent, at time contract is executed, to take unlawful interest. - To constitute usury, it is essential that there be, at the time the contract is executed, an intent on the part of the lender to take or charge, for use of money, a higher rate of interest than that allowed by law. Bellerby v. Goodwyn, 112 Ga. 306 , 37 S.E. 376 (1900); Loganville Banking Co. v. Forrester, 143 Ga. 302 , 84 S.E. 961 , 1915D L.R.A. 1195 (1915); Harrison v. Arrendale, 113 Ga. App. 118 , 147 S.E.2d 356 (1966), later appeal, 117 Ga. App. 463 , 160 S.E.2d 653 (1968); Williams v. First Bank & Trust Co., 154 Ga. App. 879 , 269 S.E.2d 923 (1980); McCrory v. Young, 158 Ga. App. 678 , 282 S.E.2d 163 (1981).

Mistake or inadvertence does not make a loan usurious. - To constitute usury it is essential that there be, at the time the contract is executed, an intent on the part of the lender to take or charge for use of money a higher rate of interest than that allowed by law. If the intent be to take only legal interest, a slight and trifling excess, due to mistake or inadvertence, will not taint the transaction with usury. Cook v. Young, 225 Ga. 26 , 165 S.E.2d 727 (1969).

Mistake in calculation or by inadvertence, not shown to be part of a usurious design or otherwise intentional, does not make a loan usurious. Sumner v. Adel Banking Co., 244 Ga. 73 , 259 S.E.2d 32 (1979).

If the intent be to take only the legal interest, a slight and trifling excess, due to mistake or inadvertence, will not taint the transaction with usury. Williams v. First Bank & Trust Co., 154 Ga. App. 879 , 269 S.E.2d 923 (1980).

Intent that excess interest be paid. - Transaction is usurious when lender and borrower mutually intend that excess interest be paid. Union Sav. Bank & Trust Co. v. Dottenheim, 107 Ga. 606 , 34 S.E. 217 (1899).

Intent implied when note usurious on note's face. - Intent to charge usurious rates may be implied if all other essential elements are expressed upon the face of the contract. Harrison v. Arrendale, 113 Ga. App. 118 , 147 S.E.2d 356 (1966).

When the note calls for usurious interest on the note's face, usurious intent will be implied, although the lender may negate it. Williams v. First Bank & Trust Co., 154 Ga. App. 879 , 269 S.E.2d 923 (1980).

Intent to take unlawful interest demands verdict of usury. - If it appears that the lender intended to take for use of money more than the lawful rate of interest, a verdict of usury is demanded. Simpson v. Charters, 188 Ga. 842 , 5 S.E.2d 27 (1939).

Jury question. - Question of usurious intent and truth of transaction is generally for jury determination, but whe contract is usurious on the contract's face, the intent to violate usury law may be implied. McCrory v. Young, 158 Ga. App. 678 , 282 S.E.2d 163 (1981).

Rebuttal of intent by evidence of honest mistake. - Implication of usurious intent arising from taking or reserving of interest greater than legal rate may be rebutted by evidence that excess was the result of an honest mistake and that usury was not intended. But when evidence is clear, this question can be decided as a matter of law. McCrory v. Young, 158 Ga. App. 678 , 282 S.E.2d 163 (1981).

Application

Price never considered usury. - One may sell one's credit, one's responsibility, one's goods, or one's lands; and if the person deals fairly, the person may take as large a price for either as the person can get, and there can be no usury in the case. Rushing v. Worsham & Co., 102 Ga. 825 , 30 S.E. 541 (1898).

Cash price and time price. - Seller may make a difference in the seller's cash price and the seller's time price for property. Bowen v. Consolidated Mtg. & Inv. Corp., 115 Ga. App. 874 , 156 S.E.2d 168 (1967).

Higher time price than cash price for property is not a loan; thus, usury laws are inapplicable. Bowen v. Consolidated Mtg. & Inv. Corp., 115 Ga. App. 874 , 156 S.E.2d 168 (1967).

Conditional-sale contract for amount termed time-price is not usurious, even though in a given instance the difference in cash price and term price may exceed eight percent interest. Newkirk v. Universal C.I.T. Credit Corp., 93 Ga. App. 1 , 90 S.E.2d 618 (1955).

Property received as interest permissible unless value exceeds lawful rate. - Creditor has right to demand payment of the creditor's debt with legal interest; and if the creditor receives property, the value of which does not exceed the creditor's lawful demand, the creditor has not received any usury, although the creditor may have agreed with the debtor that the property was of greater value than the sum the creditor was lawfully entitled to exact. First Nat'l Bank v. Davis, 135 Ga. 687 , 70 S.E. 246 , 36 L.R.A. (n.s.) 134 (1911).

Note permitting acceleration of all liabilities not usurious on the note's face. - Clause in secondary security deed on realty permitting acceleration of all liabilities does not render note usurious on its face. Goodwin v. Trust Co., 144 Ga. App. 787 , 242 S.E.2d 302 (1978).

Note usurious when acceleration clause allows more than lawful interest. - Promissory note containing acceleration clause permitting collection of more than allowable interest constitutes usurious contract to reserve and take more than lawful interest. Goodwin v. Trust Co., 144 Ga. App. 787 , 242 S.E.2d 302 (1978).

Payment of sum exceeding lawful rate under guise of rent usurious. - When vendee of property is to pay a vendor 10 percent on purchase money until it is settled in full, under name of rent, such contract is usurious on the contract's face. Scofield v. McNaught, 52 Ga. 69 (1874).

Payment of rents from property exceeding lawful rate, as consideration for loan, constitutes usury. - If money is loaned for purpose of enabling borrower to buy certain shop, upon agreement that for use of money lender shall receive from borrower one half of specified rents from property, which amounts to more than highest legal rate of interest per annum, the transaction will be usurious. Reese v. Bloodsworth, 146 Ga. 355 , 91 S.E. 120 (1917).

Paying taxes on bonds, in addition to lawful interest, is usurious. - Stipulation in bonds to pay, in addition to lawful interest, a percentage of federal income taxes that might be imposed upon the bonds is usurious. Newcomb v. Niskey's Lake, Inc., 190 Ga. 565 , 10 S.E.2d 51 , answer conformed to, 63 Ga. App. 811 , 12 S.E.2d 160 (1940).

Commission, in addition to full rate of lawful interest, usurious. - Under former Code 1933, § 57-102 (see now O.C.G.A. § 7-4-1 ), charge by a lender as a commission of $8,000.00, deducted from a loan of $80,000.00 evidenced by bonds of a borrower, which carrying full rate of lawful interest (eight percent per annum) is usury. Newcomb v. Niskey's Lake, Inc., 190 Ga. 565 , 10 S.E.2d 51 , answer conformed to, 63 Ga. App. 811 , 12 S.E.2d 160 (1940).

Agreement to forbear collection of judgment in consideration of usurious interest unlawful. - If a judgment not tainted with usury is transferred, and the transferee agrees with the defendants to forbear its collection for a term of time, in consideration of usurious interest paid the defendants, such subsequent agreement is usurious. Troutman v. Barnett, 9 Ga. 30 (1850).

Requirement that borrower keep certain sum on deposit makes loan usurious. - Requirement that borrower shall keep on deposit a certain sum, if made a condition precedent to the loan of money, infects the loan with usury; for reason that the borrower thus pays interest on money which the borrower does not receive or have use of. Bank of Lumpkin v. Farmers State Bank, 161 Ga. 801 , 132 S.E. 221 (1963); Reid v. National Bank, 149 Ga. App. 834 , 256 S.E.2d 82 (1979).

Excess interest may be paid for considerations beyond use of money. - When excess over legal interest is paid for other good and valuable considerations beyond mere use of money, it is not usury. Atlanta Mining & Rolling Mill Co. v. Gwyer, 48 Ga. 9 (1873); Sledd v. Pilot Life Ins. Co., 52 Ga. App. 326 , 183 S.E. 199 (1935); Simpson v. Charters, 188 Ga. 842 , 5 S.E.2d 27 (1939).

Lender's 49 percent economic interest. - In a class action suit seeking to hold a lender liable for payday loans, the trial court did not err in concluding that genuine issues of material fact existed as to whether the lender was the true lender of the loans made after May 14, 2004, because evidence was presented sufficient to create a genuine issue of material fact regarding whether the lender actually received only a 49 percent economic interest for the lender's services and even if the lender did so, whether the lender nevertheless, by contrivance, device, or scheme, attempted to avoid the provisions of O.C.G.A. § 16-17-2(a) . Ga. Cash Am. v. Greene, 318 Ga. App. 355 , 734 S.E.2d 67 (2012).

Premium for insurance required as collateral security for loan not charge for use of money. Sledd v. Pilot Life Ins. Co., 52 Ga. App. 326 , 183 S.E. 199 (1935).

Interest on overdue interest and attorneys' fees lawful. - It is lawful to contract for interest on interest overdue and for payment by debtor of reasonable attorneys' fees on sums, both principal and interest, which have to be collected by suit. Merck v. American Freehold Land Mtg. Co., 79 Ga. 213 , 7 S.E. 265 (1887); Young v. First Nat'l Bank, 22 Ga. App. 58 , 95 S.E. 381 (1918).

Inclusion of past due interest in note not usurious. - Contention that, because a sum of past due interest was included in the note, the transaction was thereby tainted with usury, on the theory that the interest cannot be collected on interest, was without merit. Walton v. Johnson, 213 Ga. 108 , 97 S.E.2d 310 (1957).

Interest recoverable on annual interest installments from time interest become due. - Upon contract to pay interest annually, interest may be recovered on annual installments of interest from time interest became due. Calhoun v. Marshall, 61 Ga. 275 , 34 Am. R. 99 (1878); Ray v. Pease, 97 Ga. 618 , 25 S.E. 360 (1895); Haley v. Covington, 19 Ga. App. 782 , 92 S.E. 297 (1917).

Loan not usurious if used to pay usurious loan. - Paying old usurious loan with new, nonusurious loan does not necessarily render new loan usurious. Lott v. Peterson, 23 Ga. App. 458 , 98 S.E. 361 (1919).

When lender of money neither charges nor receives more than legal rate of interest, fact that money was, with the lender's knowledge, borrowed for purpose of paying debt infected with usury due by borrower to third person does not make loan usurious. Thompson v. First State Bank, 99 Ga. 651 , 26 S.E. 79 (1896); Carter v. Brooks, 144 Ga. 852 , 88 S.E. 209 (1916).

Facts warranting finding that transaction is merely device to cover agreement to pay usurious interest. - See Kennedy v. Baggarley, 15 Ga. App. 811 , 84 S.E. 211 (1915).

Parol Evidence

Introduction to show contract was cover for usury. - Parol evidence may be introduced to show written contract was a cover for usury. McDaniel v. Bank of Bethlehem, 22 Ga. App. 223 , 95 S.E. 724 (1918).

Admissible for testing validity of a transaction. - Law abhors usury and will search every fact and circumstance and allow introduction of parol evidence to test the validity of the real transaction of parties. Bailey v. Newberry, 52 Ga. App. 693 , 184 S.E. 357 (1935).

OPINIONS OF THE ATTORNEY GENERAL

"Usury." - Usury is not the taking of interest from a borrower at an unlawful rate, but rather it is receiving from any source a greater sum for use of money than the lawful interest. 1969 Op. Att'y Gen. No. 69-53.

Where interest plus points or loan discount exceed legal limit, loan usurious. - When interest rate charged borrower coupled with points or loan discount collected from seller exceed legal limit, such loan is usurious; the standard charges in a loan transaction are not included in this computation if those charges are expended in a bona fide manner. 1969 Op. Att'y Gen. No. 69-53.

Carrying charges limited to legal rate plus actual expenses. - When no distinction is made between cash price and time price of an article, carrying charges are limited to legal rate of interest, plus any actual expense incurred by vendor incident to the sale, such as fee for recording a security instrument and reasonable protective insurance. 1954-56 Op. Att'y Gen. p. 448.

RESEARCH REFERENCES

Am. Jur. 2d. - 44B Am. Jur. 2d, Interest and Usury, §§ 1 et seq., 81 et seq.

14C Am. Jur. Pleading and Practice Forms, Interest and Usury, § 2.

Proof of Violation of State Usury Consumer Loan Law, 75 POF3d 103.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, §§ 1 et seq., 184, 185.

ALR. - Effect on indebtedness originally valid of usurious forbearance, renewal, or extension, 3 A.L.R. 877 .

Waiver of usury by renewal or other executory agreement, 13 A.L.R. 1213 ; 74 A.L.R. 1184 .

Provision in statute or ordinance limiting rate of interest per annum as precluding requirement of payment at maximum rate at intervals of less than a year, 29 A.L.R. 1109 .

Validity of agreement to pay interest on interest, 37 A.L.R. 325 ; 76 A.L.R. 1484 .

Usury: expenses or charges (including taxes) incident to loan of money, 53 A.L.R. 743 ; 63 A.L.R. 823 ; 105 A.L.R. 795 ; 52 A.L.R.2d 703.

Noncompliance with conditions prescribed by statute as affecting validity of contract, under usury laws, for payment of premium on loan of building and loan association, 74 A.L.R. 973 .

Waiver of usury by renewal or other executory agreements, 74 A.L.R. 1184 .

Delay in paying over proceeds of loan to borrower as affecting question of usury, 76 A.L.R. 1467 .

Right of a purchaser assuming a mortgage debt, with the authorization of the mortgagor, to set up usury in mortgage as a defense or rely upon it as a ground of relief in equity, 82 A.L.R. 1153 .

Parol-evidence rule as affecting extrinsic evidence to show or to negative usury, 82 A.L.R. 1199 ; 104 A.L.R. 1261 .

Taking of usury or excessive interest as subject of criminal conspiracy, 89 A.L.R. 830 .

Obligations covering deferred payments of purchase money, or extension thereof, as loan or forbearance within usury laws, 91 A.L.R. 1105 .

Usury as predicable on agreement by which lender is to receive something other than money for his loan, 95 A.L.R. 1231 .

Validity, construction, and effect of express agreement releasing cause of action or defense based on exaction of usury, 99 A.L.R. 600 .

Conflict of laws as to usury, 125 A.L.R. 482 .

Note or other obligation payable on demand for an amount in excess of amount actually loaned as usurious, 127 A.L.R. 460 .

Finance charge in connection with conditional sale contract as usury, 143 A.L.R. 238 .

Transaction in form a sale, but accompanied by an agreement or option for repurchase by the vendor or a third person previously interested, as a loan, as regards usury law, 154 A.L.R. 1063 .

Computing interest on basis of 360 days in year, 30 days in month, or the like, as usury, 35 A.L.R.2d 842.

Usury: expenses or charges (including taxes) incident to loan of money, 52 A.L.R.2d 703.

Taking or charging interest in advance as usury, 57 A.L.R.2d 630.

Statute denying defense of usury to corporation, 63 A.L.R.2d 924.

Admissibility, in civil case involving usury issue, of evidence of other assertedly usurious transactions, 67 A.L.R.2d 232.

Usury as affected by repayment of, or borrower's option to repay, loan before maturity, 75 A.L.R.2d 1265.

Payments under (ostensibly) independent contract as usury, 81 A.L.R.2d 1280.

Practice of exacting usury as a nuisance or ground for injunction, 83 A.L.R.2d 848.

Usury: liability for the statutory penalty of persons other than the offending lender in a usurious loan transaction, 4 A.L.R.3d 650.

Usury as affected by mistake in amount or calculation of interest or service charges for loan, 11 A.L.R.3d 1498.

Advance in price for credit sale as compared with cash sale as usury, 14 A.L.R.3d 1065.

Provision for interest after maturity at a rate in excess of legal rate as usurious or otherwise illegal, 28 A.L.R.3d 449.

Reformation of usurious contract, 74 A.L.R.3d 1239.

Contingency as to borrower's receipt of money or other property from which loan is to be repaid as rendering loan usurious, 92 A.L.R.3d 623.

Leaving part of loan on deposit with lender as usury, 92 A.L.R.3d 769.

Application of usury laws to transactions characterized as "leases,", 94 A.L.R.3d 640.

7-4-2. Legal rate of interest; maximum rate of interest generally; certain items not considered interest.

      1. The legal rate of interest shall be 7 percent per annum simple interest where the rate percent is not established by written contract. Notwithstanding the provisions of other laws to the contrary, except Code Section 7-4-18, the parties may establish by written contract any rate of interest, expressed in simple interest terms as of the date of the evidence of the indebtedness, and charges and any manner of repayment, prepayment, or, subject to the provisions of paragraph (1) of subsection (b) of this Code section, acceleration, where the principal amount involved is more than $3,000.00 but less than $250,000.00 or where the lender or creditor has committed to lend, advance, or forbear with respect to any loan, advance, or forbearance to enforce the collection of more than $3,000.00 but less than $250,000.00.
      2. Where the principal amount is $250,000.00 or more, or the lender or creditor has committed to lend, advance, or forbear with respect to any loan, advance, or forbearance to enforce the collection of $250,000.00 or more, the parties may establish by written contract any rate of interest, expressed in simple interest terms or otherwise, and charges to be paid by the borrower or debtor.
      3. Nothing contained in this subsection shall be construed to prohibit the computation and collection of interest at a variable rate or on a negative amortization basis or on an equity participation basis or on an appreciation basis.
    1. Where the principal amount involved is $3,000.00 or less, such rate shall not exceed 16 percent per annum simple interest on any loan, advance, or forbearance to enforce the collection of any sum of money unless the loan, advance, or forbearance to enforce the collection of any sum of money is made pursuant to another law.
    2. As used in this Code section, the term "interest" means a charge for the use of money computed over the term of the contract at the rate stated in the contract or precomputed at a stated rate on the scheduled principal balance or computed in any other way or any other form. Principal includes such charges to which the parties may agree under paragraph (1) of this subsection. Amounts paid or contracted to be paid as either an origination fee or discount points, or both, on any loan secured by an interest in real estate shall not be considered interest and shall not be taken into consideration in the calculation of interest and shall not be subject to rebate as provided in paragraph (1) of subsection (b) of this Code section.
    1. Upon acceleration of the maturity of any loan, advance of money, or forbearance to enforce the collection of any sum of money upon which interest has been precomputed, unearned interest shall be rebated to the debtor in such amount as would result in the rate of interest earned being no greater than the rate of interest established by the original contract. In the case of a loan in which the principal and the interest for the entire term of the loan are included in the face amount of the loan and the loan is to be paid back in weekly, monthly, quarterly, semiannual, or yearly installments, with the interest and principal portions of each installment determined under the pro rata method, any such rebate shall be determined on the pro rata method.
    2. Unless stipulated in the contract, there shall be no prepayment penalty.
  1. Nothing contained in this Code section shall be construed to amend or modify the provisions of Chapter 3 of this title, the "Georgia Industrial Loan Act," Article 1 of Chapter 1 of Title 10, the "Retail Installment and Home Solicitation Sales Act," Chapter 5 of this title, "The Credit Card and Credit Card Bank Act," Chapter 22 of Title 33, the "Insurance Premium Finance Company Act," Part 5 of Article 3 of Chapter 12 of Title 44, relating to pawnbrokers, and, except as provided in Code Section 7-4-3, Article 2 of Chapter 1 of Title 10, the "Motor Vehicle Sales Finance Act."
  2. Notwithstanding the foregoing, fees and other charges agreed upon by a financial institution and depositor, as defined in Code Section 7-1-4, in a written agreement governing a deposit, share, or other account, including, but not limited to, overdraft and nonsufficient funds, delinquency or default charges, returned payment charges, stop payment charges, or automated teller machine charges, shall not be considered interest.

    (Laws 1822, Cobb's 1851 Digest, p. 393; Laws 1845, Cobb's 1851 Digest, p. 393; Code 1863, § 2022; Code 1868, § 2023; Ga. L. 1873, p. 52, §§ 2-4; Code 1873, § 2050; Ga. L. 1878-79, p. 184, § 3; Code 1882, §§ 2050, 2057a; Civil Code 1895, §§ 2876, 2886; Civil Code 1910, §§ 3426, 3436; Code 1933, § 57-101; Ga. L. 1975, p. 370, § 1; Ga. L. 1979, p. 355, § 1; Ga. L. 1983, p. 1146, § 1; Ga. L. 1984, p. 22, § 7; Ga. L. 1987, p. 268, § 2; Ga. L. 1988, p. 534, § 1; Ga. L. 1997, p. 143, § 7; Ga. L. 2014, p. 213, § 1/HB 824.)

The 2014 amendment, effective April 15, 2014, added subsection (d).

Cross references. - Credit Card and Credit Card Bank Act, § 7-5-1 et seq.

Georgia Industrial Loan Act, § 7-3-1 et seq.

Insurance Premium Finance Company Act, § 33-22-1 et seq.

Retail Installment and Home Solicitation Sales Act, § 10-1-1 et seq.

Illegal payday loans, § 16-17-1 et seq.

Editor's notes. - Ga. L. 2014, p. 213, § 3/HB 824, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of February 19, 2014."

Law reviews. - For article surveying 1979 legislative developments in commercial law, see 31 Mercer L. Rev. 13 (1979). For article on Georgia's usury laws and interest on interest, see 8 Ga. St. U.L. Rev. 291 (1992). For annual survey on construction law, see 65 Mercer L. Rev. 67 (2013). For note discussing the reservation of interest at highest lawful rate as constituting usury, see 1 Ga. L. Rev. No. 2 p. 38 (1927). For note discussing problems with profits generated by escrow account, and proposing federal legislative reform, see 10 Ga. St. B.J. 618 (1974). For note discussing whether a holder in due course takes free of claims of violations of the usury laws, see 12 Ga. L. Rev. 814 (1978).

JUDICIAL DECISIONS

ANALYSIS

General Consideration

Editor's notes. - Many of the cases cited below were decided under this Code section as it read prior to the 1983 amendment, which extensively rewrote this Code section.

Purpose of section. - Purpose of the statute against usury is, at most, only a check on the conscience of the lender. The necessity to borrow on one hand, and greed on the other, prompted the legislature, no doubt, to fix from time to time a limit on the value of money. This value is merely arbitrary in the legislative mind. Green v. Equitable Mtg. Co., 107 Ga. 536 , 33 S.E. 869 (1899).

State law applied. - In a suit seeking to confirm an arbitration award, a corporation was entitled to an award of interest in accordance with O.C.G.A. § 7-4-2(a)(1)(A) on any unpaid portion of the arbitration award for the period between when the award was made and when the court entered final judgment confirming the award; state law, rather than federal law, applied because the court's jurisdiction was based on diversity. Bryant Motors, Inc. v. Blue Bird Body Co., F. Supp. 2d (M.D. Ga. Aug. 22, 2007).

Comparison with federal rate. - At the relevant times asserted in an adversary proceeding asserted by a Chapter 7 trustee, the legal rate of interest under 28 U.S.C. § 1961 was less than the Georgia legal rate of interest of 7 percent. Silliman v. Benson (In re Metro Builders Supply, Inc.), Bankr. (Bankr. N.D. Ga. Oct. 4, 2007).

Rate chargeable when not named in contract. - Former Code 1933, § 57-101 sets forth interest rate chargeable when none is named in contract. Hopkins v. West Publishing Co., 106 Ga. App. 596 , 127 S.E.2d 849 (1962).

Distinction between legal interest and lawful interest. - Generally, the terms legal interest and lawful interest have different meanings. The former means exact rate of interest named in statute, while latter means anything up to maximum rate which law allows. Daniel v. Gibson, 72 Ga. 367 , 53 Am. R. 845 (1884).

Legal interest rates are prima facie "equitable" and any award deviating from the legal rates must be based on sufficient evidence demonstrating that another rate is appropriate. Atlantic States Constr., Inc. v. Beavers, 169 Ga. App. 584 , 314 S.E.2d 245 (1984).

Promise of liberal interest will not justify more than the legal interest. Weaver v. Chauncey, 43 Ga. 343 (1871).

Postdefault interest rate higher than predefault interest rate. - In a suit by a lender on a note and guaranties, the note's postdefault interest rate was only 3 percent higher than the predefault rate of 5 percent, so the total rate of 8 percent per year was well within the legal limit of 60 percent and was permissible under O.C.G.A. §§ 7-4-2(a)(1)(B) and 7-4-18(a) . MMA Capital Corp. v. ALR Oglethorpe, LLC, 336 Ga. App. 360 , 785 S.E.2d 38 (2016).

These provisions apply to counties, as well as to individuals. A county is bound to pay eight percent interest when that rate is specified in writing, if there is compliance with all other legal requirements. Americus Grocery Co. v. Pitts Banking Co., 169 Ga. 70 , 149 S.E. 776 (1929), overruled on another point, Marion County v. First Nat'l Bank, 193 Ga. 263 , 18 S.E.2d 475 (1942).

Section inapplicable to lost wages awards. - Director was properly awarded 12 percent interest on a lost wages award as lost wages were not open accounts under O.C.G.A. § 7-4-2 . Gallagher v. McKinnon, 273 Ga. App. 727 , 615 S.E.2d 746 (2005).

Applicability to national banks of state laws regulating interest rate. - See Cooper v. National Bank, 21 Ga. App. 356 , 94 S.E. 611 (1917), cert. denied, 246 U.S. 670, 38 S. Ct. 423 , 62 L. Ed. 931 (1918), aff'd, 251 U.S. 108, 40 S. Ct. 58 , 64 L. Ed. 171 (1919). See also 12 USC §§ 85 and 86, and annotations relating thereto.

Federal savings and loan association subject to usury laws. - Federal savings and loan association doing business in this state is subject to usury laws and in making loans must comply with provisions thereof. However, such association may require borrower to pay necessary initial charges in connection with making of loan. First Fed. Sav. & Loan Ass'n v. Norwood Realty Co., 212 Ga. 524 , 93 S.E.2d 763 (1956).

Construction of Industrial Loan Act, (see now O.C.G.A. § 7-1-4 et seq.) and this section as to pawn-brokers. - See Wall v. Lewis, 192 Ga. 652 , 16 S.E.2d 430 (1941).

Industrial Loan Act operates in same manner generally as usury statute. - Industrial Loan Act, (see now O.C.G.A. § 7-3-1 et seq.), operates generally upon entire class of subjects with which it deals, uniformly throughout the state and in the same manner generally as the usury statute. Talley v. Sun Fin. Co., 223 Ga. 419 , 156 S.E.2d 55 (1967).

Acts 1912, p. 144 (see now O.C.G.A. § 7-4-10(a) ) was not invalid as special law for which provision had been made by Former Civil Code 1910, §§ 3426 and 3436 (see now O.C.G.A. § 7-4-2 ). South Ga. Mercantile Co. v. Lance, 143 Ga. 530 , 85 S.E. 749 (1915).

Section not repealed by §§ 36-11-3 through 36-11-6 . - Former Code 1933, § 23-1605 (see now O.C.G.A. §§ 36-11-3 through 36-11-6 ) did not expressly or impliedly repeal former Code 1933, §§ 57-101 and 57-110 (see now O.C.G.A. §§ 7-4-2 , 7-4-15 ), and former Code 1933 § 14-207 (see now O.C.G.A. § 11-3-108 ). They all were to be considered together, and when so considered, the sections first mentioned contemplate administrative action by county officers in regard to the order in which lawful county orders should be paid. Marion County v. First Nat'l Bank, 193 Ga. 263 , 18 S.E.2d 475 (1942).

Floating interest rates under P.L. 93-501. - The 1975 amendments to former Code 1933, § 57-101 (see now O.C.G.A. § 7-4-2 ) were not intended to supersede floating interest rates permitted by Public Law 93-501. Kennedy v. Brand Banking Co., 245 Ga. 496 , 266 S.E.2d 154 (1980).

Liquidated damages for nonpayment of money cannot exceed lawful interest. - No damages for mere nonpayment of money can ever be so liquidated between parties as to evade provisions of law which fix rate of interest. Clark, Austin & Smith v. Kay, 26 Ga. 403 (1858).

Lender may recover annual interest payments when due, whether principal is due or not. - Maker of note having expressly contracted to pay interest annually, holder is entitled to recover interest when due, whether principal is due or not. Calhoun v. Marshall, 61 Ga. 275 , 34 Am. R. 99 (1878); Ray v. Pease, 97 Ga. 618 , 25 S.E. 360 (1895).

Underwriting is not an agreement to loan money. Stewart v. Miller & Co., 161 Ga. 919 , 132 S.E. 535 , 45 A.L.R. 599 (1926).

Liability of guarantors when no rate stated. - When guaranty, entered into by separate instrument, does not contain stipulated interest rate, guarantors are liable only for legal rate of 7 percent annually. FDIC v. Willis, 497 F. Supp. 272 (S.D. Ga. 1980).

Promise to pay 5 percent for attorney fees should suit arise. - Promissory note contained the promise to pay 7 percent interest and 5 percent for attorneys fees, if the note should be collected by suit. The promise to pay the attorneys fees is a part of the principal debt. Baxter v. Bates, 69 Ga. 587 (1882).

Facts substantially complying with section. - See Tribble v. Anderson, 63 Ga. 31 (1878); Green v. Equitable Mtg. Co., 107 Ga. 536 , 33 S.E. 869 (1899); Stewart v. Slocumb, 120 Ga. 762 , 48 S.E. 311 (1904).

Objection to statutory rate of interest rather than lower contract rate waived. - Parties waived any objection to the statutory rate of seven percent by failing to object to the rate in the trial court, although the parties' contract provided for a lower rate. Sovereign Healthcare v. Mariner Health Care Mgmt. Co., 329 Ga. App. 782 , 766 S.E.2d 172 (2014).

Cited in Houser v. Planters' Bank, 57 Ga. 95 (1876); Daniel v. Gibson, 72 Ga. 367 , 53 Am. R. 845 (1884); Partridge v. William's Sons, 72 Ga. 807 (1884); Cleghorn v. Greeson, 77 Ga. 343 (1886); Crane v. Goodwin, 77 Ga. 362 (1886); Jackson v. Garner, 79 Ga. 415 , 7 S.E. 213 (1887); Mackenzie v. Flannery & Co., 90 Ga. 590 , 16 S.E. 710 (1892); Union Sav. Bank & Trust Co. v. Dottenheim, 107 Ga. 606 , 34 S.E. 217 (1899); Mohr-Weil Lumber Co. v. Russell, 109 Ga. 579 , 34 S.E. 1005 (1900); Harrell v. Blount, 112 Ga. 711 , 38 S.E. 56 (1901); McCall v. Herring, 116 Ga. 235 , 42 S.E. 468 (1902); Howell v. Pennington, 118 Ga. 494 , 45 S.E. 272 (1903); Ver Nooy v. Pitner, 17 Ga. App. 29 , 86 S.E. 456 (1915); Croom v. Jordan, 20 Ga. App. 802 , 93 S.E. 538 (1917); Long v. Gresham, 148 Ga. 170 , 96 S.E. 211 (1918); Glynn County v. Dubberly, 148 Ga. 290 , 96 S.E. 566 (1918); Bank of Lumpkin County v. Justus, 150 Ga. 286 , 103 S.E. 794 (1920); Flint River Pecan Co. v. Fry, 29 F.2d 457 (5th Cir. 1928); Pitts v. Pease, 39 F.2d 14 (5th Cir. 1930); Leathers v. Auto Sales Co., 46 Ga. App. 85 , 166 S.E. 838 (1932); Folsom v. Continental Adjustment Corp., 48 Ga. App. 435 , 172 S.E. 833 (1934); Penn Mut. Life Ins. Co. v. Marshall, 49 Ga. App. 287 , 175 S.E. 412 (1934); Nash Loan Co. v. Dixon, 181 Ga. 297 , 182 S.E. 23 (1935); Gore v. Industrial Loan & Sav. Co., 52 Ga. App. 401 , 183 S.E. 499 (1936); Osborne v. National Realty Mfg. Co., 182 Ga. 892 , 187 S.E. 56 (1936); Ellis v. Williams, 56 Ga. App. 181 , 192 S.E. 491 (1937); Denson v. Peoples Bank, 58 Ga. App. 518 , 199 S.E. 324 (1938); Peoples Bank v. Mayo, 61 Ga. App. 877 , 8 S.E.2d 405 (1940); Kent v. Hibernia Sav., Bldg. & Loan Ass'n, 193 Ga. 546 , 19 S.E.2d 264 (1942); Southern Feed Stores v. Sanders, 193 Ga. 884 , 20 S.E.2d 413 (1942); Hartsfield Co. v. Watkins, 67 Ga. App. 411 , 20 S.E.2d 440 (1942); United States v. A Certain Tract or Parcel of Land, 47 F. Supp. 30 (S.D. Ga. 1942); Butler v. Reisman, 70 Ga. App. 654 , 29 S.E.2d 433 (1944); Graham v. Lynch, 206 Ga. 301 , 57 S.E.2d 86 (1950); McConnell v. Shropshire, 80 Ga. App. 677 , 57 S.E.2d 293 (1950); Carroll v. Taylor, 87 Ga. App. 815 , 75 S.E.2d 346 (1953); M.B. Dale, Inc. v. Dawson County Bank, 112 Ga. App. 560 , 145 S.E.2d 619 (1965); Harrison v. Arrendale, 113 Ga. App. 118 , 147 S.E.2d 356 (1966); Colter v. Consolidated Credit Corp., 115 Ga. App. 408 , 154 S.E.2d 713 (1967); Service Loan & Fin. Corp. v. McDaniel, 115 Ga. App. 548 , 154 S.E.2d 823 (1967); Cochran v. Bank of Hancock County, 118 Ga. App. 100 , 162 S.E.2d 765 (1968); Fried v. Morris & Eckels Co., 118 Ga. App. 595 , 164 S.E.2d 732 (1968); Vezzani v. Tallant, 121 Ga. App. 67 , 172 S.E.2d 858 (1970); Lewis v. Termplan, Inc., 124 Ga. App. 507 , 184 S.E.2d 473 (1971); Poteat v. Butler, 231 Ga. 187 , 200 S.E.2d 741 (1973); Finlay v. Oxford Constr. Co., 139 Ga. App. 801 , 230 S.E.2d 69 (1976); Green v. Decatur Fed. Sav. & Loan Ass'n, 143 Ga. App. 368 , 238 S.E.2d 740 (1977); Adcock v. First Nat'l Bank, 144 Ga. App. 394 , 241 S.E.2d 289 (1977); Plunkett v. Francisco, 430 F. Supp. 235 (N.D. Ga. 1977); Farmers Mut. Exch. of Wrens, Inc. v. Rabun, 145 Ga. App. 798 , 245 S.E.2d 52 (1978); Reid v. National Bank, 149 Ga. App. 834 , 256 S.E.2d 82 (1979); Gorlin v. First Nat'l Bank, 150 Ga. App. 637 , 258 S.E.2d 290 (1979); Sumner v. Adel Banking Co., 244 Ga. 73 , 259 S.E.2d 32 (1979); Peterson v. Newton, 151 Ga. App. 852 , 261 S.E.2d 763 (1979); Commercial Credit Plan, Inc. v. Parker, 152 Ga. App. 409 , 263 S.E.2d 220 (1979); Williams v. Public Fin. Corp., 598 F.2d 349 (5th Cir. 1979); Kellos v. Parker-Sharpe, Inc., 245 Ga. 130 , 263 S.E.2d 138 (1980); Laminoirs-Trefileries-Cableries de Lens, S.A. v. Southwire Co., 484 F. Supp. 1063 (N.D. Ga. 1980); Lennon v. Aeck Assocs., 157 Ga. App. 294 , 277 S.E.2d 289 (1981); Thompson v. Hurt, 159 Ga. App. 656 , 284 S.E.2d 671 (1981); FDIC v. Lattimore Land Corp., 656 F.2d 139 (5th Cir. 1981); Barge & Co. v. City of Atlanta, 161 Ga. App. 675 , 288 S.E.2d 98 (1982); Prince v. Lee Roofing Co., 161 Ga. App. 181 , 288 S.E.2d 135 (1982); Willis v. Rabun County Bank, 161 Ga. App. 151 , 291 S.E.2d 52 (1982); Scott v. Leder, 164 Ga. App. 334 , 297 S.E.2d 103 (1982); Bulman v. First Nat'l Bank, 165 Ga. App. 843 , 303 S.E.2d 29 (1983); Varner v. Century Fin. Corp., 253 Ga. 27 , 317 S.E.2d 178 (1984); Ehrman v. Manning, 177 Ga. App. 442 , 339 S.E.2d 652 (1986); Gold Kist Peanuts v. Alberson, 178 Ga. App. 253 , 342 S.E.2d 694 (1986); McDermott v. Middle E. Carpet Co., 811 F.2d 1422 (11th Cir. 1987); Weprin v. Peterson, 736 F. Supp. 1131 (N.D. Ga. 1988); Moore v. Comfed Sav. Bank, 908 F.2d 834 (11th Cir. 1990); American Mini-Storage, Marietta Blvd., Ltd. v. Investguard, Ltd., 196 Ga. App. 862 , 397 S.E.2d 199 (1990); Equicor, Inc. v. Stamey, 216 Ga. App. 375 , 454 S.E.2d 550 (1995); Felker v. Chipley, 246 Ga. App. 296 , 540 S.E.2d 285 (2000); S & A Indus. v. Bank Atlanta, 247 Ga. App. 377 , 543 S.E.2d 743 (2000); Colonial Bank v. Boulder Bankcard Processing, Inc., 254 Ga. App. 686 , 563 S.E.2d 492 (2002); In the Matter of Babson, 283 Ga. 382 , 659 S.E.2d 384 (2008).

Interest and Other Charges

Method of expressing interest rate. - Requirement that the rate of interest be expressed in simple interest terms does not mandate numerical terminology but the requirement is met by the expression of the method of computation of interest by reference to "prime" or other indices such as "base." 1600 Capital Co. v. Bankers First Fed. Sav. & Loan Ass'n, 187 Ga. App. 504 , 370 S.E.2d 668 (1988).

Note must state the rate of interest in simple interest terms. Orix Credit Alliance, Inc. v. CIT Group/Equipment Fin., Inc., 230 Bankr. 213 (Bankr. M.D. Ga. 1998).

Computation of interest on loans for less than or longer than a year. - See Patton v. Bank of La Fayette, 124 Ga. 965 , 53 S.E. 664 , 5 L.R.A. (n.s.) 592, 4 Ann. Cas. 639 (1906), overruled on other grounds, Sharpe v. Department of Transp., 267 Ga. 267 , 476 S.E.2d 722 (1996).

Former Civil Code 1895, § 2886 (see now O.C.G.A. § 7-4-2 ) spoke of years and not of months. A legal year is 365 days. Patton v. Bank of La Fayette, 124 Ga. 965 , 53 S.E. 664 , 5 L.R.A. (n.s.) 592, 4 Ann. Cas. 639 (1906), overruled on other grounds, Sharpe v. Department of Transp., 267 Ga. 267 , 476 S.E.2d 722 (1996).

Lender's charge for service not rendered or to be rendered is interest. - Lender's charge for service which was not in fact rendered or to be rendered the borrower is a charge for use of money advanced and is therefore interest. Williams v. First Bank & Trust Co., 154 Ga. App. 879 , 269 S.E.2d 923 (1980).

Interest on liquidated demand not part of debt. - When purchase price of machinery for necessary improvement of public roads becomes a liquidated demand, as by issuance of county warrant drawn on county treasurer by county commissioners, payable to vendor for purchase price, interest which may thereafter lawfully accrue upon warrant is incidental, and is not to be counted as part of debt for which warrant was issued. Marion County v. First Nat'l Bank, 193 Ga. 263 , 18 S.E.2d 475 (1942).

Prepayment penalty clause was permissible under O.C.G.A. § 7-4-21(a)(1) since the clause was in reality a charge and use of the term "interest" in the clause was merely a device for determining the amount of the charge. In re Curtis, 83 Bankr. 853 (Bankr. S.D. Ga. 1988).

Escrow account charges in a loan for the purchase of real property did not amount to a disguised interest charge since there was a realistic correspondence between the monthly escrow deposit and the annual tax liability and insurance premium covering the property. In re Curtis, 83 Bankr. 853 (Bankr. S.D. Ga. 1988).

Lender need not pay interest on funds escrowed for a valid business reason. - There is no requirement as a matter of law for the lender to pay the borrower interest on funds escrowed for valid business reasons such as a reserve for replacement of deteriorating equipment. Knight v. First Fed. Sav. & Loan Ass'n, 151 Ga. App. 447 , 260 S.E.2d 511 (1979).

Lease late charge provision. - While a landlord can recover unpaid rent and is also entitled to recover the legal rate of interest on the unpaid rental money, it does not follow that an agreement in a lease providing for a late charge when the rent is not timely paid must comply with O.C.G.A. § 7-4-2 . Krupp Realty Co. v. Joel, 168 Ga. App. 480 , 309 S.E.2d 641 (1983).

Prejudgment interest. - Having found there was no jury issue as to whether the buyers owed the earnest money payment plus interest to sellers under the contract, as well as under principles of promissory estoppel, the trial court erred in failing to award such interest for the period money was due until final judgment. Ware v. Renfroe, 231 Ga. App. 529 , 499 S.E.2d 907 (1998).

Because the defendant neither filed a compulsory counterclaim nor pled a set-off as an affirmative defense, there was no error in the trial court's failure to provide for a set-off for lease deposits prior to calculating pre-judgment and post-judgment interest. American Medical Transp. Group, Inc. v. Glo-An, Inc., 235 Ga. App. 464 , 509 S.E.2d 738 (1998).

In an action in which the lenders demanded payment of a loan to the debtor before the date of trial, and after a date set by the debtor that the debtor would repay the loan, the lenders were entitled to prejudgment interest up and until the day of trial on the unpaid loan balance at the legal rate of interest. Gray v. King, 270 Ga. App. 855 , 608 S.E.2d 320 (2004).

Trial court erred when the court imposed a fixed rate of interest on a judgment obtained by a class of retirees in their action against the Teachers Retirement System of Georgia, arising from their claims that the retirees were not paid the appropriate amounts for their retirement benefits, as there was no pre- or post-judgment interest rate established by the written contract between the parties that governed those payments, such that the statutory rates of seven percent and prime plus three percent should have been applied pursuant to O.C.G.A. §§ 7-4-2(a)(1)(A) and 7-4-12(a) ; another interest rate that was set by the System in a regulation was not applicable to the instant matter. Teachers Ret. Sys. v. Plymel, 296 Ga. App. 839 , 676 S.E.2d 234 (2009).

Because the defendant's damages on the defendant's suit on account counterclaim were fixed, certain, and ascertainable making the damages liquidated (plaintiff conceded that the plaintiff received and never paid for $1,017,551 worth of GPS units from the defendant), the district court erred in failing to award the defendant pre-judgment interest at the legal rate established by O.C.G.A. § 7-4-2 . Discrete Wireless, Inc. v. Coleman Techs., Inc., F.3d (11th Cir. Apr. 5, 2011)(Unpublished).

In breach-of-contract actions in all cases when an amount ascertained would be the damages at the time of the breach, it may be increased by the addition of legal interest from that time until the recovery. Goody Prods. v. Dev. Auth. of Manchester, 320 Ga. App. 530 , 740 S.E.2d 261 (2013).

In a condemnation action, the property owner was properly awarded prejudgment interest on the purchase price on a second parcel because the price was fixed, certain, and ascertainable under the terms of the parties' contract such that the debt owed by the county was liquidated and subject to prejudgment interest under O.C.G.A. § 7-4-15 . Gwinnett County v. Old Peachtree Partners, LLC, 329 Ga. App. 540 , 764 S.E.2d 193 (2014).

Prejudgment interest in excess of statutory amount. - When the claim was undisputed, the defendant was entitled to prejudgment interest at the rate of seven percent per annum from the date the debt became due and the trial court's judgment of prejudgment interest of 18% per annum was in excess of the statutorily required amount. Turner Constr. Co. v. Electrical Distribs., Inc., 202 Ga. App. 726 , 415 S.E.2d 325 (1992).

Trial court erred in awarding the prevailing party in a contract dispute prejudgment interest at the rate of 12 percent per annum; instead, the legal rate of interest of only 7 percent per annum pursuant to O.C.G.A. § 7-4-2(a) was appropriate. Murray v. Barrett, 257 Ga. App. 438 , 571 S.E.2d 448 (2002).

Prejudgment interest on damages exceeded recovery amount authorized by evidence. - Pursuant to instructions from the trial court, while the jury was authorized under O.C.G.A. § 13-6-13 to increase the $24,698.39 in breach of contract damages by adding prejudgment legal interest to damages at the rate of seven percent per annum simple interest from the date of the breach, the jury's general verdict on the breach of contract claim in amount of $42,690.05 was in excess of any recovery authorized by the evidence; as a result, the judgment entered on the verdict had to be reversed and the case remanded for new trial. Chacon v. Holcombe, 290 Ga. App. 767 , 660 S.E.2d 851 (2008).

Deposits in court not subject to prejudgment and postjudgment interest. - In a contract action, a party was not entitled to prejudgment and postjudgment interest when deposits were made pursuant to the requirements of O.C.G.A. § 9-11-67 . Sacha v. Coffee Butler Serv., Inc., 215 Ga. App. 280 , 450 S.E.2d 704 (1994).

No writing necessary for interest when admission by debtor. - Trial court did not err in awarding a creditor a money judgment, plus interest, because the interest owed was established by the debtor's own admission on the stand; in a case when the interest owed is established by a party's own admission on the stand, no writing is necessary. Allen v. Santana, 303 Ga. App. 844 , 695 S.E.2d 314 (2010).

Interest rate not in excess of maximum. - Trial court did not err by rejecting a debtor's argument that a lender's temporary acceptance of lowered payments without waiving full payment transformed the loan into a usurious transaction because the interest rate of the loan was not in excess of the maximum applicable legal rate of 5 percent per month under O.C.G.A. § 7-4-18(a) . Latimore v. Vatacs Group, Inc., 317 Ga. App. 98 , 729 S.E.2d 525 (2012).

Usury
1. In General

Usury defined. - Usury is excess over legal interest charged by lender for use of the lender's money. Sledd v. Pilot Life Ins. Co., 52 Ga. App. 326 , 183 S.E. 199 (1935).

Effect of criminal usury. - Loan violative of the criminal usury statute is illegal with the result that the lender forfeits the interest but may collect the principal. Norris v. Sigler Daisy Corp., 260 Ga. 271 , 392 S.E.2d 242 (1990).

Intent required. - Under law of Georgia, intent to circumvent usury laws is prerequisite to existence of usury. Camilla Cotton Oil Co. v. Spencer Kellogg & Sons, 257 F.2d 162 (5th Cir. 1958).

Four elements of usurious transaction. - There are four elements of a usurious transaction under Georgia law: (1) loan or forbearance of money, either express or implied; (2) upon understanding that principal shall or may be returned; and that (3) for such loan or forbearance a greater profit than is authorized by law shall be paid; and (4) that contract was made with intent to violate the law. Element of intent may be implied if all other elements are expressed upon face of contract. Bank of Lumpkin v. Farmers State Bank, 161 Ga. 801 , 132 S.E. 221 (1926); Duderwicz v. Sweetwater Sav. Ass'n, 595 F.2d 1008 (5th Cir. 1979); Hershiser v. Yorkshire Condominium Ass'n, 201 Ga. App. 185 , 410 S.E.2d 455 (1991).

Substance of transaction examined in determining whether usurious. - Court must look not at form and words, but at substance of transaction; and as, on the one hand, it should not pay attention to words of transaction, or manner in which the transaction was negotiated, if substance of it went to defeat the statute against usury, so, on the other hand, it ought not to rely upon words or form of transaction, if in substance such transaction was legal. Murdock Acceptance Corp. v. Wagnon, 587 F.2d 764 (5th Cir. 1979).

In determining whether contract is usurious, substance of transaction will be critically inspected and analyzed; for name by which transaction is denominated is altogether immaterial if it appears that a loan of money was the basis of agreement which is under consideration. Bank of Lumpkin v. Farmers State Bank, 161 Ga. 801 , 132 S.E. 221 (1926).

Usurious interest violates section. - Usury being an excess of legal interest, it was a violation of former Code 1933, § 57-101 to reserve and take usury or to contract to reserve and take usury. Newcomb v. Niskey's Lake, Inc., 190 Ga. 565 , 10 S.E.2d 51 , answer conformed to, 63 Ga. App. 811 , 12 S.E.2d 160 (1940).

It was a violation of former Code 1933, § 57-101 to reserve and take usurious interest, or to contract to reserve and take usurious interest. Duderwicz v. Sweetwater Sav. Ass'n, 595 F.2d 1008 (5th Cir. 1979).

Effect of repealing usury limit. - In the absence of a savings clause, repeal of a usury limit operates retroactively to lift the penalty for usury. Doyle v. Southern Guar. Corp., 795 F.2d 907 (11th Cir. 1986), cert. denied, 484 U.S. 926, 108 S. Ct. 289 , 98 L. Ed. 2 d 249 (1987).

When defense of usury was not raised until after the 1983 amendment of O.C.G.A. § 7-4-2 became effective, the interest rates at issue are legal so long as those rates conform to the limits contained in O.C.G.A. § 7-4-2 (a)(1). Ward v. Hudco Loan Co., 254 Ga. 294 , 328 S.E.2d 729 (1985).

Lender's 49 percent economic interest. - In a class action suit seeking to hold a lender liable for payday loans, the trial court did not err in concluding that genuine issues of material fact existed as to whether the lender was the true lender of the loans made after May 14, 2004, because evidence was presented sufficient to create a genuine issue of material fact regarding whether the lender actually received only a 49 percent economic interest for the lender's services and even if the lender did so, whether the lender nevertheless, by contrivance, device, or scheme, attempted to avoid the provisions of O.C.G.A. § 16-17-2(a) . Ga. Cash Am. v. Greene, 318 Ga. App. 355 , 734 S.E.2d 67 (2012).

Amortization of initial charges. - Initial charges in the form of discount points and other interest charges during the first month of the loan should be amortized over the life of the loan to calculate what interest rate was charged "per month." Johnson v. Fleet Fin., Inc., 785 F. Supp. 1003 (S.D. Ga. 1992), aff'd, 4 F.3d 946 (11th Cir. 1993).

Actual declining principal balance method should be used in determining whether irregularly amortized loan is usurious because usury on a particular loan can only be determined by proper reference to the actual outstanding principal balance on that loan. Southern Fed. Sav. & Loan Ass'n v. Lyle, 249 Ga. 284 , 290 S.E.2d 455 (1982).

Actual performance of usurious agreement not required. - Taint of usury results not from payment of usurious interest, but from agreement to do so, whether performed or unperformed. Duderwicz v. Sweetwater Sav. Ass'n, 595 F.2d 1008 (5th Cir. 1979).

Terms of contract rather than actual turn of events are to be used in computing usury. Knight v. First Fed. Sav. & Loan Ass'n, 151 Ga. App. 447 , 260 S.E.2d 511 (1979).

Usurious contracts unlawful only as to usurious interest. - Contracts to pay usury are unlawful, but only as to the usurious interest; but mere illegality in consideration is not sufficient to defeat rights of an innocent holder. Weed v. Gainesville, Jefferson & S. R.R., 119 Ga. 576 , 46 S.E. 885 (1904).

Substance of transaction controls. - Law recognizes a seller's right to make a difference in the seller's cash price and the seller's time price for the seller's property; and, though in a given instance this difference may exceed the maximum allowable rate, usury laws are not applicable. If, however, property is sold at a cash price, and time is given by vendor to purchaser upon a portion of the purchase money, and a greater rate of interest than that allowed by law is charged on such deferred payments, the contract is usurious. Murdock Acceptance Corp. v. Wagnon, 587 F.2d 764 (5th Cir. 1979).

While it is lawful and not usurious to charge one price for property sold for cash and a higher price for same property if sold on credit, if contract is that property be sold at cash valuation, and that certain payments are to be deferred in consideration of a greater rate of interest than that allowed by law, such contract is usurious. Irvin v. Mathews, 75 Ga. 739 (1885); Rushing v. Worsham & Co., 102 Ga. 825 , 30 S.E. 541 (1898); Ozmore v. Coram, 133 Ga. 250 , 65 S.E. 448 (1909); Plastics Dev. Corp. v. Flexible Prods. Co., 112 Ga. App. 460 , 145 S.E.2d 655 (1965).

Section inapplicable to note outside provisions. - Defendant did not prevail on defendant's claim of usury because the amount of the note, $2.3 million, is outside the provisions of Georgia's usury statute. Barton v. Marubeni Am. Corp., 204 Ga. App. 346 , 419 S.E.2d 342 (1992).

Parol evidence rule inapplicable to usurious contracts. - While it is well established that parol evidence cannot be used to add to or change terms of valid written contract, the rule does not apply to contract which is usurious and, therefore, invalid. Pickens Inv. Co. v. Jones, 82 Ga. App. 850 , 62 S.E.2d 753 (1950).

Parol promise found valid. - When a promissory note on the note's face bore interest at 6 percent, and, after the note fell due and was unpaid, the makers in consideration of the holders delaying to enforce collection agreed in parol to pay 8 percent interest thereon and for two years interest was paid at this rate, such payments were valid, and interest in excess of 6 percent could neither be recovered, nor thereafter applied as a credit on the principal of the note. Strickland v. Bank of Cartersville, 141 Ga. 565 , 81 S.E. 886 (1914).

Showing required when loan made at less than maximum rate. - When loan had been made at less than maximum rate of interest, the debtor must prove that escrow arrangement was a device to exact interest in excess of the lawful rate, and the debtor must show the exact amount of claimed excess and how the excess was computed. Knight v. First Fed. Sav. & Loan Ass'n, 151 Ga. App. 447 , 260 S.E.2d 511 (1979).

To purge contract of usury it must be wholly abandoned or cancelled, and a new obligation undertaken containing no part of the usury. Duderwicz v. Sweetwater Sav. Ass'n, 595 F.2d 1008 (5th Cir. 1979).

Lender cannot unilaterally purge transaction of taint. - Allegedly usurious loan transaction cannot be purged of usurious taint through unilateral action of lender. Duderwicz v. Sweetwater Sav. Ass'n, 595 F.2d 1008 (5th Cir. 1979).

Under the look-through rule, a hypothetical coercive claim was the basis for federal jurisdiction over the petitioner bank's Federal Arbitration Act petition, but petitioner payday loan companies' arbitration petition was precluded by a related underlying state court judgment holding the companies in contempt and, striking the companies' arbitration defenses under O.C.G.A. § 9-11-37(b)(2) to respondent borrower's suit alleging violations of Georgia's usury statute, O.C.G.A. § 7-4-1 et seq., Georgia's Industrial Loan Act, O.C.G.A. § 7-3-1 et seq.; and Georgia's Racketeer Influenced and Corrupt Organizations statute, O.C.G.A. § 16-14-1 et seq. Cmty. State Bank v. Strong, 651 F.3d 1241 (11th Cir. 2011), cert. denied, U.S. , 133 S. Ct. 101 , 184 L. Ed. 2 d 22 (2012).

2. Transactions Held Usurious

Only when prepaid sums and stipulated interest together exceed lawful interest is a transaction usurious. Scheil v. Georgia Fed. Sav. & Loan Ass'n, 154 Ga. App. 714 , 269 S.E.2d 881 (1980).

Taking or reserving of maximum interest in advance is usurious. - Taking or reserving in advance of interest at highest legal rate, whether in short or long term loan, is usurious. Haley v. Covington, 19 Ga. App. 782 , 92 S.E. 297 (1917); Kent v. Hibernia Sav., Bldg. & Loan Ass'n, 190 Ga. 764 , 10 S.E.2d 759 (1940), later appeal, 193 Ga. 546 , 19 S.E.2d 264 (1942).

Deed to secure usurious loan is void. - Reserving of interest in advance at highest legal rate on a loan, whether it be a short or long-term loan, is usurious; and deed to land given to secure promissory note for such a loan is void on account of usury. Loganville Banking Co. v. Forrester, 143 Ga. 302 , 84 S.E. 961 , 1915D L.R.A. 1195 (1915); Reese v. Bloodworth, 146 Ga. 355 , 91 S.E. 120 (1917).

Commission deducted from loan is usurious. - Under former Code 1933, § 57-101, charge by lender as a commission, deducted from a loan evidenced by bonds of the borrower, which carry full rate of lawful interest was usury. Newcomb v. Niskey's Lake, Inc., 190 Ga. 565 , 10 S.E.2d 51 , answer conformed to, 63 Ga. App. 811 , 12 S.E.2d 160 (1940).

Combining loans to reach usury limit prohibited. - Former § 7-4-7 , which removed the former nine percent rate ceiling on loans exceeding $100,000 in certain situations, was not applicable when there were eleven separate loans and notes, none of which amounted to $100,000, although the total principal balance was over $100,000, and although the borrower paid the interest on all eleven notes with one check. Henson v. Columbus Bank & Trust Co., 770 F.2d 1566 (11th Cir. 1985) (decided under former § 7-4-7 ).

Escrow fund used as device to extract excess interest is usurious. - Escrow fund is usurious only when the lender's requirement that the borrower maintain such a deposit is in fact merely a scheme or device by which the intent to extract excess interest is concealed. Knight v. First Fed. Sav. & Loan Ass'n, 151 Ga. App. 447 , 260 S.E.2d 511 (1979).

Stipulation to pay taxes on bonds is usurious. - Stipulation in bonds to pay, in addition to lawful interest, a percentage of federal income taxes that might be imposed upon the bonds is usurious. Newcomb v. Niskey's Lake, Inc., 190 Ga. 565 , 10 S.E.2d 51 , answer conformed to, 63 Ga. App. 811 , 12 S.E.2d 160 (1940).

Petition sufficiently pleading usury. - Petition alleging: (1) sum upon which paid; (2) time when contract was made; (3) when payable; and (4) amount of usury agreed upon, sufficiently pleads usury. Pickens Inv. Co. v. Jones, 82 Ga. App. 850 , 62 S.E.2d 753 (1950).

Condition precedent to loan charging maximum rate that borrower pay another's debt. - When lender requires, as condition precedent to making loan upon which full legal rate of interest is expressly charged, that the borrower shall assume and pay off a promissory note held by the lender against one who is known by the lender to be insolvent, and whose debt the borrower is under no obligation to pay, the transaction is usurious. Bishop v. Exchange Bank, 114 Ga. 962 , 41 S.E. 43 (1902).

Indefinite amount. - Portion of the judgment awarding interest at a rate greater than the seven percent was vacated and the case was remanded to the trial court for recalculation of the interest at the correct rate because with an indefinite rate expressed in the subdivision declaration, the seven percent per year rate mandated by O.C.G.A. § 7-4-2(a)(1)(A) governed the rate of interest allowed by the declaration. Lend A Hand Charity, Inc. v. Ford Plantation Club, Inc., 338 Ga. App. 594 , 791 S.E.2d 180 (2016).

3. Transactions Held Not Usurious

Excess over legal rate paid for other considerations not usurious. - When excess over legal interest is paid for other good and valuable considerations beyond mere use of money, it is not usury. Sledd v. Pilot Life Ins. Co., 52 Ga. App. 326 , 183 S.E. 199 (1935).

Minor mistake held not usury. - Contract not usurious when by mistake a few cents more than legal rate is charged. Rushing v. Willingham, 105 Ga. 166 , 31 S.E. 154 (1898); Loganville Banking Co. v. Forrester, 143 Ga. 302 , 84 S.E. 961 , 1915D L.R.A. 1195 (1915).

Interest charged on interest due is not usurious. - Contract to pay maximum rate of interest per annum semi-annually, with interest on semi-annual payments of interest after due, did not constitute usury under former Civil Code 1910, § 3436. Pendergrass v. New York Life Ins. Co., 163 Ga. 671 , 137 S.E. 36 (1927).

Interest not usurious based on principal. - When the principal amount of the homeowners' mortgage was $61,850 with accrued interest at the rate of 13 percent per year, this interest was not in violation of P.C.G.A. § 7-4-2 . English v. Liberty Mtg. Corp., 205 Ga. App. 141 , 421 S.E.2d 286 (1992).

Interest rate based upon a daily charge. - Interest rate based upon a daily charge equal to the annual rate divided by 360 is not usurious per se. Mom Corp. v. Chattahoochee Bank, 203 Ga. App. 847 , 418 S.E.2d 74 (1992).

Interest from maturity upon principal and lawful interest not usurious. - It is lawful to include in a promissory note amount of interest at legal rate, which will be due at its maturity, and to provide that sum represented by principal and such interest shall bear interest at maximum rate per annum from maturity. McCrary v. Woodard, 122 Ga. 793 , 50 S.E. 941 (1905).

Note covering loan, lawful interest, and antecedent debt not usurious. - When debtor who has been adjudicated bankrupt, but who has not obtained a discharge, arranges with one of the debtor's creditors for a loan of money on condition that the debtor will execute a note to cover the loan, with lawful interest and also amount of the debtor's previous indebtedness to creditor, such transaction is a valid and enforceable renewal of an antecedent debt, and a note is not usurious because the note contains a promise to pay the antecedent debt. Cameron v. Meador-Pasley Co., 39 Ga. App. 712 , 148 S.E. 309 (1929).

Compensation for professional services by lender not usurious. - If sum was paid bona fide by way of compensation for professional services rendered by a lender, and did not enter into consideration moving lender to make loan, the transaction was not usurious. Sanders v. Nicolson, 101 Ga. 739 , 28 S.E. 976 (1897).

Charge for insurance on security for debt not usurious. - When property is conveyed to secure a debt, a stipulation that the borrower shall, in addition to legal interest, pay insurance premiums thereon is not usurious. New England Mtg. Sec. Co. v. Gay, 33 F. 636 (S.D. Ga. 1888), writ of error dismissed, 145 U.S. 123, 12 S. Ct. 815 , 36 L. Ed. 646 (1892).

Premium for insurance required on collateral security for loan not counted as part of interest. Sledd v. Pilot Life Ins. Co., 52 Ga. App. 326 , 183 S.E. 199 (1935).

Forfeiture of Interest

Usury works forfeiture of all interest under the law. Newcomb v. Niskey's Lake, Inc., 190 Ga. 565 , 10 S.E.2d 51 , answer conformed to, 63 Ga. App. 811 , 12 S.E.2d 160 (1940).

Effect of device by which lender exacts usurious interest. - If agreement is a mere device or subterfuge by which one party was permitted to charge a higher than lawful rate of interest for a loan of money, the agreement would be usurious, and the lender can collect no interest at all. Stewart v. Miller & Co., 161 Ga. 919 , 132 S.E. 535 , 45 A.L.R. 599 (1926).

Interest not forfeited when claim amended to legal rate. - Plaintiff did not forfeit any right to interest on an open account for seeking a higher interest rate than that allowed by law since, before trial, the plaintiff amended the plaintiff's pleadings to seek the statutorily permitted rate of interest on commercial accounts. Belvin v. Houston Fertilizer & Grain Co., 169 Ga. App. 100 , 311 S.E.2d 526 (1983).

Written Contract

Absent specification in writing, interest exceeding 7 percent per annum may not be collected. Cosby v. A.M. Smyre Mfg. Co., 158 Ga. App. 587 , 281 S.E.2d 332 (1981).

Portion awarding interest in a foreclosure judgment was vacated and the case remanded for recalculation of the interest rate pursuant to O.C.G.A. § 7-4-2 because § 7-4-2 governed the rate of interest in contracts when the interest rate was not specified and since the maximum legal rate specified in the declaration was not definite and ascertainable, the trial court erred in awarding 18 percent interest rather than the seven percent provided for by § 7-4-2. Northside Bank v. Mountainbrook of Bartow County Homeowners Ass'n, 338 Ga. App. 126 , 789 S.E.2d 378 (2016).

Writing requirement applies only to executory promises. - Former Civil Code 1910, § 3426, which provided that a contract to pay interest in excess of 7 percent must be in writing, applied only to a contract containing an executory promise to pay such excess interest, and did not apply to a contract where such excess interest had been actually paid and accepted in consideration of a promise to extend time of payment of the principal sum. Lewis v. Citizens' & S. Bank, 31 Ga. App. 597 , 121 S.E. 524 (1924), aff'd, 159 Ga. 551 , 126 S.E. 392 (1925).

Designation of interest rate in terms of "prime" was "in writing" and thereby complied with laws of usury. Stewart v. National Bank, 174 Ga. App. 892 , 332 S.E.2d 19 (1985).

Specification of interest in handwriting of debtor, signed by creditor, is sufficient. Wofford v. Wyly, 72 Ga. 863 (1884).

One seeking 8 percent interest on alleged note must sue upon written instrument providing therefor. Ramsey v. Langley, 86 Ga. App. 544 , 71 S.E.2d 863 (1952).

Acceleration

By accelerating payment on notes payable on or before maturity, maker avoids paying unearned interest. Garner v. Sisson Properties, Inc., 198 Ga. 203 , 31 S.E.2d 400 (1944).

Interest on accelerated balance limited to 7 percent absent authorization. - In suit to recover balance on promissory note, award of interest on accelerated balance was limited to 7 percent per annum, rather than 9 percent which was sought, since there was no language in the note authorizing the collection of a higher rate upon declaration of default. Atlantic Bank & Trust Co. v. Fox, 157 Ga. App. 673 , 278 S.E.2d 474 (1981).

Interest after Maturity

Rate of interest specified in contract runs after maturity as well as before. Silvey v. McCool, 86 Ga. 1 , 12 S.E. 175 (1890); Neal v. Brockhan, 87 Ga. 130 , 13 S.E. 283 (1891).

Post-maturity interest rate not penalty when same as loan interest rate. - Post-maturity interest rate on outstanding balance does not constitute penalty or compensation for delay when rate is the same as interest rate of loan itself. Whitfield v. Termplan, Inc., 651 F.2d 383 (5th Cir. 1981).

Interest called for will extend only if contracted for. - When promissory note contained a promise to pay principal, with interest from date at 8 percent, in the absence of agreement, such rate will not extend beyond maturity of note, unless terms of the note itself expressly so provide. Sherwood v. Moore, 35 F. 109 (N.D. Ga. 1888).

Attorney Fees

Reasonable fee to lender's attorney for title examination was not considered commission for negotiation of loan. McCall v. Herring, 118 Ga. 522 , 45 S.E. 442 (1903).

Jury/Court Determinations

Unless apparent on face of contract, question of usury is for jury. - If it is apparent on the face of the contract, the court may declare it to be usurious, but if doubtful question must be resolved by the jury. Pickens Inv. Co. v. Jones, 82 Ga. App. 850 , 62 S.E.2d 753 (1950).

It is incumbent upon one attacking loan to show jury that it is in fact usurious; intent of lender to charge and collect more than legal rate of interest in violation of law is a question for the jury. Knight v. First Fed. Sav. & Loan Ass'n, 151 Ga. App. 447 , 260 S.E.2d 511 (1979).

Question of whether one intends to exact usury by a contrivance or device or whether the alleged charge is bona fide for actual services is for the determination of the jury. Bank of Lumpkin v. Farmers State Bank, 161 Ga. 801 , 132 S.E. 221 (1926).

Claim that transaction is a device to cover up usury raises jury issue. - When a transaction is not per se usurious, if it is claimed to be a device to cover up a charge of usury, a question of fact as well as a question of law is raised and the question should be submitted to the jury. Knight v. First Fed. Sav. & Loan Ass'n, 151 Ga. App. 447 , 260 S.E.2d 511 (1979).

Section 7-4-12 inapplicable to awards of special master preceding judgment. - Twelve percent rate of O.C.G.A. § 7-4-12 applies only to judgments; any interest accruing under O.C.G.A. § 22-2-113 for that period of time following an award of the special master until the jury verdict and entry of final judgment is to be at legal interest rate established by O.C.G.A. § 7-4-2 . City of Atlanta v. Wright, 159 Ga. App. 809 , 285 S.E.2d 250 (1981).

Court orders to pay money bear interest at 7 percent. - Orders absolute given by inferior courts of this state for payment of money to other persons in liquidation of debts due by those courts draw interest just as other liquidated demands do, that is, those when sum is fixed, ascertained, and agreed to be paid bear interest at the rate of 7 percent per annum. State ex rel. Greer v. Speer, 33 Ga. 93 (1864).

Award of prejudgment interest in federal court. - Admiralty courts have discretion in awarding prejudgment interest so federal rather than state law controls, and there is no abuse of discretion in a federal court's award of 10% prejudgment interest. The fact that the suit was brought under the court's diversity jurisdiction does not affect this conclusion. Kilpatrick Marine Piling v. Fireman's Fund Ins. Co., 795 F.2d 940 (11th Cir. 1986).

OPINIONS OF THE ATTORNEY GENERAL

Editor's notes. - Many of the opinions cited below were rendered under this Code section as it read prior to the 1983 amendment, which extensively rewrote this Code section.

Usury defined. - Usury is not the taking of interest from the borrower at an unlawful rate, but rather it is receiving from any source a greater sum for use of money than the lawful interest. 1969 Op. Att'y Gen. No. 69-53.

Carrying charges are limited to legal rate plus actual expenses incurred. - When no distinction is made between cash price and time price of an article, carrying charges are limited to legal rate of interest, plus any actual expense incurred by vendor incident to sale, such as fee for recording security instrument and reasonable protective insurance. 1954-56 Op. Att'y Gen. p. 448.

Service charge probably usurious. - If monthly service charge plan does not come within any specific exception set out by state law, then charge of 1 to 1 1/2 percent per month of unpaid balance would probably be usurious. 1969 Op. Att'y Gen. No. 69-45.

Construction with Industrial Loan Act. - Merchant who makes cash advances of $3,000.00 or less is subject to the provisions of the Georgia Industrial Loan Act rather than O.C.G.A. § 7-4-2(a)(2), unless the merchant charges 8 percent simple interest per annum or less. 1984 Op. Att'y Gen. No. 84-79.

Loan or origination fee. - If a loan or origination fee charged in connection with a non-real estate loan under $3,000 is not adduced based on the time value of money, if its use merely increases the lender's expectation of collecting in full the principal amount of the loan plus interest or if the fee is attributable to a service or benefit other than the extension of credit, and if the fee's factual justification is clearly documented in sufficient detail, such a fee should not be considered prepaid interest. 2003 Op. Att'y Gen. No. 2003-8.

Overdraft fees. - Overdraft fee will not be considered interest when the transaction is readily characterized as a checking account transaction, lacking the legal and economic reality of a loan or extension of credit, and when the fee is not determined based on the amount and time value of overdraft amounts. 2003 Op. Att'y Gen. No. 2003-9.

RESEARCH REFERENCES

Am. Jur. 2d. - 44B Am. Jur. 2d, Interest and Usury, §§ 1, 3.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, §§ 1 et seq., 84, 85.

ALR. - Provision in statute or ordinance limiting rate of interest per annum as precluding requirement of payment at maximum rate at intervals of less than a year, 29 A.L.R. 1109 .

Validity of agreement to pay interest on interest, 37 A.L.R. 325 ; 76 A.L.R. 1484 .

Construction of contractual provisions as to interest as regards time from which interest is to be computed, 69 A.L.R. 958 .

Delay in paying over proceeds of loan to borrower as affecting question of usury, 76 A.L.R. 1467 .

Obligations covering deferred payments of purchase money, or extension thereof, as loan or forbearance within usury laws, 91 A.L.R. 1105 .

Validity, construction, and effect of express agreement releasing cause of action or defense based on exaction of usury, 99 A.L.R. 600 .

Termination of interest, or reduction of interest rate, on deposit of public funds, 107 A.L.R. 1210 .

Rate of interest chargeable against guardians, executors or administrators, and trustees, 112 A.L.R. 333 .

Note or other obligation payable on demand for an amount in excess of amount actually loaned as usurious, 127 A.L.R. 460 .

Finance charge in connection with conditional sale contract as usury, 143 A.L.R. 238 .

Usury as affecting conditional sale contract, 152 A.L.R. 598 .

Usury as predictable upon transaction in form a sale or exchange of commercial paper or other choses in action, 165 A.L.R. 626 .

Retrospective application and effect of statutory provision for interest or changed rate of interest, 4 A.L.R.2d 932; 40 A.L.R.4th 147; 41 A.L.R.4th 694.

Computing interest on basis of 360 days in year, 30 days in month, or the like, as usury, 35 A.L.R.2d 842.

Taking or charging interest in advance as usury, 57 A.L.R.2d 630.

Interest upon arrearages or unpaid accumulations of annuities, 66 A.L.R.2d 857.

Usury as affected by repayment of, or borrower's option to repay, loan before maturity, 75 A.L.R.2d 1265.

What is "compound interest" within meaning of statutes prohibiting the charging of such interest, 10 A.L.R.3d 421.

Advance in price for credit sale as compared with cash sale as usury, 14 A.L.R.3d 1065.

Usury: effect of borrower's agreement to pay, guarantee, or secure some other debt owed to or by lender, 31 A.L.R.3d 763.

Validity and construction of provision (escalator clause) in land contract or mortgage that rate of interest payable shall increase if legal rate is raised, 60 A.L.R.3d 473.

Reformation of usurious contract, 74 A.L.R.3d 1239.

Validity under usury laws of provision calling for repayment of principal which exceeds sum loaned by amount reflecting any decline in purchasing power of dollar, 90 A.L.R.3d 763.

Contingency as to borrower's receipt of money or other property from which loan is to be repaid as rendering loan usurious, 92 A.L.R.3d 623.

Leaving part of loan on deposit with lender as usury, 92 A.L.R.3d 769.

Application of usury laws to transactions characterized as "leases,", 94 A.L.R.3d 640.

Validity and construction of state statute or rule allowing or changing rate of prejudgment interest in tort actions, 40 A.L.R.4th 147.

Retrospective application and effect of state statute or rule allowing interest or changing rate of interest on judgments or verdicts, 41 A.L.R.4th 694.

7-4-3. Finance charge on retail installment contracts for manufactured homes and motor vehicles subject to federal law; stating of federal provisions in contract.

  1. Notwithstanding the provisions of subsections (a) through (c) of Code Section 10-1-33, any retail installment contract pertaining to:
    1. Any manufactured home with a cash sale price of more than $3,000.00; or
    2. Any motor vehicle where the amount financed is $5,000.00 or more

      may provide for such finance charge as the parties may agree in writing.

    1. Any retail installment contract pertaining to a manufactured home or any consumer loan secured by such a home shall contain the contract provisions required by subsection (c) of Section 501 of the Depository Institutions Deregulation and Monetary Control Act of 1980, Public Law 96-221 (12 U.S.C. Section 1735f-7, notes).
    2. Any person violating this subsection shall be subject to the liability specified in Code Section 7-4-5; but the contract or loan shall still be entitled to the benefits of the other provisions of Code Section 7-4-2.
  2. As used in this Code section, the term:
    1. "Finance charge" means the amount agreed upon between the buyer and the seller to be added to the cash sale price and, if a separate charge is made therefor, the amount, if any, included for insurance and other benefits and official fees, in determining the time sale price.
    2. "Manufactured home" means a structure, transportable in one or more sections, which, in the traveling mode, is eight body feet or more in width, or 40 body feet or more in length, or, when erected on site, is 320 or more square feet and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities and includes the plumbing, heating, air-conditioning, and electrical systems contained therein; except that such term shall include any structure which meets all the requirements of this paragraph except the size requirements and with respect to which the manufacturer voluntarily files a certification required by the secretary of Housing and Urban Development and complies with the standards established under The National Mobile Home Construction and Safety Standards Act of 1974, 42 U.S.C. Section 5401, et seq.
    3. "Retail installment contract" or "contract" means an instrument or instruments creating a purchase money security interest or any instrument evidencing an obligation secured by a purchase money security interest. (Code 1981, § 7-4-3 , enacted by Ga. L. 1983, p. 1146, § 2; Ga. L. 1985, p. 698, § 4; Ga. L. 2004, p. 631, § 7.)

Editor's notes. - Ga. L. 1983, p. 1146, § 2 repealed the former Code Section 7-4-3, relating to flexible maximum interest rates on real estate loans, and enacted the present Code Section 7-4-3, which became effective March 31, 1983.

JUDICIAL DECISIONS

Controlling nature of section as to mobile homes. - Since the General Assembly, beginning in 1983, has distinguished between mobile home loans and motor vehicle loans, and since O.C.G.A. § 7-4-3(a)(1) and (b)(1), as amended in 1983, deal specifically with mobile home installment sales contracts, whereas O.C.G.A. § 10-1-33(d) , as amended in 1985, does not, subsections (a)(1) and (b)(1) express the controlling legislation and legislative intent on mobile home installment sales contracts in excess of $3,000. Southern Guar. Corp. v. Doyle, 256 Ga. 790 , 353 S.E.2d 510 (1987).

Retroactivity. - The 1983 enactment of O.C.G.A. § 7-4-3(a) , which provides that O.C.G.A. § 10-1-33 shall not apply to retail installment contracts pertaining to any manufactured home with a cash sales price of more than $3,000.00, does not operate retroactively so as to eliminate any cause of action a manufactured home purchaser may have acquired under O.C.G.A. § 10-1-38 by a transaction prior to the 1983 act's effective date. Southern Guar. Corp. v. Doyle, 256 Ga. 790 , 353 S.E.2d 510 (1987).

Cited in Gibbs v. Green Tree Acceptance, Inc., 188 Ga. App. 633 , 373 S.E.2d 637 (1988); Purser Truck Sales, Inc. v. Patrick, 201 Ga. App. 119 , 410 S.E.2d 335 (1991).

7-4-3.1. Maximum interest rate on loans by insured financial institutions.

Repealed by Ga. L. 1983, p. 1146, § 8, effective March 31, 1983.

Editor's notes. - The former Code section was based on Code 1933, § 57-101.2, Ga. L. 1980, p. 511, § 1; Ga. L. 1981, p. 784, § 1; Ga. L. 1981, Ex. Sess., p. 8; Ga. L. 1982, p. 3, § 7.

7-4-4. Advertisement of rates of interest or finance charge.

  1. No person shall advertise in or through any newspaper, radio, television, letter, circular, billhead, or in any way or through any medium any rate of interest or finance charge pertaining to any consumer credit transactions other than a rate stated in simple interest terms or a rate stated in terms which would comply with the federal Truth in Lending Simplification and Reform Act, Public Law 96-221 (15 U.S.C. 57(a) and 1602, et seq.).
  2. There is no liability under this Code section on the part of any owner or personnel of any medium in which an advertisement appears or through which it is disseminated when the publisher, owner, agent, or employee did not have knowledge of the false, misleading, or deceptive character of the advertisement, did not prepare the advertisement, or did not have a direct financial interest in the sale or distribution of the advertised product or service.
  3. Nothing contained in this Code section shall be construed to amend, modify, or repeal any of the provisions of Part 2 of Article 15 of Chapter 1 of Title 10, known as the "Fair Business Practices Act of 1975." (Code 1981, § 7-4-4 , enacted by Ga. L. 1983, p. 1146, § 3; Ga. L. 1984, p. 22, § 7.)

Editor's notes. - Ga. L. 1983, p. 1146, § 3 repealed former Code Section 7-4-4, relating to maximum interest rates on installment loans and giving security for principal and interest, and enacted present Code Section 7-4-4, which became effective March 31, 1983.

RESEARCH REFERENCES

ALR. - What constitutes "finance charge" under § 106(a) of the Truth in Lending Act (15 USCA § 1605(a)) or applicable regulations, 154 A.L.R. Fed. 431.

Validity, construction, and application of Truth in Lending Act (TILA) and regulations promulgated thereunder - United States Supreme Court cases, 67 A.L.R. Fed. 2d 567.

7-4-5. Failure to include federal loan act provisions in retail installment loan; violating advertising restrictions.

  1. Any person who fails to comply with subsection (b) of Code Section 7-4-3 or Code Section 7-4-4 with respect to any person is liable to such person in an amount equal to the sum of:
    1. Any actual damage sustained by such person as a result of the failure; and
    2. Twice the amount of any interest or finance charge contracted for in connection with the transaction, except that the liability under this paragraph shall not be less than $100.00 nor greater than $1,000.00.
  2. Such liability may be asserted in an individual action only and may not be the subject of a class action; provided, however, this provision shall not apply to any class action pending prior to March 31, 1983. (Code 1981, § 7-4-5 , enacted by Ga. L. 1983, p. 1146, § 4.)

Editor's notes. - Ga. L. 1983, p. 1146, § 4 repealed former Code Section 7-4-5, relating to maximum interest on loans secured by deposits or savings account, and enacted present Code Section 7-4-5, which became effective March 31, 1983.

JUDICIAL DECISIONS

Cited in Ford Motor Credit Co. v. London, 175 Ga. App. 33 , 332 S.E.2d 345 (1985).

7-4-6. No limit on interest rate payable by profit corporations or persons on nonconsumer loans in excess of $3,000.00

Reserved. Repealed by Ga. L. 1983, p. 1146, § 8, effective March 31, 1983.

Editor's notes. - The former Code section was based on Code 1933, § 57-118, enacted by Ga. L. 1961, p. 300, §§ 1, 2; Ga. L. 1979, p. 355, § 2.

7-4-7. No limit on interest rate on loans of $100,000.00 or more.

Reserved. Repealed by Ga. L. 1983, p. 1146, § 8, effective March 31, 1983.

Editor's notes. - The former Code section was based on Code 1933, § 57-119, enacted by Ga. L. 1969, p. 80, §§ 1, 2, 5.

7-4-8. Commission to third person does not make lawful interest usurious.

Except as the application of this Code section is modified by Code Section 7-3-5, where the lender neither takes nor contracts to take more than lawful interest, the loan is not rendered usurious by money paid or agreed to be paid others by the borrower in order to obtain the loan.

(Civil Code 1895, § 2887; Civil Code 1910, § 3437; Code 1933, § 57-104; Ga. L. 1957, p. 331, § 3.)

History of section. - This Code section is derived from the decisions in Merck v. American Freehold Land Mfg. Co., 79 Ga. 213 , 7 S.E. 265 (1887), and Hughes v. Griswold, 82 Ga. 299 , 9 S.E. 1092 (1889).

Law reviews. - For article discussing methods of computation of finance charges in Georgia consumer credit contracts, see 30 Mercer L. Rev. 281 (1978). For note discussing the applicability of the usury laws to legitimate brokers' commissions, see 12 Ga. L. Rev. 814 (1978).

JUDICIAL DECISIONS

Commission to surety is not usurious. - Premium or commission paid by principal maker of promissory note to endorser or surety to protect latter in risk assumed and to compensate the endorser for the endorser's services in procuring loan for which note is given, in which premium or commission lender has no interest, is in no sense usury. Jones v. Norton, 9 Ga. App. 333 , 71 S.E. 687 (1910); Morgan v. Shepherd, 171 Ga. 33 , 154 S.E. 780 (1930).

Whether one is agent of borrower or of lender is question for jury. - Question whether agent was agent of borrower or of lender is question of fact which should be decided by jury. Williams v. Forman, 18 Ga. App. 242 , 89 S.E. 459 (1916), later appeal, 147 Ga. 441 , 94 S.E. 552 (1917).

Cited in Eubanks v. Shewmake Bros. Co., 30 Ga. App. 315 , 117 S.E. 664 (1923); Vezzani v. Tallant, 121 Ga. App. 67 , 172 S.E.2d 858 (1970).

RESEARCH REFERENCES

Am. Jur. 2d. - 45 Am. Jur. 2d, Interest and Usury, § 167 et seq.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, § 243.

ALR. - Usury: expenses or charges (including taxes) incident to loan of money, 53 A.L.R. 743 ; 63 A.L.R. 823 ; 105 A.L.R. 795 .

Usury: expenses or charges in form of commissions to agents, brokers, or like intermediaries incident to loan of money, 52 A.L.R.2d 703.

Payments under (ostensibly) independent contract as usury, 81 A.L.R.2d 1280.

Usury: charging borrower for or with expense or trouble of procuring money loaned, 91 A.L.R.2d 1389.

7-4-9. Back interest may be stipulated in contract and recovered.

Interest from date, if the debt is not punctually paid at maturity, may be recovered when so stipulated in the contract, provided interest has not already been included in the principal amount.

(Orig. Code 1863, § 2025; Code 1868, § 2026; Code 1873, § 2052; Code 1882, § 2052; Civil Code 1895, § 2879; Civil Code 1910, § 3429; Code 1933, § 57-105.)

Law reviews. - For article on Georgia's usury laws and interest on interest, see 8 Ga. St. U.L. Rev. 291 (1992).

JUDICIAL DECISIONS

Interest on past due interest. - There is no inhibition against charging interest on interest which is past due. Hardy v. G.A.C. Fin. Corp., 131 Ga. App. 282 , 205 S.E.2d 526 , aff'd, 232 Ga. 632 , 208 S.E.2d 453 (1974).

Interest obligation note is liquidated demand bearing interest upon maturity. - When obligation to pay interest is put in form of an interest note, that note becomes a liquidated demand; and when it is not paid at maturity it bears interest as such, certainly if parties have contracted that it should. Hardy v. G.A.C. Fin. Corp., 131 Ga. App. 282 , 205 S.E.2d 526 , aff'd, 232 Ga. 632 , 208 S.E.2d 453 (1974).

Cited in Taylor v. Thomas, 61 Ga. 472 (1878); Union Sav. Bank & Trust Co. v. Dottenheim, 107 Ga. 606 , 34 S.E. 217 (1899); Haire v. Allied Fin. Co., 99 Ga. App. 649 , 109 S.E.2d 291 (1959); Fried v. Morris & Eckels Co., 118 Ga. App. 595 , 164 S.E.2d 732 (1968); Lewis v. Termplan, Inc., 124 Ga. App. 507 , 184 S.E.2d 473 (1971).

RESEARCH REFERENCES

Am. Jur. 2d. - 44B Am. Jur. 2d, Interest and Usury, §§ 307, 308.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, § 134 et seq.

ALR. - Rate of interest after maturity on contracts fixing rate "until payment", 6 A.L.R. 1196 .

Right to have usurious payments made on previous obligation applied as payment of principal on renewal, 13 A.L.R. 1244 .

Interest on certificate of deposit after maturity, 15 A.L.R. 650 .

Right to interest on overdue instalments of interest, in absence of provision therefor, 27 A.L.R. 81 .

Right of partners inter se in respect of interest, 66 A.L.R. 3 .

Construction of contractual provisions as to interest as regards time from which interest is to be computed, 69 A.L.R. 958 .

Payment of or offer to pay principal and legal interest as condition of relief in equity against usurious contract, 70 A.L.R. 693 ; 135 A.L.R. 808 ; 166 A.L.R. 458 .

Who other than borrower may avail himself to latter's right to recover back usurious payments or penalties therefor, 82 A.L.R. 1008 ; 134 A.L.R. 1335 .

Income tax in respect of amount collected on a debt which had been deducted as a bad debt in the return for a previous year, 143 A.L.R. 338 .

Right of holder of commercial paper to interest or finance charges applicable to period after acceleration of maturity of obligation because of debtor's default, 63 A.L.R.3d 10.

Contingency as to borrower's receipt of money or other property from which loan is to be repaid as rendering loan usurious, 92 A.L.R.3d 623.

7-4-10. Usury forfeits entire interest; right of setoff; how forfeiture discharged; when time bars action or defense.

  1. Any person, company, or corporation violating the provisions of Code Section 7-4-2 shall forfeit the entire interest so charged or taken or contracted to be reserved, charged, or taken. No further penalty or forfeiture shall be occasioned, suffered, or allowed.
  2. The amount forfeited as provided in subsection (a) of this Code section may be pleaded as a setoff in any action for the recovery of the principal sum loaned or advanced by the defendant in said action.
  3. No contrivance or arrangement between the parties to any such unlawful transaction or their privies, except an actual and full payment of the amount forfeited as provided in subsection (a) of this Code section, shall have the effect of discharging such forfeiture.
  4. No plea or action for the recovery of such forfeiture shall be barred by lapse of time shorter than one year.

    (Ga. L. 1875, p. 105, §§ 3, 4; Code 1882, §§ 2057b, 2057c, 2057d, 2057e; Civil Code 1895, §§ 2888, 2889, 2890, 2891; Civil Code 1910, §§ 3438, 3439, 3440, 3441; Ga. L. 1916, p. 48, §§ 1, 2; Code 1933, §§ 57-112, 57-113, 57-114, 57-115.)

Law reviews. - For article discussing methods of computation of finance charges in Georgia consumer credit contracts, see 30 Mercer L. Rev. 281 (1978). For note discussing problems with profits generated by escrow account, and proposing federal legislative reform, see 10 Ga. St. B.J. 618 (1974). For note discussing penalties for violations of the usury statutes, and procedures for invoking the usury defense, see 12 Ga. L. Rev. 814 (1978).

JUDICIAL DECISIONS

ANALYSIS

General Consideration

Actual performance of usurious agreement not required. - Taint of usury does not result from payment of usurious interest, but from agreement to do so, whether performed or unperformed. Duderwicz v. Sweetwater Sav. Ass'n, 595 F.2d 1008 (5th Cir. 1979).

Once there is usury, the usury infects any renewal note for the same debt or any part thereof unless the usury is purged. A determination as to the application of former O.C.G.A. § 7-4-7 , which provided for no limit of interest rate on loans of $100,000.00 or more, cannot be decided without a complete accounting to purge all usurious interest (to be applied to principal, if paid) and then a determination made as to whether or not the principal of the original note was for $100,000 or more, which would insulate it against the defense of usury. McNair v. Gold Kist, Inc., 166 Ga. App. 782 , 305 S.E.2d 478 (1983).

Unilateral action cannot purge usurious taint. - Allegedly usurious loan transaction cannot be purged of usurious taint through unilateral action of the lender. Duderwicz v. Sweetwater Sav. Ass'n, 595 F.2d 1008 (5th Cir. 1979).

To purge contract of usury, the contract must be wholly abandoned or cancelled, and a new obligation undertaken containing no part of the usury. Duderwicz v. Sweetwater Sav. Ass'n, 595 F.2d 1008 (5th Cir. 1979).

Tender of principal required prior to intervention to prevent foreclosure. - Since interest only is subject to forfeiture, principal amount of indebtedness must be tendered before equity will intervene to prevent foreclosure sale. Citizens & S.S. DeKalb Bank v. Watkins, 236 Ga. 759 , 225 S.E.2d 266 (1976).

Before a borrower who has executed a deed infected with usury can have affirmative equitable relief, such as injunction to prevent exercise of power of sale by grantee in such security deed, the borrower must pay or tender to the grantee the principal sum due. McGraw v. Planters' Bank, 178 Ga. 580 , 173 S.E. 643 (1934).

No forfeiture when claim amended to legal rate. - Plaintiff did not forfeit any right to interest on an open account for seeking a higher interest rate than that allowed by law when, before trial, the plaintiff amended the plaintiff's pleadings to seek the statutorily permitted rate of interest on commercial accounts. Belvin v. Houston Fertilizer & Grain Co., 169 Ga. App. 100 , 311 S.E.2d 526 (1983).

Judgment for principal and attorney's fees does not bear interest. - When note is tainted with usury and judgment is obtained for amount advanced and for attorney's fees, as provided for in note, the judgment obtained does not bear interest. Taylor v. Merchants Mut. Credit Corp., 100 Ga. App. 634 , 112 S.E.2d 188 (1959).

Waiver of homestead in usurious contract is void. - Nothing in former Code 1882, § 2057 militated against the view that waiver of right of homestead and exemption, made as part of usurious contract, was void. Cleghorn v. Greeson, 77 Ga. 343 (1886).

Federal savings and loan associations subject to usury laws. - Federal savings and loan association doing business in this state is subject to operation of usury laws and in making loans must comply with provisions thereof. However, such association may require borrower to pay necessary initial charges in connection with making of loan. First Fed. Sav. & Loan Ass'n v. Norwood Realty Co., 212 Ga. 524 , 93 S.E.2d 763 (1956).

Cited in Everett v. Planters' Bank, 61 Ga. 38 (1878); Finney v. Brumby, 64 Ga. 510 (1880); Gramling, Spalding & Co. v. Pool, 111 Ga. 93 , 36 S.E. 430 (1900); Weed v. Gainesville, Jefferson & S. R.R., 119 Ga. 576 , 46 S.E. 885 (1904); McIntosh v. Thomasville Real Estate & Imp. Co., 141 Ga. 105 , 80 S.E. 629 (1913); Strickland v. Bank of Cartersville, 141 Ga. 565 , 81 S.E. 886 (1914); Lee v. King, 142 Ga. 609 , 83 S.E. 272 (1914); Kennedy v. Baggarley, 15 Ga. App. 811 , 84 S.E. 211 (1915); King Bros. & Co. v. Moore, 147 Ga. 43 , 92 S.E. 757 (1917); Young v. First Nat'l Bank, 22 Ga. App. 58 , 95 S.E. 381 (1918); Laing v. Hinesville Bank, 31 Ga. App. 416 , 120 S.E. 799 (1923); Poulk v. Cario Banking Co., 158 Ga. 338 , 123 S.E. 292 (1924); Mitchell v. Southland Loan & Inv. Co., 161 Ga. 215 , 130 S.E. 565 (1925); Bank of Lumpkin v. Farmers State Bank, 161 Ga. 801 , 132 S.E. 221 (1926); Stewart v. Miller & Co., 161 Ga. 919 , 132 S.E. 535 , 45 A.L.R. 599 (1926); Flood v. Empire Inv. Co., 35 Ga. App. 266 , 133 S.E. 60 (1926); Winder Nat'l Bank v. Graham, 38 Ga. App. 552 , 144 S.E. 357 (1928); Bennett v. Lowry, 167 Ga. 347 , 145 S.E. 505 (1928); Griggs v. Clemons, 44 Ga. App. 522 , 162 S.E. 392 (1932); Cornwall v. Atlanta Trust Co., 177 Ga. 303 , 170 S.E. 194 (1933); Folsom v. Continental Adjustment Corp., 48 Ga. App. 435 , 172 S.E. 833 (1934); Bennett v. Bennett, 50 Ga. App. 34 , 177 S.E. 90 (1934); Nash Loan Co. v. Dixon, 181 Ga. 297 , 182 S.E. 23 (1935); Osborne v. National Realty Mgt. Co., 182 Ga. 892 , 187 S.E. 56 (1936); Gore v. Industrial Loan & Sav. Co., 52 Ga. App. 401 , 183 S.E. 499 (1936); Ellis v. Williams, 56 Ga. App. 181 , 192 S.E. 491 (1937); National Bondholders Corp. v. Kelly, 185 Ga. 788 , 196 S.E. 411 (1938); Lankford v. Holton, 187 Ga. 94 , 200 S.E. 243 (1938); Peoples Bank v. Mayo, 61 Ga. App. 877 , 8 S.E.2d 405 (1940); Newcomb v. Niskey's Lake, Inc., 63 Ga. App. 811 , 12 S.E.2d 160 (1940); Hartsfield Co. v. Willis, 192 Ga. 219 , 14 S.E.2d 735 (1941), later appeal, 195 Ga. 317 , 24 S.E.2d 292 (1943); Graham v. Lynch, 206 Ga. 301 , 57 S.E.2d 86 (1950); McConnell v. Shropshire, 80 Ga. App. 677 , 57 S.E.2d 293 (1950); Pickens Inv. Co. v. Jones, 82 Ga. App. 850 , 62 S.E.2d 753 (1950); Gersh v. Peacock, 89 Ga. App. 57 , 78 S.E.2d 543 (1953); First Fed. Sav. & Loan Ass'n v. Lindsey, 99 Ga. App. 316 , 108 S.E.2d 198 (1959); Plastics Dev. Corp. v. Flexible Prods. Co., 112 Ga. App. 460 , 145 S.E.2d 655 (1965); Friend v. Bank of Eastman, 112 Ga. App. 756 , 146 S.E.2d 110 (1965); Colter v. Consolidated Credit Corp., 115 Ga. App. 408 , 154 S.E.2d 713 (1967); Waters v. Lanier, 116 Ga. App. 471 , 157 S.E.2d 796 (1967); Fried v. Morris & Eckels Co., 118 Ga. App. 595 , 164 S.E.2d 732 (1968); Hodges v. Community Loan & Inv. Corp., 234 Ga. 427 , 216 S.E.2d 274 (1975); Flanders v. Columbia Nitrogen Corp., 135 Ga. App. 21 , 217 S.E.2d 363 (1975); Gilbert v. Cherry, 136 Ga. App. 417 , 221 S.E.2d 472 (1975); Thomas v. Estes, 139 Ga. App. 738 , 229 S.E.2d 538 (1976); Family Home Servs., Inc. v. Taylor, 142 Ga. App. 386 , 236 S.E.2d 28 (1977); Henson v. Columbus Bank & Trust Co., 144 Ga. App. 80 , 240 S.E.2d 284 (1977); Roberts v. Cameron-Brown Co., 556 F.2d 356 (5th Cir. 1977); Motor Fin. Co. v. Harris, 150 Ga. App. 762 , 258 S.E.2d 628 (1979); Peterson v. Newton, 151 Ga. App. 852 , 261 S.E.2d 763 (1979); Commercial Credit Plan, Inc. v. Parker, 152 Ga. App. 409 , 263 S.E.2d 220 (1979); Kellos v. Parker-Sharpe, Inc., 245 Ga. 130 , 263 S.E.2d 138 (1980); Kennedy v. Brand Banking Co., 245 Ga. 496 , 266 S.E.2d 154 (1980); Williams v. First Bank & Trust Co., 154 Ga. App. 879 , 269 S.E.2d 923 (1980); Adamson v. Trust Co. Bank, 155 Ga. App. 646 , 271 S.E.2d 899 (1980); Clark v. Kaiser Agric. Chems., 156 Ga. App. 251 , 274 S.E.2d 648 (1980); Thompson v. Hurt, 159 Ga. App. 656 , 284 S.E.2d 671 (1981); Dorfman v. Briah Assocs., 160 Ga. App. 359 , 287 S.E.2d 75 (1981); Cornelius v. Auto Analyst, Inc., 222 Ga. App. 759 , 476 S.E.2d 9 (1996); W. Sky Fin., LLC v. State of Ga. ex rel. Olens, 300 Ga. 340 , 793 S.E.2d 357 (2016).

Forfeiture

Operation of subsections (a) and (d) of this section. - Under former Code 1933, § 57-112, all interest on a usurious loan was forfeited and payments thereon go in reduction of principal, and any payments made after principal was paid off can be recovered, if paid within 12 months next before filing suit therefor. Hartsfield Co. v. Watkins, 67 Ga. App. 411 , 20 S.E.2d 440 (1942); Duderwicz v. Sweetwater Sav. Ass'n, 595 F.2d 1008 (5th Cir. 1979).

Under former Code 1933, § 57-112, one who lends at usurious rate forfeits interest and other charges for making the loan. Childs v. Liberty Loan Corp., 144 Ga. App. 715 , 242 S.E.2d 354 (1978).

Forfeiture extends to interest and charges not to principal. - One who lends at a usurious rate forfeits only interest and other charges for making loan - not principal. Service Loan & Fin. Corp. v. McDaniel, 115 Ga. App. 548 , 154 S.E.2d 823 (1967).

Usurious interest rate charged in a note did not void the entire transaction; thus, the interest, but not the principal was forfeited. Aikens v. Wagner, 231 Ga. App. 178 , 498 S.E.2d 766 (1998).

Entire interest forfeited. - Any person charging more than maximum rate of interest forfeits entire interest. Murdock Acceptance Corp. v. Wagnon, 587 F.2d 764 (5th Cir. 1979).

Unpaid interest forfeited. - Interest contracted for but not yet paid is subject to forfeiture. Duderwicz v. Sweetwater Sav. Ass'n, 595 F.2d 1008 (5th Cir. 1979).

Payments exceeding principal, not barred by statute of limitations. - Under former Code 1933, § 57-112 all money shown to have been paid in excess of principal amount of loan and not barred by statute of limitations was recoverable. Family Home Servs., Inc. v. Taylor, 142 Ga. App. 386 , 236 S.E.2d 28 (1977).

All interest forfeited when payments are applied to principal. - All interest is forfeited when loan is usurious and payments on such loan are applied to principal amount of debt. Hartsfield Co. v. Watkins, 67 Ga. App. 411 , 20 S.E.2d 440 (1942).

Prepaid finance charge is subject to forfeiture if loan is usurious. - Prepaid finance charge for making a loan which is not paid to a separate legal entity but to a lender in the lender's own right is subject to the forfeiture provision of former Code 1933, § 57-112 when the loan is usurious. Childs v. Liberty Loan Corp., 144 Ga. App. 715 , 242 S.E.2d 354 (1978).

Forfeiture of interest is only penalty when deed secures usurious debt. - Deed executed by a borrower purporting to convey title to the lender to secure a debt infected with usury was not void because so infected with usury. The only penalty to be incurred, under Acts 1916, p. 48, was to forfeit entire interest charged or taken, or contracted to be reserved, charged, or taken. McGraw v. Planters' Bank, 178 Ga. 580 , 173 S.E. 643 (1934).

Setoff

Usurious interest paid may not be setoff against independent claims or recovered per se after lapse of one year after its payment. Feeney Hay Co. v. Suggs, 60 Ga. App. 42 , 2 S.E.2d 806 (1939).

Statute of Limitations

Suit to recover forfeiture must be brought within one year from payment. Baker v. Moultrie Banking Co., 53 Ga. App. 107 , 184 S.E. 894 (1936).

Suits for recovery of forfeiture must be brought within 12 months from payment. Hartsfield Co. v. Watkins, 67 Ga. App. 411 , 20 S.E.2d 440 (1942).

Forfeiture referred to in former Code 1933, § 57-115 (see now O.C.G.A. § 7-4-10(d) ) was that provided for in former Code 1933, § 57-112 (see now O.C.G.A. § 7-4-10(a) ). Duderwicz v. Sweetwater Sav. Ass'n, 595 F.2d 1008 (5th Cir. 1979).

Subsection (d) not complete bar. - Rather than concluding that O.C.G.A. § 7-4-10(d) acts as a complete bar to actions filed more than a year after contract formation, the courts interpreting that section have held that the statute bars only actions to affirmatively recover interest paid more than a year before the action was instituted. Doyle v. Southern Guar. Corp., 795 F.2d 907 (11th Cir. 1986), cert. denied, 484 U.S. 926, 108 S. Ct. 289 , 98 L. Ed. 2 d 249 (1987).

Subsection (d) does not prevent plea claiming credit towards principal. - When a lender charges for use of money a greater rate of interest than is permitted by law, the whole charge for interest is forfeited, and all payments made by debtor may be claimed by the debtor as credits upon the principal sum loaned; to such claim, no matter when payments were made, statutory bar of one year is not applicable; and this is true even though the debtor may have given express direction that payments be applied to interest. Reconstruction Fin. Corp. v. Puckett, 181 Ga. 288 , 181 S.E. 861 (1935).

Limitation inapplicable to defensive pleading alleging payment of usurious debt. - Plea alleging payment of debt infected with usury may be properly filed to an action on debt, notwithstanding more than 12 months have elapsed after payment before plea is filed. Haskins v. Bank of State, 100 Ga. 216 , 27 S.E. 985 (1897), overruled on other grounds, Montgomery v. Reynolds, 124 Ga. 1053 , 53 S.E. 576 (1906); Atlanta Sav. Bank v. Spencer, 107 Ga. 629 , 33 S.E. 878 (1899); Lankford v. Peterson, 21 Ga. App. 1 , 93 S.E. 499 (1917).

Timely petition cannot be amended to recover usury barred by limitation. - Petition to recover usury cannot be amended by adding a count which seeks to recover for other usury paid on a date more than one year before tendering of amendment. Baker v. Moultrie Banking Co., 53 Ga. App. 107 , 184 S.E. 894 (1936).

Statute of limitations in National Banking Act inapplicable to usury defense. - Statutory limitation of two years in National Banking Act of June 3, 1864, c. 106, 13 Stat. 99, applies only to suit to recover penalty of double interest received or paid, and not to defense of usury to defeat recovery of interest, and begins to run from time of payment of usurious interest. Young v. First Nat'l Bank, 22 Ga. App. 58 , 95 S.E. 381 (1918).

RESEARCH REFERENCES

Am. Jur. 2d. - 44B Am. Jur. 2d, Interest and Usury, §§ 218 et seq., 242, 332 et seq.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, §§ 286 et seq., 325, 400, 401.

ALR. - Right to have usurious payments made on previous obligation applied as payment of principal on renewal, 13 A.L.R. 1244 .

Affirmative liability for usurious penalty or excess interest paid under usurious contract in event of assignment or transfer, 78 A.L.R. 408 .

Right to have usurious payments of interest applied as credit on principal as affected by statute of limitations, 101 A.L.R. 741 .

Validity or voluntary conveyance consideration for which was tainted by usury, 102 A.L.R. 483 .

When does limitation commence to run against action, defense, or counterclaim based on usury, 108 A.L.R. 622 .

Right of junior mortgagee to attack senior mortgage for usury, 121 A.L.R. 879 .

Usury as affecting conditional sale contract, 152 A.L.R. 598 .

Payment or offer to pay principal and interest as condition of relief in equity against usurious contract, 166 A.L.R. 458 .

Availability of setoff, counterclaim, or the like to recover either penalty for usury in, or usurious interest paid on, separate transaction or instrument, 54 A.L.R.2d 1344.

Right, in absence of statute expressly so providing, to recover back usurious payments, 59 A.L.R.2d 522.

Validity, and applicability to causes of action not already barred, of a statute enlarging limitation period, 79 A.L.R.2d 1080.

Statute of limitations: effect of delay in appointing administrator or other representative on cause of action accruing at or after death of person in whose favor it would have accrued, 28 A.L.R.3d 1141.

Validity under usury laws of provision calling for repayment of principal which exceeds sum loaned by amount reflecting any decline in purchasing power of dollar, 90 A.L.R.3d 763.

7-4-11. Usury is personal defense; no collection from insolvent to prejudice of others.

Usury is a personal defense; but a creditor may not collect usurious interest from an insolvent debtor to the prejudice of other creditors.

(Civil Code 1895, § 2878; Civil Code 1910, § 3428; Code 1933, § 57-103.)

History of section. - This section is derived from the decision in Burgwyn Bros., Tobacco Co. v. Bentley & Co., 90 Ga. 508 , 16 S.E. 216 (1892).

Law reviews. - For note discussing whether a holder in due course takes free of claims of violations of the usury laws, see 12 Ga. L. Rev. 814 (1978).

JUDICIAL DECISIONS

Defense of usury is personal to debtor, and may not be urged save by borrower or borrower's privies. Clark v. Kaiser Agric. Chems., 156 Ga. App. 251 , 274 S.E.2d 648 (1980); Plowden v. Peoples Fin. Corp. (In re Pair), 14 Bankr. 732 (Bankr. N.D. Ga. 1981).

Plea of usury is personal and because the usury laws protect the debtor, not the debt, the parties' various rights concerning the debt belongs to them only so long as they remain within a lender-borrower relationship. Lindenberg v. First Fed. Sav. & Loan Ass'n, 528 F. Supp. 440 (N.D. Ga. 1981), aff'd, 691 F.2d 974 (11th Cir. 1982).

Counterclaim or separate suit unnecessary. - Usury is a defense and need not be asserted as a counterclaim or in separate suit. Williams v. First Bank & Trust Co., 154 Ga. App. 879 , 269 S.E.2d 923 (1980).

Before defense raised, obligation to pay indebtedness prima facie valid. - Defense of usury is a matter personal to the debtor and, before the debtor has made such defense, the debtor's obligation to pay the indebtedness infected with usury is prima facie valid. Napier v. Jordan, 52 Ga. App. 585 , 183 S.E. 854 (1936).

Borrower cannot use usury statute to take advantage of own wrong. Eiberger v. West, 247 Ga. 767 , 281 S.E.2d 148 (1981).

Estoppel can lie to bar defense of usury. Eiberger v. West, 247 Ga. 767 , 281 S.E.2d 148 (1981).

Failure to plead usury results in an estoppel to rely upon it as a defense. Clark v. Kaiser Agric. Chems., 156 Ga. App. 251 , 274 S.E.2d 648 (1980).

One failing to set up defense of usury is concluded by judgment. Clark v. Kaiser Agric. Chems., 156 Ga. App. 251 , 274 S.E.2d 648 (1980).

Failure to raise defense of usury precludes attack levy of execution. - Debtor who has had the debtor's day in court will not be heard to attack levy of execution on ground that the debt was infected with usury. Wilkinson v. Holton, 119 Ga. 557 , 46 S.E. 620 (1904); Clark v. Kaiser Agric. Chems., 156 Ga. App. 251 , 274 S.E.2d 648 (1980).

Advertisement of collateral not tortious when defense not raised. - Fact that after creditor has advertised property for sale for payment of a usurious debt, the debtor, in a bill in equity to enjoin sale, sets up usury and shows that the debtor has paid all that the debtor was legally liable for, and obtains a judgment against the creditor for an amount which debtor overpaid, does not so relate as to give any tortious character to the creditor's original act in advertising property for sale. Napier v. Jordan, 52 Ga. App. 585 , 183 S.E. 854 (1936).

Creditor of insolvent may attack claim of another creditor as usurious. - While plea of usury is a personal one which can be set up by a debtor only, when the debtor is insolvent and there is a fund in court to be distributed, equity will allow one creditor to suggest usury as to claim of another, and compel usurious creditor to write off usury and receive only principal and legal interest. Stone v. Georgia Loan & Trust Co., 107 Ga. 524 , 33 S.E. 861 (1899).

Under former Civil Code 1895, § 2878 petitioning creditors in bankruptcy may attack validity of deed by which alleged bankrupt has conveyed to another creditor a valuable part of the bankrupt's estate on the ground that it was usurious, and the court of bankruptcy has power to enjoin the sale of property by the grantee pending adjudication of the question. In re Miller, 118 F. 360 (E.D. Ga. 1902).

Assignee of bond for title can attack conveyance to usurer. - Assignee of bond for title can attack in equity a conveyance to one who had advanced money to complete purchase for usury. First Nat'l Bank v. Rambo, 143 Ga. 665 , 85 S.E. 840 (1915).

Creditor of a party who makes a conveyance tainted with usury is a privy. Stone v. Georgia Loan & Trust Co., 107 Ga. 524 , 33 S.E. 861 (1899).

Cited in Western Union Tel. Co. v. Ryan, 126 Ga. 191 , 55 S.E. 21 (1906); Broach v. Mullis, 228 F. 551 (S.D. Ga. 1915); Peoples Bank v. Fidelity Loan & Trust Co., 155 Ga. 619 , 117 S.E. 747 (1923); Newcomb v. Niskey's Lake, Inc., 63 Ga. App. 811 , 12 S.E.2d 160 (1940); Clark v. Associate Disct. Corp., 92 Ga. App. 583 , 89 S.E.2d 208 (1955); Stein Steel & Supply Co. v. Briggs Mfg. Co., 219 Ga. 779 , 135 S.E.2d 862 (1962); Gazaway v. Israel, 107 Ga. App. 389 , 130 S.E.2d 269 (1963); Rahal v. Titus, 107 Ga. App. 844 , 131 S.E.2d 659 (1963); Thompson v. Hurt, 159 Ga. App. 656 , 284 S.E.2d 671 (1981).

RESEARCH REFERENCES

Am. Jur. 2d. - 44B Am. Jur. 2d, Interest and Usury, § 229.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, § 351.

ALR. - Right of junior mortgagee to attack senior mortgage for usury, 59 A.L.R. 342 ; 121 A.L.R. 879 .

Right of surety or guarantor to avail himself of defense of usury, 70 A.L.R. 359 .

Survival of claim for usury against estate of usurer, 78 A.L.R. 451 .

Who other than borrower may avail himself to latter's right to recover back usurious payments or penalties therefor, 82 A.L.R. 1008 ; 134 A.L.R. 1335 .

Validity, construction, and effect of express agreement releasing cause of action or defense based on exaction of usury, 99 A.L.R. 600 .

Estoppel to assert usury against innocent purchaser of usurious instrument, 110 A.L.R. 451 .

Statute denying defense of usury to corporation, 63 A.L.R.2d 924.

Right of attachment or judgment creditor, or officer standing in his shoes, to attack older lien or security interest for usury, 70 A.L.R.2d 1409.

7-4-12. Interest on judgments.

  1. All judgments in this state shall bear annual interest upon the principal amount recovered at a rate equal to the prime rate as published by the Board of Governors of the Federal Reserve System, as published in statistical release H. 15 or any publication that may supersede it, on the day the judgment is entered plus 3 percent.
  2. If the judgment is rendered on a written contract or obligation providing for interest at a specified rate, the judgment shall bear interest at the rate specified in the contract or obligation.
  3. The postjudgment interest provided for in this Code section shall apply automatically to all judgments in this state and the interest shall be collectable as a part of each judgment whether or not the judgment specifically reflects the entitlement to postjudgment interest.
  4. This Code section shall apply to all civil actions filed on or after July 1, 2003.

    (Laws 1845, Cobb's 1851 Digest, p. 394; Code 1863, § 2027; Code 1868, § 2028; Code 1873, § 2054; Code 1882, § 2054; Civil Code 1895, § 2882; Civil Code 1910, § 3432; Code 1933, § 57-108; Ga. L. 1980, p. 1118, § 1; Ga. L. 1986, p. 195, § 1; Ga. L. 1987, p. 352, § 1; Ga. L. 1989, p. 14, § 7; Ga. L. 2003, p. 820, § 1.)

Cross references. - Amount of judgment upon which interest may be charged, § 9-12-10 .

Pre-judgment interest in highway condemnation proceedings, § 32-3-19 .

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1988, the hyphen was deleted in the word "postjudgment" (in subsection (c)).

Pursuant to Code Section 28-9-5, in 2003, "July 1, 2003" was substituted for "the effective date of this Code section" in subsection (d).

Editor's notes. - Ga. L. 2003, p. 820, § 9, not codified by the General Assembly, provides that this Act "shall apply to all civil actions filed on or after July 1, 2003."

Law reviews. - For article discussing methods of computation of finance charges in Georgia consumer credit contracts, see 30 Mercer L. Rev. 281 (1978). For annual survey of trial practice and procedure, see 56 Mercer L. Rev. 433 (2004). For note on the 2003 amendment to this Code section, see 20 Ga. St. U.L. Rev. 28 (2003).

JUDICIAL DECISIONS

ANALYSIS

General Consideration

Construction with O.C.G.A. § 51-12-14 . - Trial court did not err in adding interest to the award before considering whether the judgment was greater than the demand for purposes of O.C.G.A. § 51-12-14 , as § 51-12-14 had to be construed in pari materia with § 7-4-12 ; post-judgment interest continued to accrue under O.C.G.A. § 7-4-12 until the set-off became effective under O.C.G.A. § 9-13-75 . Sec. Life Ins. Co. v. St. Paul Marine & Fire Ins. Co., 263 Ga. App. 525 , 588 S.E.2d 319 (2003).

Interest on judgments mandatory. - See Gunnin v. Parker, 198 Ga. App. 864 , 403 S.E.2d 822 , cert. denied, 198 Ga. App. 897 , 403 S.E.2d 822 (1991).

Judgment is a liquidated demand of highest dignity upon which creditor is entitled to interest. Executrix of Houston v. Mossman, 1 Ga. Rpt. Ann. (T.U.P.C. 138) 50 (1807).

Judgment for sum certain required. - Mandate of O.C.G.A. § 7-4-12 that judgments bear interest "upon the principal amount recovered..." presupposes the rendition of a judgment of a sum certain; thus, in an action seeking declaration of the value of a homeplace equity that was not established at the time of a divorce judgment, the former wife was entitled to interest from the date of the declaratory judgment, not from the date of entry of the divorce judgment. Brown v. Brown, 265 Ga. 725 , 462 S.E.2d 609 (1995).

Trial court did not err in denying a request for post-judgment interest since no judgment for a sum certain was entered. McClure v. Raper, 277 Ga. 642 , 594 S.E.2d 330 (2004).

Retroactivity of increase. - The 1980 amendment, which raised the interest on judgments from 7 percent to 12 percent, applied, as of July 1, 1980 (the effective date of the amendment), to judgments rendered before the effective date of the amendment but not satisfied by then. Shook & Fletcher Insulation Co. v. Central Rigging & Contracting Corp., 684 F.2d 1383 (11th Cir. 1982). But see DOT v. Delta Mach. Prods. Co., 162 Ga. App. 252 , 291 S.E.2d 104 (1982); Camellia Corp. v. Cornell, 162 Ga. App. 362 , 291 S.E.2d 556 (1982).

Application by federal court. - Federal district court used an interest rate of 12% based on O.C.G.A. § 7-4-12 , in computing the total amount of damages in an action for retirement benefits under the federal Employee Retirement Income Security Act, 29 U.S.C. § 1051 et seq. Williams v. Wright, 783 F. Supp. 1392 (S.D. Ga. 1992).

If forfeiture provision of § 7-4-10(a) applicable, judgment bears no interest. - If usurious interest was reserved for a loan of money, and in suit by lender against the debtor, the judgment was rendered for the principal amount only, interest being forfeited by virtue of Acts 1916, p. 48 (see now O.C.G.A. § 7-4-10(a) ), such judgment bears no interest as that Act prohibited recovery of any interest if usury was charged. Tennille Banking Co. v. Quinn, 156 Ga. 159 , 118 S.E. 644 (1923).

Commercial accounts. - Commercial account is not, by virtue of O.C.G.A. § 7-4-16 , regarding when interest runs on commercial accounts, transformed into such an "obligation" as would come within the exception to the standard post-judgment interest rate of 12 percent per year that is established by O.C.G.A. § 7-4-12 . ADC Constr. Co. v. Hall, 202 Ga. App. 119 , 413 S.E.2d 522 (1991).

Section applicable in action upon revolving account. - Although general usury statutes are inapplicable to revolving accounts, those statutes do apply to interest rates chargeable on judgments for actions on such accounts. Farmers Mut. Exch. of Wrens, Inc. v. Rabun, 145 Ga. App. 798 , 245 S.E.2d 52 (1978).

In proceeding to hold party in contempt for failure to make alimony and child-support payments under a divorce decree, the contempt judgment bears interest of 12 percent from the date of the judgment's entry. The court is vested with discretion in determining whether any interest is payable on the child-support arrearages prior to entry of the contempt judgment, which interest should be made part of the contempt judgment itself. Turner v. Turner, 251 Ga. 435 , 306 S.E.2d 650 (1983); Leroux v. Avera, 192 Ga. App. 210 , 384 S.E.2d 274 (1989).

Judgment against surety on supersedeas bond bears interest under this section. - Judgment in alimony suit against surety upon supersedeas bond given by the defendant for eventual condemnation money may, when remittitur from appellate court is received, affirming judgment, be rendered for full amount of all accrued unpaid installments due at time of entering of judgment, which necessarily represents eventual condemnation money. Such a judgment bears interest under former Civil Code 1910, § 3432 (see now O.C.G.A. § 7-4-12 ). Luke v. Luke, 32 Ga. App. 738 , 124 S.E. 556 (1924).

Judgment providing for interest on interest is erroneous. State Hwy. Dep't v. Godfrey, 118 Ga. App. 560 , 164 S.E.2d 340 (1968).

Cited in Sherwood v. Moore, 35 F. 109 (N.D. Ga. 1888); Sharpe v. City of Waycross, 185 Ga. 208 , 194 S.E. 522 (1937); Shedden v. National Florence Crittenton Mission, 191 Ga. 428 , 12 S.E.2d 618 (1940); Bank of Tupelo v. Collier, 192 Ga. 409 , 15 S.E.2d 499 (1941); Fried v. Morris & Eckels Co., 118 Ga. App. 595 , 164 S.E.2d 732 (1968); State Hwy. Dep't v. Owens, 120 Ga. App. 647 , 171 S.E.2d 770 (1969); Giant Peanut Co. v. Carolina Chems., Inc., 135 Ga. App. 597 , 218 S.E.2d 305 (1975); Laminoirs-Trefileries-Cableries de Lens, S.A. v. Southwire Co., 484 F. Supp. 1063 (N.D. Ga. 1980); FDIC v. Kucera Bldrs., Inc., 503 F. Supp. 967 (N.D. Ga. 1980); Pettigrew v. Houston's Bldg. Materials & Supply Co. (In re Guevara), 67 Bankr. 982 (Bankr. N.D. Ga. 1986); Camellia Corp. v. Cornell, 157 Ga. App. 625 , 278 S.E.2d 168 (1981); Swish Mfg. S.E., Inc. v. Wilkie, 158 Ga. App. 275 , 279 S.E.2d 724 (1981); DOT v. Cochran, 160 Ga. App. 583 , 287 S.E.2d 599 (1981); Upton v. Duck, 249 Ga. 267 , 290 S.E.2d 92 (1982); Stinson v. Georgia Dep't of Human Resources Credit Union, 171 Ga. App. 303 , 319 S.E.2d 508 (1984); Bowers v. Price, 171 Ga. App. 516 , 320 S.E.2d 211 (1984); Stuckey Health Care, Inc. v. State, 193 Ga. App. 771 , 389 S.E.2d 349 (1989); Nodvin v. West, 197 Ga. App. 92 , 397 S.E.2d 581 (1990); Hughes v. Great S. Midway, Inc., 265 Ga. 94 , 454 S.E.2d 130 (1995); Threatt v. Forsyth County, 262 Ga. App. 186 , 585 S.E.2d 159 (2003); Schoenbaum Ltd. Co., LLC v. Lenox Pines, LLC, 262 Ga. App. 457 , 585 S.E.2d 643 (2003); Interfinancial Midtown, Inc. v. Choate Constr. Co., 343 Ga. App. 793 , 806 S.E.2d 255 (2017).

Rates

Legal interest rates are prima-facie "equitable" and any award deviating from the legal rates must be based upon sufficient evidence demonstrating that another rate is appropriate. Atlantic States Constr., Inc. v. Beavers, 169 Ga. App. 584 , 314 S.E.2d 245 (1984).

Rate of interest. - Generally interest on a judgment is to be calculated at 7 percent (now 12 percent) per annum from date of judgment until payment, but when contract or note upon which action is based specifies a different rate, or where interest is prescribed by statute, the judgment thereon bears interest from the date of judgment at contract rate or at statutory rate. Chilivis v. Rogers Oil Co., 135 Ga. App. 176 , 217 S.E.2d 179 (1975).

District court did not abuse the court's discretion in looking to the state statutory interest rate for guidance in determining the appropriate pre-judgment interest rate. Smith v. American Int'l Life Assurance Co., 50 F.3d 956 (11th Cir. 1995).

Director was properly awarded 12 percent interest on a lost wages award as lost wages were not open accounts under O.C.G.A. § 7-4-2 . Gallagher v. McKinnon, 273 Ga. App. 727 , 615 S.E.2d 746 (2005).

Trial court properly ordered that a judgment in favor of the plaintiffs in a personal injury action would bear post-judgment interest at a rate of 12 percent because the version of O.C.G.A. § 7-4-12 which was in effect at the time of the filing of the action allowed that rate of interest. Ford Motor Co. v. Sasser, 274 Ga. App. 459 , 618 S.E.2d 47 (2005).

Shareholder's award of lost wages was not an open account; 12 percent interest was properly added to the award under O.C.G.A. § 7-4-12 as it existed at the time of the judgment. Gallagher v. McKinnon, 273 Ga. App. 727 , 615 S.E.2d 746 (2005).

In a suit in which an insured contended that an insurer acted with negligence or in bad faith in failing to honor an accident victim's time-sensitive demand for settlement in the amount of the policy limits, the insured was not precluded from seeking post-judgment interest, at a rate of 12% per annum, under O.C.G.A. § 7-4-12 upon a judgment that was rendered in 2004 in favor of the victim and against the insured simply because the insurer later tendered the policy limits. Hulsey v. Travelers Indem. Co. of Am., 460 F. Supp. 2d 1332 (N.D. Ga. 2006).

Trial court erred when the court imposed a fixed rate of interest on a judgment obtained by a class of retirees in their action against the Teachers Retirement System of Georgia, arising from their claims that they were not paid the appropriate amounts for their retirement benefits, as there was no pre- or post-judgment interest rate established by the written contract between the parties that governed those payments, such that the statutory rates of seven percent and prime plus three percent should have been applied pursuant to O.C.G.A. §§ 7-4-2(a)(1)(A) and 7-4-12(a) ; another interest rate that was set by the System in a regulation was not applicable to the instant matter. Teachers Ret. Sys. v. Plymel, 296 Ga. App. 839 , 676 S.E.2d 234 (2009).

Husband's concern about the interest rate of 11.25 percent imposed on an award of attorneys fees was justified under circumstances in which the husband asserted that the date of the judgment was October 1, 2007, and the applicable prime rate was 7.75 percent, while the wife argued that the applicable prime rate was 8.25 percent, the rate on July 20, 2007, the day the trial court orally pronounced the court's judgment; however, an oral pronouncement was not a judgment. It had to have been reduced to writing and entered as a judgment to have been effective. Mongerson v. Mongerson, 285 Ga. 554 , 678 S.E.2d 891 (2009), overruled on other grounds, 288 Ga. 670 , 706 S.E.2d 456 (2011).

Judgment exempted from statutory rate. - Although the record contained no written contract between the parties, when the plaintiff's complaint alleged that the defendants contracted, in addition to paying for the plaintiff's services, to pay the plaintiff 1.5 percent per month interest, this contractual provision constituted an obligation under O.C.G.A. § 7-4-12 , which exempted the judgment from the post-judgment rate of 12 percent. Sellers v. Nodvin, 207 Ga. App. 742 , 429 S.E.2d 138 (1993).

Timing

.

Money judgments bear interest from their dates of entry both at law and in equity. Guernsey v. Phinizy, 113 Ga. 898 , 39 S.E. 402 , 84 Am. St. R. 270 (1901).

Interest accrues until paid. - Under O.C.G.A. § 7-4-12 , interest on a judgment continues to accrue at the rate of 12 percent per annum until paid; such post-judgment interest is a damage that the plaintiffs recover against the defendants, and is included in calculating the recovery against it for purposes of O.C.G.A. § 51-12-14 , because post-judgment interest at 12 percent is intended to deter post-judgment delay, motions, and appeals and to bring finality to judgments or the defendant pays the price of protracted post-judgment litigation. Sec. Life Ins. Co. v. St. Paul Marine & Fire Ins. Co., 263 Ga. App. 525 , 588 S.E.2d 319 (2003).

Deposits in court not subject to prejudgment and postjudgment interest. - In a contract action, a party was not entitled to prejudgment and postjudgment interest when deposits were made pursuant to the requirements of O.C.G.A. § 9-11-67 . Sacha v. Coffee Butler Serv., Inc., 215 Ga. App. 280 , 450 S.E.2d 704 (1994).

Judgment in action of trover bears interest from time of entry. - Judgment in action of trover for gross amount made up of value of mules and their hire bears interest from time of entry. O'Neil Mfg. Co. v. Woodley, 118 Ga. 114 , 44 S.E. 980 (1903).

Postjudgment interest ran from date of original judgment entered on the jury's verdict, not from the date on which the judgment of the appellate court reversing the grant of the motion for JNOV was made the judgment of trial court. Wilensky v. Blalock, 205 Ga. App. 845 , 424 S.E.2d 26 (1992).

When two appeals were taken from an original judgment on a note, and the trial court's judgment in favor of the creditor as to liability on the note was affirmed in both appeals, postjudgment interest ran, not from the date the trial court adopted the appellate judgment, but from the date the original judgment was entered in the trial court. Groover v. Commercial Bancorp, 220 Ga. App. 13 , 467 S.E.2d 355 (1996).

Application

.

Interest on confirmed arbitration award. - Trial court properly awarded postjudgment interest after the court confirmed an arbitration award; once confirmed, the arbitration was treated like all other judgments, and under O.C.G.A. § 7-4-12(a) , all judgments bore annual interest on the principal amount recovered. Airtab, Inc. v. Limbach Co., LLC, 295 Ga. App. 720 , 673 S.E.2d 69 (2009).

Accrual of interest when more than one judgment entered. - When a first judgment lacks an evidentiary or legal basis, postjudgment interest accrues from the date of the second judgment; when the original judgment was basically sound but was modified on remand, postjudgment interest accrues from the date of the first judgment. CRS Sirrine, Inc. v. Dravo Corp., 219 Ga. App. 301 , 464 S.E.2d 897 (1995).

After the trial court's finding of liability was confirmed on appeal and the case was simply remanded for clarification of the damage award, and when the second judgment awarded exactly the same amount of damages, postjudgment interest would run from the date of the original judgment. CRS Sirrine, Inc. v. Dravo Corp., 219 Ga. App. 301 , 464 S.E.2d 897 (1995).

Deposit into registry of court for less than amount of entire judgment. - Defendant city's deposit into the registry of the court did not constitute a valid tender of the entire judgment in a condemnation action, notwithstanding that the deposit was in an amount greater than the judgment rendered for the plaintiff, since the deposit was for the payment of judgments rendered to two plaintiffs and was in an amount less than their combined judgments and, therefore, the plaintiff was entitled to postjudgment interest. Chouinard v. City of East Point, 248 Ga. App. 768 , 546 S.E.2d 827 (2001).

Post-judgment interest under O.C.G.A. § 13-6-11 . - Trial court properly excluded an award of pre-judgment interest in calculating the amount of post-judgment interest and properly applied post-judgment interest to the award of attorney fees under O.C.G.A. § 13-6-11 . Davis v. Whitford Props., 282 Ga. App. 143 , 637 S.E.2d 849 (2006).

As to postjudgment interest in condemnation cases, O.C.G.A. § 7-4-12 supersedes O.C.G.A. § 32-3-19 as § 7-4-12 is the more recent of the two. DOT v. Vest, 160 Ga. App. 368 , 287 S.E.2d 85 (1981).

Section does not apply to awards of special masters. - O.C.G.A. § 7-4-12 applies only to judgments; any interest accruing under O.C.G.A. § 22-2-113 for that period of time following an award of special master until the jury verdict and entry of final judgment is to be at the legal interest rate established by O.C.G.A. § 7-4-2 , such rate being 7 percent per annum. City of Atlanta v. Wright, 159 Ga. App. 809 , 285 S.E.2d 250 (1981).

Favorable judgment appellant entitled to interest during pendency of appeal. - One obtaining money judgment in lower court, who unsuccessfully appeals one's favorable judgment, is entitled to interest on one's judgment during the pendency of the appeal. Henley v. Mabry, 125 Ga. App. 293 , 187 S.E.2d 309 (1972).

Interest on a favorable judgment is not abated by appealing that judgment. Heath v. L.E. Schwartz & Sons, 203 Ga. App. 91 , 416 S.E.2d 113 (1992).

Filing of garnishment proceedings by the judgment creditor during the pendency of an appeal by the debtor did not toll the accrual of post-judgment interest, even if the garnishee paid the funds into the court. Great S. Midway, Inc. v. Hughes, 223 Ga. App. 643 , 478 S.E.2d 400 (1996).

When a claim for principal judgment debt interest arises in a later-filed garnishment action, it is more akin to a request for prejudgment interest because the judgment creditor seeks to recover interest running from before the trial court enters judgment in the garnishment action and, in fact, from before the garnishment action was even commenced. St. Paul Reinsurance Co. v. Ross, 276 Ga. App. 135 , 622 S.E.2d 374 (2005).

Administrator acting as mere stakeholder is not liable for interest on judgment rendered against the administrator when the administrator did not make an appeal and was at all times ready to make payment. Truett v. Williams, 101 Ga. 311 , 28 S.E. 851 (1897).

Operation of section in condemnation proceedings under "three assessor" law contained in Title 22. - When, in condemnation proceeding under the "three assessor" law as contained in Title 22, the amount of the final judgment is less than the award made by the assessors, condemnee is not liable for a refund of interest on the difference in the amount of the award and judgment except from the date of judgment. City of Atlanta v. Lunsford, 105 Ga. App. 247 , 124 S.E.2d 493 (1962).

Verdict need not provide for future interest. - As all judgments bear interest from the date of rendition under former Civil Code, § 3432 (see now O.C.G.A. § 7-4-12 ), it is immaterial that the verdict does not provide for future interest and judgment, insofar as the verdict provides for future interest, is lawful, and is not invalid upon ground that the judgment does not follow the verdict. Lang v. South Ga. Inv. Co., 38 Ga. App. 430 , 144 S.E. 149 (1928).

Judgment for principal and interest due bears interest only upon principal. - Judgment may be legally entered for principal sum and interest due on claim sued on to the date of judgment. However, such judgment only bears interest from its date on principal sum. The interest found to be due at date of judgment does not bear interest. Southern Loan Co. v. McDaniel, 50 Ga. App. 285 , 177 S.E. 834 (1934); West v. Jamison, 182 Ga. App. 565 , 356 S.E.2d 659 (1987).

Objection to judgment bearing interest on principal and interest well taken. - Objection that when verdict included both principal and interest in one gross sum, and that unless corrected the judgment entered thereon would bear interest against the defendant upon both principal and interest of the balance of the original debt, was well taken under former Code 1882, § 2054. Hubbard v. McRae, 95 Ga. 705 , 22 S.E. 714 (1895); Linder v. Renfroe, 1 Ga. App. 58 , 57 S.E. 975 (1907).

When verdict does not separate principal and interest, new trial granted. - When verdict in favor of the plaintiff manifestly includes both principal and interest, and does not specifically separate the amount of each, a new trial will be granted. Bentley v. Phillips, 171 Ga. 866 , 156 S.E. 898 (1930).

Interest on vacated partial summary judgment not awardable. - Although a partial summary judgment is a judgment for purposes of O.C.G.A. § 7-4-12 , when the court vacated such a judgment, no post-judgment interest could be awarded on that judgment. Crolley v. Haygood Contracting, Inc., 207 Ga. App. 434 , 429 S.E.2d 93 (1993).

Bankruptcy "cramdown" provisions. - Motor vehicle finance company was entitled to receive interest from bankruptcy debtor under the Chapter 13 cramdown provisions at the state legal rate of 12%, and not at the installment contract rate of 14%, since there was no evidence other than the contract of a prevailing rate other than 12%, and since there was no evidence that the debtors acted in bad faith in proposing the Chapter 13 plan. In re Mitchell, 191 Bankr. 957 (Bankr. M.D. Ga. 1995).

Effect of party's dilatory practices. - Plaintiff, a long-term disability benefits claimant, sought pre-judgment interest under O.C.G.A. § 7-4-12 on a benefits award against the defendant plan administrator; however, denial of interest was not an abuse of discretion since the amount of interest sought was greater than the claimant's award of benefits and claimant bore some fault for the extended period of time required to litigate the case due to the claimant's several amended complaints, requests to extend discovery times and other deadlines, and motion to disqualify the judge. Byars v. Coca-Cola Co., 517 F.3d 1256 (11th Cir. 2008).

Interest award reversed. - Award of interest for a client against an attorney from the date that the client satisfied an underlying judgment against the client, the client's son, and the attorney had no legal basis and was reversed; it had been established that the client, the client's son, and the attorney were joint tortfeasors and while O.C.G.A. § 10-7-51 authorized the award of interest running from the date of a co-surety's payment of a joint obligation, it applied to contribution actions arising from joint instruments executed by the sureties, not to joint tortfeasors. The issue was not controlled by O.C.G.A. § 9-13-78 as the statute provided a method of enforcing contribution from a joint defendant and it did not purport to control an award of interest; O.C.G.A. § 7-4-12 provided that all money judgments bore post-judgment interest from the date of entry. Gerschick v. Pounds, 281 Ga. App. 531 , 636 S.E.2d 663 (2006), cert. denied, No. S07C0191, 2007 Ga. LEXIS 95 (Ga. 2007).

OPINIONS OF THE ATTORNEY GENERAL

Distinction between condemnation cases based on date filed. - Condemnation cases filed before July 1, 1980, bear interest at 7 percent on amount recovered from date of taking. Cases filed on and after July 1, 1980, bear interest at 7 percent from date of taking to date of final judgment and at 12 percent from date of final judgment. 1980 Op. Att'y Gen. No. 80-100.

RESEARCH REFERENCES

Am. Jur. 2d. - 44B Am. Jur. 2d, Interest and Usury, § 51.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, § 60 et seq.

ALR. - Statute of limitation applicable to interest on judgment, 120 A.L.R. 719 .

Time when interest ceases to run upon obligation secured by lien transferred to proceeds of sale of the property free from liens in receivership, bankruptcy, or other proceedings, 134 A.L.R. 846 .

Date of verdict or date of entry of judgment thereon as beginning of interest period on judgment, 1 A.L.R.2d 479.

Recovery of interest on claim against a governmental unit in absence of provision in contract or express statutory provision, 24 A.L.R.2d 928.

Right to interest on unpaid alimony, 33 A.L.R.2d 1455.

Interest on decree or judgment of Probate Court allowing a claim against estate or making an allowance for services, 54 A.L.R.2d 814.

Interest upon arrearages or unpaid accumulations of annuities, 66 A.L.R.2d 857.

Date from which interest on judgment starts running, as affected by modification of amount of judgment on appeal, 4 A.L.R.3d 1221.

Right to interest, pending appeal, of judgment creditor appealing unsuccessfully on ground of inadequacy, 15 A.L.R.3d 411; 11 A.L.R.4th 1099.

Running of interest on judgment where both parties appeal, 11 A.L.R.4th 1099.

Retrospective application and effect of state statute or rule allowing interest or changing rate of interest on judgments or verdicts, 41 A.L.R.4th 694.

Divorce and separation: award of interest on deferred installment payments of marital asset distribution, 10 A.L.R.5th 191.

Date on which postjudgment interest, under 28 USCS sec. 1961 (a), begins to accrue on federal court's award of attorneys' fees, 111 A.L.R. Fed. 615.

Determination of appropriate Chapter 11 "cramdown" rate of interest, 17 A.L.R. Fed. 3d 8.

7-4-12.1. Interest on arrearage on child support.

  1. All awards, court orders, decrees, or judgments rendered pursuant to Title 19 expressed in monetary amounts shall accrue interest at the rate of 7 percent per annum commencing 30 days from the date such award, court order, decree, or judgment is entered or an installment payment is due, as applicable. The court may modify the date on which interest shall begin to accrue. It shall not be necessary for the party to whom the child support is due to reduce any such award to judgment in order to recover such interest. The court shall have discretion in applying or waiving past due interest. In determining whether to apply, waive, or reduce the amount of interest owed, the court shall consider whether:
    1. Good cause existed for the nonpayment of the child support;
    2. Payment of the interest would result in substantial and unreasonable hardship for the parent owing the interest;
    3. Applying, waiving, or reducing the interest would enhance or detract from the parent's current ability to pay child support, including the consideration of the regularity of payments made for current child support of those dependents for whom support is owed; and
    4. The waiver or reduction of interest would result in substantial and unreasonable hardship to the parent to whom interest is owed.
  2. Subsection (a) of this Code section shall not be construed to abrogate the authority of the Department of Human Services to waive, reduce, or negotiate a settlement of unreimbursed public assistance in accordance with subsection (b) of Code Section 19-11-5.
  3. Notwithstanding Code Section 7-4-12 , 7-4-15 , 9-12-10 , or 13-6-13 , when an award, court order, decree, or judgment for alimony or equitable division of assets and liabilities is payable in installments, interest on such award, court order, decree, or judgment shall not begin to accrue until an installment is 30 days past due unless otherwise ordered by the court. (Code 1981, § 7-4-12 .1, enacted by Ga. L. 1996, p. 649, § 1; Ga. L. 2005, p. 224, § 3/HB 221; Ga. L. 2006, p. 583, § 2/SB 382; Ga. L. 2010, p. 878, § 7/HB 1387; Ga. L. 2015, p. 34, § 1/HB 347; Ga. L. 2017, p. 646, § 2-1/SB 137.)

The 2015 amendment, effective April 2, 2015, in subsection (a), rewrote the first sentence, which read: "All awards of child support expressed in monetary amounts shall accrue interest at the rate of 7 percent per annum commencing 30 days from the day such award payment is due.", added the present second sentence, and deleted the former second sentence, which read: "This Code section shall apply to all awards, court orders, decrees, and judgments rendered pursuant to Title 19."; substituted "Subsection (a) of this Code section" for "This Code section" at the beginning of subsection (b); and added subsection (c). See editor's note for applicability.

The 2017 amendment, effective July 1, 2017, substituted "the Department of Human Services" for "a IV-D agency" in the middle of subsection (b).

Editor's notes. - Ga. L. 2005, p. 224, § 1/HB 221, not codified by the General Assembly, provides that: "The General Assembly finds and declares that it is important to assess periodically child support guidelines and determine whether existing guidelines continue to be viable and effective or whether they have failed or ceased to accomplish their original policy objectives. The General Assembly further finds that supporting Georgia's children is vitally important to the citizens of Georgia. Therefore, the General Assembly has determined that it is in the best interests of the state and its citizenry to undertake an evaluation of the child support guidelines on a continuing basis. The General Assembly declares that it is important that all of Georgia's children are provided with adequate financial support whether the children's parents are living together or not living together. The General Assembly finds that both parents have a continuing obligation with respect to providing financial and emotional stability for their child or children. It is the hope of the members of the General Assembly that all parents work together to advance the best interest of their children."

Ga. L. 2006, p. 583, § 8/SB 382, not codified by the General Assembly, amended Ga. L. 2005, p. 224, § 13/HB 221, so as to delay the effective date of the 2005 amendment to this Code section until January 1, 2007.

Ga. L. 2006, p. 583, § 9, not codified by the General Assembly, provided that it was the intention of the 2006 Act to delay for six months the effectiveness of the provisions of 2005 Act No. 52 (Ga. L. 2005, p. 224) of the General Assembly, excepting only those provisions of 2005 Act No. 52 (Ga. L. 2005, p. 224) creating the Georgia Child Support Commission which went into effect upon approval of that Act by the Governor.

Ga. L. 2006, p. 583, § 10(b)/SB 382, not codified by the General Assembly, provides: "Sections 1 through 7 of this Act shall become effective on January 1, 2007, and shall apply to all pending civil actions on or after January 1, 2007."

Ga. L. 2015, p. 34, § 2/HB 347, not codified by the General Assembly, provides: "This Act shall become effective upon its approval by the Governor or upon its becoming law without such approval and shall apply to all civil actions pending on or after such effective date." This Act became effective April 2, 2015.

Law reviews. - For annual survey of domestic relations law, see 56 Mercer L. Rev. 221 (2004). For article on 2005 amendment of this Code section, see 22 Ga. St. U.L. Rev. 73 (2005). For article on 2006 amendment of this Code section, see 23 Ga. St. U.L. Rev. 103 (2006).

JUDICIAL DECISIONS

Res judicata. - Because the issue of interest on past due child support was not put in issue and decided in a prior contempt proceeding related to a father's failure to pay child support, res judicata did not bar a subsequent judgment for interest on the past due child support amounts; it is undisputed that O.C.G.A. § 7-4-12.1 applies retroactively. Dial v. Adkins, 265 Ga. App. 650 , 595 S.E.2d 332 (2004).

No enforceable contract to collect post-judgment interest on unpaid child support. - Trial court's grant of summary judgment in favor of the Georgia Department of Human Resources, Office of Child Support enforcement, was upheld on appeal in a class action suit brought by a recipient challenging the department's failure to collect post-judgment interest on unpaid child support since a statement of understanding, though stating it was a contract, afforded complete discretion to the department in rendering services and used the vague term appropriate services, which rendered the purported agreement too vague and uncertain to be enforced as a contract. Kennedy v. Ga. Dep't of Human Res. Child Support Enforcement, 286 Ga. App. 222 , 648 S.E.2d 727 (2007).

Retroactive application. - Legislative intent of adopting O.C.G.A. § 7-4-12.1 was to have it apply to all child support arrearages, regardless of whether arrearages accrued prior to July 1, 1996. Reid v. Reid, 232 Ga. App. 304 , 502 S.E.2d 269 (1998).

Amended version of O.C.G.A. § 7-4-12.1 applies to all civil actions that were filed when the former version of the statute was effective but were still pending on or after January 1, 2007; the amended version of § 7-4-12.1 makes changes related to interest on child support arrearage that are remedial rather than substantive, and therefore retroactive application does not impair vested substantive rights. Gowins v. Gary, 284 Ga. App. 370 , 643 S.E.2d 836 (2007), rev'd on other grounds, 283 Ga. 433 , 658 S.E.2d 575 (2008).

Cited in Mullin v. Roy, 287 Ga. 810 , 700 S.E.2d 370 (2010).

7-4-13. Law of place of contract governs interest unless otherwise provided.

Every contract shall bear interest according to the law of the place of the contract at the time of the contract, unless upon its face it shall be apparent that the intention of the parties was to adopt the law of another forum; in this case the law of that forum shall govern.

(Orig. Code 1863, § 2026; Code 1868, § 2027; Code 1873, § 2053; Code 1882, § 2053; Civil Code 1895, § 2880; Civil Code 1910, § 3430; Code 1933, § 57-106.)

Law reviews. - For article on choice-of-law of contracts in Georgia, see 21 Mercer L. Rev. 389 (1970).

JUDICIAL DECISIONS

ANALYSIS

General Consideration

O.C.G.A. § 7-4-13 has been interpreted as a choice of law provision which determines which state's usury laws are controlling. FDIC v. Lattimore Land Corp., 656 F.2d 139 (5th Cir. 1981).

Determination of place of contract. - See Folsom v. Continental Adjustment Corp., 48 Ga. App. 435 , 172 S.E. 833 (1934).

Law of place of performance governs interest. - General rule that interest which contract shall bear is to be governed by law of place where it is to be performed applies to contracts legal where made. Martin v. Johnson, 84 Ga. 481 , 10 S.E. 1092 , 8 L.R.A. 170 (1890).

On contracts made in one state to be performed in another, if the contracts bear interest, the law of the state where the contracts are to be performed governs the rate of interest to be paid. Vinson v. Platt & McKenzie, 21 Ga. 135 (1857).

Parties to a private contract who admittedly made loans to Georgia residents could not, by virtue of a choice of law provision, exempt themselves from investigation for potential violations of Georgia's usury laws. BankWest, Inc. v. Oxendine, 266 Ga. App. 771 , 598 S.E.2d 343 (2004).

Dealings with foreign corporation governed by laws of its domicile. - Dealings in Indiana with corporation chartered by that state are governed by its laws, and when attacked here for usury, provisions of such laws applicable to the transaction must be made to appear. Flournoy & Epping v. First Nat'l Bank, 79 Ga. 810 , 2 S.E. 547 (1887).

Place of preliminary negotiations does not determine place of contract. - Where land was located in Georgia and all papers executed therein, mere fact that negotiations preliminary to execution of papers took place in Florida does not alter fact that this is a Georgia contract. First Nat'l Bank v. Rambo, 143 Ga. 665 , 85 S.E. 840 (1915).

Federal law was intended to preempt conflicting state law in the area of due-on-sale home loan assumption practices of federal savings and loan associations, and federal law permits the escalation of interest rates upon the assumption of a residential purchase loan when there is an appropriate provision in the contract. Lindenberg v. First Fed. Sav. & Loan, 691 F.2d 974 (11th Cir. 1982).

Section applicable when note executed in another state. - When note is executed and made payable in another state, even though secured by a deed to land in this state, the rate of interest on the note is governed by usury laws of the sister state. Jones v. Lawman, 56 Ga. App. 764 , 194 S.E. 416 (1937); Clark v. Transouth Fin. Corp., 142 Ga. App. 389 , 236 S.E.2d 135 (1977).

Georgia law applies when contract executed and payable in Georgia. - Choice of law rule holds that when: (1) land held by security deed is in Georgia; (2) contract was executed in Georgia; and (3) contract was made payable in Georgia, law of usury applies as Georgia is place of performance of contract. FDIC v. Lattimore Land Corp., 656 F.2d 139 (5th Cir. 1981).

Applicability of common law of Georgia. - When a promissory note is both executed and to be performed in another state, in an attack by the maker upon a note for usury, in an action brought in this state against the maker by the holder, when laws of the foreign states regulating interest charges and usury do not appear, the common law will be presumed to be there in force, and the right to collect interest in such suit, unless contrary to public policy or specific statutes of this state, will be governed by common law as it has been construed and applied in this state. Folsom v. Continental Adjustment Corp., 48 Ga. App. 435 , 172 S.E. 833 (1934).

When evidence is silent as to legal interest in another state, common law is presumed to govern, and a contract for reasonable interest is allowed. Thomas v. Clarkson, 125 Ga. 72 , 54 S.E. 77 , 6 L.R.A. (n.s.) 658 (1906); Ellington v. Harris, 127 Ga. 85 , 56 S.E. 134 , 119 Ann. Cas. 320 (1906).

Subsequent agreements governed by laws as of date made. - Parties are free to bargain away their rights, and once the borrower is released from liability, whether by novation, a loan modification, or any other means, subsequent agreements for repayments of the debt are governed by the laws as of the date they are made, and not the date of the creation of the debt. Lindenberg v. First Fed. Sav. & Loan Ass'n, 528 F. Supp. 440 (N.D. Ga. 1981), aff'd, 691 F.2d 974 (11th Cir. 1982).

Transactions involving the assumption of home loan obligations, the release of borrowers, and the substitution of new parties at escalated interest rates resulted in new contracts, notwithstanding that the loan modification agreements were not intended to be novations; so the date of the loan assumptions, rather than the original date of the notes, controlled the applicable usury rates. Lindenberg v. First Fed. Sav. & Loan, 691 F.2d 974 (11th Cir. 1982).

Facts resulting in finding of Georgia contract. - See Taylor v. American Freehold Land-Mortgage Co., 106 Ga. 238 , 32 S.E. 153 (1898).

Facts resulting in finding of out-of-state contract. - See Goodrich v. Williams, 50 Ga. 425 (1873).

Party must plead and prove interest or usury laws of other state. - When another state's law applies, provision of law applicable must be made to appear. Since courts of this state will not take cognizance of interest or usury laws of another state it is essential that the defendant, if the defendant wishes to avail oneself of defense of usury, plead and prove laws of other state in this respect, and that such laws were in force at time of execution of note. Jones v. Lawman, 56 Ga. App. 764 , 194 S.E. 416 (1937).

Cited in Byrd v. Equitable Life Assurance Soc'y, 185 Ga. 628 , 196 S.E. 63 (1938); In re Georgia, Fla. & Ala. R.R, 88 F. Supp. 796 (M.D. Ga. 1950); Liberty Loan Corp. v. Crowder, 116 Ga. App. 280 , 157 S.E.2d 52 (1967); Midland Guardian Co. v. Varnadore, 148 Ga. App. 742 , 252 S.E.2d 685 (1979); Christiansen v. Beneficial Nat'l Bank, 972 F. Supp. 681 (S.D. Ga. 1997).

Intent of Parties

Georgia law governs when contract so stipulates. - When note, executed in this state, is made payable in the State of New York, and is secured by a mortgage which stipulates contract and note shall in all respects be construed according to the laws of Georgia, and the note on the note's face bears interest at the rate of 8 percent per annum, which is legal in Georgia, the entire amount of such interest is collectible in this state, notwithstanding that the maximum legal rate of interest in the State of New York may be less than 8 percent. New England Mtg. Sec. Co. v. McLaughlin, 87 Ga. 1 , 13 S.E. 81 (1891).

Security deeds are relevant in indicating situs contemplated in fixing rate of interest on note. Clark v. Transouth Fin. Corp., 142 Ga. App. 389 , 236 S.E.2d 135 (1977).

Facts evidencing intent of parties that Georgia law apply. - See Underwood v. American Mtg. Co., 97 Ga. 238 , 24 S.E. 847 (1895).

Evidence

No presumption of usury absent proof of other state's usury law. - When there is no proof as to statute of usury of another state, there will be no presumption that the contract is usurious. Rooney v. Southern Bldg. & Loan Ass'n, 119 Ga. 941 , 47 S.E. 345 (1904).

In ascertaining another state's usury laws, courts are confined to evidence introduced. - It is not permissible for courts of this state to avail themselves of any means of ascertaining what are laws of another state on subject of usury, other than by evidence introduced. Champion v. Wilson & Co., 64 Ga. 184 (1879); Craven v. Bates, Kingsbery & Co., 96 Ga. 78 , 23 S.E. 202 (1895).

One pleading another state's statute must show that the statute was in force at the contract's execution. Thomas v. Clarkson, 125 Ga. 72 , 54 S.E. 77 , 6 L.R.A. (n.s.) 658 (1906).

Evidence necessary for finding that foreign contract is usurious. - For jury to find that the contract made and to be performed in another state was void for usury, evidence must show that the rate of interest agreed to be taken was in excess of the rate allowed by the law of such state. Mayor of Griffin v. Inman, Swann & Co., 57 Ga. 370 (1876).

Insufficient showing as to other state's usury laws. - See Craven v. Bates, Kingsbery & Co., 96 Ga. 78 , 23 S.E. 202 (1895).

RESEARCH REFERENCES

Am. Jur. 2d. - 44B Am. Jur. 2d, Interest and Usury, §§ 13, 17, 18.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, § 79 et seq.

ALR. - Time at which interest is payable under will or contract providing for payment of interest, 10 A.L.R. 997 .

Validity of agreement to pay interest on interest, 37 A.L.R. 325 ; 76 A.L.R. 1484 .

Right of holder of preferred claim to interest after appointment of receiver or declared bankruptcy or insolvency, where assets are insufficient to pay principal of all claims, 69 A.L.R. 1210 .

Law of the forum as governing the right to and rate of interest as damages for delay in payment of money or discharge of other obligations, 78 A.L.R. 1047 .

Who other than borrower may avail himself to latter's right to recover back usurious payments or penalties therefor, 82 A.L.R. 1008 ; 134 A.L.R. 1335 .

7-4-14. Interest runs from default unless otherwise agreed; when demand necessary.

In the absence of an agreement to the contrary, interest shall not run until default; hence, where money can be recovered because of mistake or other like reasons, no interest shall run until after demand and refusal to refund.

(Civil Code 1895, § 2881; Civil Code 1910, § 3431; Code 1933, § 57-107.)

History of section. - This Code section is derived from the decision in Georgia R.R. & Banking Co. v. Smith, 83 Ga. 626 , 10 S.E. 235 (1889).

Law reviews. - For survey article on trial practice and procedure, see 60 Mercer L. Rev. 397 (2008).

JUDICIAL DECISIONS

ANALYSIS

General Consideration

Interest accrues after default on interest-free contract. - Stipulation in contract for sale of goods, to be delivered within a reasonable time in the future and to be paid for on delivery, to effect that obligation of purchaser is to bear no interest, does not mean that the purchaser would not be required to pay interest in case of and after the purchaser's default, but was merely a provision against payment of interest prior to maturity of purchase-money. Morgan v. Colt Co., 34 Ga. App. 630 , 130 S.E. 600 (1925).

Interest note is liquidated demand which bears interest at maturity. - When obligation to pay interest is put in form of interest note, that note becomes a liquidated demand; and when the note is not paid at maturity the note bears interest as such, certainly if parties have contracted that it should. Walton v. Johnson, 213 Ga. 108 , 97 S.E.2d 310 (1957).

Good faith diversion of funds insufficient to bring case within section. - That diversion of funds was made in good faith and with honest intentions is not sufficient to bring a case within former Civil Code 1895, § 2881. Davidson v. Story, 106 Ga. 799 , 32 S.E. 867 (1899).

Trustee is chargeable with legal rate of interest from date of breach of trust. Allen v. Allen, 198 Ga. 269 , 31 S.E.2d 483 (1944).

Interest charged from time of appropriation for improper retention of fees. - When executor improperly retained attorney's fees for services rendered by the executor it is proper to charge the executor with interest from time such fees were appropriated. Davidson v. Story, 106 Ga. 799 , 32 S.E. 867 (1899).

Interest recoverable from time of discharge upon payment of spouse's debt. - When wife did not demand repayment of money with which she discharged her husband's debt until sometime subsequent to its payment, she could recover interest thereon from the time of its payment. Bank of Waynesboro v. Walters, 135 Ga. 643 , 70 S.E. 244 (1911).

Interest recoverable from date of contract made by incompetent party. - When one not having capacity to contract is induced by undue influence to pay over money under contract, interest may be recovered from date of the contract if recovery allowed at all. Newman v. Thompson, 134 Ga. 137 , 67 S.E. 662 (1910).

Cited in Cochran v. City of Thomasville, 167 Ga. 579 , 146 S.E. 462 (1928); Mendenhall v. Nalley, 81 Ga. App. 517 , 59 S.E.2d 283 (1950); Carroll v. Taylor, 87 Ga. App. 815 , 75 S.E.2d 346 (1953); Jenkins v. Tastee-Freez of Ga., Inc., 114 Ga. App. 849 , 152 S.E.2d 909 (1966); Northside Envtl. Servs., Inc. v. National Bank, 191 Ga. App. 348 , 381 S.E.2d 536 (1989); SunTrust Bank v. Hightower, 291 Ga. App. 62 , 660 S.E.2d 745 (2008).

Mistake

When payment is by mistake, interest does not run until after demand. - When money is paid by mistake, and there is no fraud or misconduct by the party receiving the money, interest does not run until after demand, since prior to demand, by suit or otherwise, the receiver is in no default. Trustees of Jesse Parker Williams Hosp. v. Nisbet, 191 Ga. 821 , 14 S.E.2d 64 (1941).

General rule is that on money paid by mistake, when there is no fraud or misconduct by the party receiving the money, interest does not run until after demand. Dell v. Kugel, 99 Ga. App. 551 , 109 S.E.2d 532 (1959).

In an action for money had and received brought to recover money paid and received by reason of mutual mistake of law, interest accrues not from the time the money is received, but from date on which demand for the money's return is made. Dell v. Kugel, 99 Ga. App. 551 , 109 S.E.2d 532 (1959).

Former Code 1933, § 57-107 is not limited to a mistake of fact; there can be a mistake as to the law in good faith. Keen v. Lewis, 215 Ga. 166 , 109 S.E.2d 764 (1959).

Section applicable only when money recoverable. - Former Code 1933, § 57-107 applicable only when money, paid by mistake or other like reason, can be recovered, and has no reference to situations when a trustee has converted property of another to the trustee's own use. Allen v. Allen, 198 Ga. 269 , 31 S.E.2d 483 (1944).

Obligations Payable On Demand

When salary is demanded and refused, judgment may bear interest. - There is a definite contractual relation between every employee and employer, whether the employee is a public officer or not, which entitles the employee to payment of the employee's salary, and when a demand is made therefor and refused, the court may award interest on the salary. Undercofler v. Scott, 220 Ga. 406 , 139 S.E.2d 299 (1964).

Interest on claim due on notice and demand runs from demand. - When claim is due only on notice and demand upon donee, interest on such claim runs only from demand. Trustees of Jesse Parker Williams Hosp. v. Nisbet, 191 Ga. 821 , 14 S.E.2d 64 (1941).

Legacy payable at discretion does not bear interest until after demand. - When legacy is placed in the hands of a person with discretion as to payment, it does not bear interest until after the date of demand for payment. Harrison v. Watkins, 127 Ga. 314 , 56 S.E. 437 (1907).

Deposit for certiorari does not bear interest until after demand. - When it is necessary for allowance of certiorari that the deposit of fine and costs for violation of a city ordinance be made, deposit does not bear interest until after the demand. Mayor of Savannah v. Kassell, 115 Ga. 310 , 41 S.E. 572 (1902).

When guarantor agreed to pay certain sum, interest does not run until demand has been made upon the guarantor. Manry v. Waxelbaum Co., 108 Ga. 14 , 33 S.E. 701 (1899).

No prejudgment interest absent demand for return of purchase money. - In determining that a tax sale was void, the superior court properly held that a buyer of real property was entitled to a refund of the purchase price the buyer paid for the property, but the buyer could not recover prejudgment interest, as the buyer failed to make an unequivocal demand for the return of the buyer's purchase money. Harpagon Co. v. Freeman, 281 Ga. 531 , 640 S.E.2d 268 (2007).

RESEARCH REFERENCES

Am. Jur. 2d. - 44B Am. Jur. 2d, Interest and Usury, §§ 62, 63.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, § 103.

ALR. - Time at which interest is payable under will or contract providing for payment of interest, 10 A.L.R. 997 .

When contract construed to require interest to be paid in advance, 39 A.L.R. 951 .

Who other than borrower may avail himself to latter's right to recover back usurious payments or penalties therefor, 82 A.L.R. 1008 ; 134 A.L.R. 1335 .

Liability of Federal Deposit Insurance Corporation for interest in respect of insured deposit, 153 A.L.R. 532 .

7-4-15. When interest runs on liquidated demands; promissory notes payable on demand.

All liquidated demands, where by agreement or otherwise the sum to be paid is fixed or certain, bear interest from the time the party shall become liable and bound to pay them; if payable on demand, they shall bear interest from the time of the demand. In case of promissory notes payable on demand, the law presumes a demand instantly and gives interest from date.

(Laws 1799, Cobb's 1851 Digest, p. 405; Ga. L. 1858, p. 90, § 1; Code 1863, § 2029; Code 1868, § 2030; Code 1873, § 2056; Code 1882, § 2056; Civil Code 1895, § 2884; Civil Code 1910, § 3434; Code 1933, § 57-110.)

Law reviews. - For article, "2015 Georgia Corporation and Business Organization Case Law Developments," see 21 Ga. St. Bar. J. 30 (Apr. 2016). For note discussing usury law application to interest charged on liquidated demands and promissory notes payable on demand, see 12 Ga. L. Rev. 814 (1978).

JUDICIAL DECISIONS

ANALYSIS

General Consideration

Prejudgment interest. - Prejudgment interest is required when damages are liquidated. United States ex rel. Delta Metals, Inc. v. R.M. Wells Co., 497 F. Supp. 541 (S.D. Ga. 1980).

Award of prejudgment interest is made by the judge as a matter of law under O.C.G.A. § 7-4-15 . American Family Life Assurance Co. v. United States Fire Co., 885 F.2d 826 (11th Cir. 1989).

Award of interest under O.C.G.A. § 7-4-15 is not premised on bad faith but on the principle that when a debt is owed and the demands for funds is made, interest accrues from the time entitlement attaches. Rivergate Corp. v. Atlanta Indoor Adv. Concepts, Inc., 210 Ga. App. 501 , 436 S.E.2d 697 (1993); United States ex rel. Ga. Elec. Supply Co. v. United States Fid. & Guar. Co., 656 F.2d 993 (5th Cir. 1981).

Because the trial court in an action involving a tax lien encumbrance erred in calculating pre-judgment interest pursuant to O.C.G.A. § 7-4-16 , which applies to commercial accounts, remand for re-calculation based on O.C.G.A. § 7-4-15 was required. Homeland Communities, Inc. v. Rahall & Fryer, 235 Ga. App. 440 , 509 S.E.2d 714 (1998).

Jury's award of prejudgment interest in the amount of $36,143 on a principal balance of $134,335 on a credit account for the sale of cattle feed products was proper and was affirmed. Dixon Dairy Farms, Inc. v. Purina Mills, Inc., 267 Ga. App. 738 , 601 S.E.2d 152 (2004).

In determining the prejudgment interest to be added to a testamentary gift, the operative statute in a probate case is the more specific statute, O.C.G.A. § 53-4-61 , rather than the more general one, O.C.G.A. § 7-4-15 . In re Estate of Barr, 278 Ga. App. 837 , 630 S.E.2d 135 (2006).

Because a stockholder failed to comply with O.C.G.A. § 51-12-14 , and prejudgment interest was not authorized by O.C.G.A. § 7-4-15 , these awards entered in favor of the stockholder were reversed. Monterrey Mexican Rest. of Wise, Inc. v. Leon, 282 Ga. App. 439 , 638 S.E.2d 879 (2006), overruled on other grounds by Temple v. Hillegass, 344 Ga. App. 454 , 810 S.E.2d 625 (2018).

Since a former employee was entitled to liquidated damages pursuant to the terms of an employment contract due to the employee's former employer's reduction of the employee's base salary, the employee was also entitled to prejudgment interest on the liquidated damages. McBride v. Mkt. St. Mortg., F.3d (10th Cir. June 2, 2010)(Unpublished).

Because the defendant's damages on the defendant's suit on account counterclaim were fixed, certain, and ascertainable making the damages liquidated (the plaintiff conceded that the plaintiff received and never paid for $1,017,551 worth of GPS units from the defendant), the district court erred in failing to award the defendant pre-judgment interest at the legal rate established by O.C.G.A. § 7-4-2 . Discrete Wireless, Inc. v. Coleman Techs., Inc., F.3d (11th Cir. Apr. 5, 2011)(Unpublished).

Trial court erred in denying a widow's motion for summary judgment on the widow's claim for prejudgment interest because the widow was entitled to collect credit life insurance proceeds since an insurer was precluded from denying or rescinding insurance coverage; the only issue contested by the insurer was the existence of coverage, not the amount of the widow's claim and, thus, the widow's claim to the insurance proceeds was liquidated. Flynt v. Life of the South Ins. Co., 312 Ga. App. 430 , 718 S.E.2d 343 (2011), cert. denied, 2012 Ga. LEXIS 305 (Ga. 2012).

Trial court properly awarded a creditor prejudgment interest under O.C.G.A. § 7-4-15 after the creditor, having been awarded partial summary judgment on the creditor's claim for money had and received, amended the creditor's complaint to seek prejudgment interest. The debtors were given an opportunity to contest the award of interest. Crisler v. Haugabook, 290 Ga. 863 , 725 S.E.2d 318 (2012).

In a condemnation action, the property owner was properly awarded prejudgment interest on the purchase price on a second parcel because the price was fixed, certain, and ascertainable under the terms of the parties' contract such that the debt owed by the county was liquidated and subject to prejudgment interest under O.C.G.A. § 7-4-15 . Gwinnett County v. Old Peachtree Partners, LLC, 329 Ga. App. 540 , 764 S.E.2d 193 (2014).

Attorney fees and expenses. - Award of attorney fees and litigation expenses is not liquidated until reduced to judgment and cannot support an award of prejudgment interest under O.C.G.A. § 7-4-15 . Harkleroad v. Stringer, 231 Ga. App. 464 , 499 S.E.2d 379 (1998).

Interest is allowed on liquidated accounts, and should be payable from due date. Walter E. Heller & Co. v. Aetna Bus. Credit, Inc., 158 Ga. App. 249 , 280 S.E.2d 144 (1981).

Recovery when amount fixed and certain. - When the amount at issue is fixed and certain, the recovery of prejudgment interest is appropriate. Buchanan v. Bowman, 820 F.2d 359 (11th Cir. 1987).

Prejudgment interest is allowed when the amount in question is liquidated, or is certain and fixed. Erickson's Inc. v. Travelers Indem. Co., 330 F. Supp. 380 (S.D. Ga. 1971), aff 'd, 454 F.2d 884 (5th Cir.), cert. denied, 409 U.S. 847, 93 S. Ct. 51 , 34 L. Ed. 2 d 87 (1972).

Amount certain cannot be rendered uncertain by means of unsuccessful, invalid, or lack of defense. Bassett Furn. Indus. v. NVF Co., 576 F.2d 1084 (5th Cir. 1978).

Total amount due and owing is ascertained when bill is tendered, and a defendant owes interest thereon, subject to reduction if the defendant can establish that retention of part of the amount after the due date is justifiable. Bassett Furn. Indus. v. NVF Co., 576 F.2d 1084 (5th Cir. 1978).

Entitlement to legal rate from maturity absent contract provision for interest. - Even though there may have been no liability for interest under express provisions of the contract, the plaintiff is nevertheless entitled to interest at the legal rate on any matured portion of indebtedness from date the indebtedness matured. Considine Co. v. Turner Communications Corp., 155 Ga. App. 911 , 273 S.E.2d 652 (1980).

Wrongfully collected taxes. - Taxpayer is allowed to recover prejudgment interest in an action for a refund of wrongfully collected taxes. Eastern Air Lines v. Fulton County, 183 Ga. App. 891 , 360 S.E.2d 425 , cert. denied, 183 Ga. App. 906 , 360 S.E.2d 425 (1987).

Payment date based on nonoccurring contingency due within reasonable time. - When existence of debt is conditional on happening of some event, payment cannot be enforced until that event happens; but when payment of existing liability is postponed until happening of event which does not happen, payment must be made within a reasonable time. B.G. Sanders & Assocs. v. Castellow, 154 Ga. App. 433 , 268 S.E.2d 695 (1980).

Jury rendering verdict for liquidated demand should give interest thereon. Earnest v. Nappier, 19 Ga. 537 (1856); Felker v. Johnson, 53 Ga. App. 390 , 186 S.E. 144 (1936).

Jury must determine interest due from time liability arose. - When the jury found that the plaintiff was entitled to recover, it was also required to find amount of interest due from the time the defendant became liable. Brandt v. Eckman, 79 Ga. App. 47 , 52 S.E.2d 665 (1949).

Payment of county orders. - Former Code 1933, §§ 23-1604 - 23-1608 (see now O.C.G.A. §§ 36-11-3 through 36-11-6 ) did not expressly or impliedly repeal former Code 1933, §§ 57-101, 57-110 and § 14-207 (see now O.C.G.A. §§ 7-4-2 , 7-4-15 and 11-3-108 , respectively). They all are to be considered together, and when so considered, the sections first mentioned contemplate administrative action by county officers in regard to an order in which lawful county orders shall be paid. Marion County v. First Nat'l Bank, 193 Ga. 263 , 18 S.E.2d 475 (1942).

Section 36-11-5 does not mean interest is disallowed when sufficient funds are available. - Provision in former Code 1933, § 23-1608 (see now O.C.G.A. § 36-11-5 ) that county orders when legally issued and duly presented but not paid for want of funds, shall bear interest if endorsed by the treasurer as set forth, does not mean that interest allowed generally on liquidated demands under former Code 1933, §§ 57-101 and 57-110 (see now O.C.G.A §§ 7-4-2 and 7-4-15 ) will be disallowed if sufficient available funds are in hand to pay warrant. Marion County v. First Nat'l Bank, 193 Ga. 263 , 18 S.E.2d 475 (1942).

Section inapplicable in suits based on quantum meruit. - When the plaintiff seeks recovery on quantum meruit basis and not for a liquidated demand, former Code 1933, § 57-110 (see now O.C.G.A. § 7-4-15 and former Code 1933, § 57-111 (see now O.C.G.A. § 7-4-16 ) were not applicable. Noble v. Hunt, 95 Ga. App. 804 , 99 S.E.2d 345 (1957).

Cited in Howard v. Chamberlain, Boynton & Co., 64 Ga. 684 (1880); Merck v. American Freehold Land Mtg. Co., 79 Ga. 213 , 7 S.E. 265 (1887); Union Sav. Bank & Trust Co. v. Dottenheim, 107 Ga. 606 , 34 S.E. 217 (1899); Central of Ga. Ry. v. Central Trust Co., 135 Ga. 472 , 69 S.E. 708 (1910); Hobbs v. Citizens Bank, 32 Ga. App. 522 , 124 S.E. 72 (1924); Waynesboro Planing Mill v. Barrow, 33 Ga. App. 26 , 125 S.E. 505 (1924); Stover v. Atlantic Ice & Coal Corp., 159 Ga. 357 , 125 S.E. 837 (1924); United States Fid. & Guar. Co. v. Koehler, 36 Ga. App. 396 , 137 S.E. 85 (1927); New York Life Ins. Co. v. Gilmore, 40 Ga. 431 , 149 S.E. 799 (1929); Donalsonville Chevrolet Co. v. Dickenson, 41 Ga. App. 392 , 153 S.E. 106 (1930); Southern Cotton Oil Co. v. Raines, 171 Ga. 154 , 155 S.E. 484 (1930); Barrow County Cotton Mills v. Sams, 48 Ga. App. 357 , 172 S.E. 820 (1934); Williams Realty & Loan Co. v. Simmons, 188 Ga. 184 , 3 S.E.2d 580 (1939); Brown v. Parks, 190 Ga. 540 , 9 S.E.2d 897 (1940); Trustees of Jesse Parker Williams Hosp. v. Nisbet, 191 Ga. 821 , 14 S.E.2d 64 (1941); Lively v. Munday, 201 Ga. 409 , 40 S.E.2d 62 (1946); Haygood v. Smith, 80 Ga. App. 461 , 56 S.E.2d 310 (1949); Browne v. Makin, 177 F.2d 753 (5th Cir. 1949); Carroll v. Taylor, 87 Ga. App. 815 , 75 S.E.2d 346 (1953); Jacksonville Blow Pipe Co. v. Trammell Hardwood Flooring Co., 170 F. Supp. 537 (N.D. Ga. 1958); Swanson v. Chase, 107 Ga. App. 295 , 129 S.E.2d 873 (1963); First Nat'l Bank v. State Hwy. Dep't, 219 Ga. 144 , 132 S.E.2d 263 (1963); Housing Auth. v. New, 220 Ga. 1 , 136 S.E.2d 732 (1964); Smith v. Maples, 114 Ga. App. 529 , 151 S.E.2d 815 (1966); State Hwy. Dep't v. Knox-Rivers Constr. Co., 117 Ga. App. 453 , 160 S.E.2d 641 (1968); Fried v. Morris & Eckels Co., 118 Ga. App. 595 , 164 S.E.2d 732 (1968); Turpin v. North Am. Acceptance Corp., 119 Ga. App. 212 , 166 S.E.2d 588 (1969); Eastern Fed. Corp. v. Avco-Embassy Pictures Corp., 331 F. Supp. 1253 (N.D. Ga. 1971); Shure v. Willner & Millkey, 126 Ga. App. 368 , 190 S.E.2d 620 (1972); Hardy v. G.A.C. Fin. Corp., 131 Ga. App. 282 , 205 S.E.2d 526 (1974); Davis v. Griffin-Spalding County Bd. of Educ., 445 F. Supp. 1048 (N.D. Ga. 1975); Midtown Properties, Inc. v. George F. Richardson, Inc., 139 Ga. App. 182 , 228 S.E.2d 303 (1976); Citizens & S. Nat'l Bank v. Weyerhaeuser Co., 152 Ga. App. 176 , 262 S.E.2d 485 (1979); Norair Eng'r Corp. v. Erickson's, Inc., 152 Ga. App. 489 , 263 S.E.2d 165 (1979); Bennett v. McGinty, 160 Ga. App. 640 , 287 S.E.2d 644 (1981); Barge & Co. v. City of Atlanta, 161 Ga. App. 675 , 288 S.E.2d 98 (1982); Stenger Indus., Inc. v. Eaton Corp., 165 Ga. App. 77 , 298 S.E.2d 628 (1983); International Indem. Co. v. Collins, 258 Ga. 236 , 367 S.E.2d 786 (1988); Vulcan Life Ins. Co. v. Davenport, 191 Ga. App. 79 , 380 S.E.2d 751 (1989); Northside Envtl. Servs., Inc. v. National Bank, 191 Ga. App. 348 , 381 S.E.2d 536 (1989); Dalcor Mgt., Inc. v. Sewer Rooter, Inc., 205 Ga. App. 681 , 423 S.E.2d 419 (1992); Adler v. Hertling, 215 Ga. App. 769 , 451 S.E.2d 91 (1994); Equicor, Inc. v. Stamey, 216 Ga. App. 375 , 454 S.E.2d 550 (1995); T & R Custom, Inc. v. Liberty Mut. Ins. Co., 227 Ga. App. 144 , 488 S.E.2d 705 (1997); Kent v. Brown, 238 Ga. App. 607 , 518 S.E.2d 737 (1999); Associated Mechanical Corp. v. Martin K. Eby Constr. Co., 67 F. Supp. 2d 1375 (M.D. Ga. 1999); Colonial Bank v. Boulder Bankcard Processing, Inc., 254 Ga. App. 686 , 563 S.E.2d 492 (2002); Cmty. & S. Bank v. First Bank of Dalton, 344 Ga. App. 815 , 811 S.E.2d 490 (2018).

Liquidated Demands

Definition of liquidated debt.- - Liquidation is an amount certain and fixed, either by act and agreement of parties, or by operation of law; a sum which cannot be changed by proof; it is so much or nothing; and the term does not necessarily refer to a writing. Nisbet v. Lawson, 1 Ga. 275 (1846); Council v. Hixon, 11 Ga. App. 818 , 76 S.E. 603 (1912).

A liquidated demand is an amount certain and fixed . . . a sum which cannot be changed by proof. GECC v. Strickle Properties, 861 F.2d 1532 (11th Cir. 1988).

A liquidated sum is an amount certain and fixed, either by the act and agreement of the parties or by operation of law; a sum which cannot be changed by the proof; it is so much or nothing. Great Am. Ins. Co. v. International Ins. Co., 753 F. Supp. 357 (M.D. Ga. 1990).

Liquidated claim is for an amount certain and fixed. International Indem. Co. v. Terrell, 178 Ga. App. 570 , 344 S.E.2d 239 (1986); American Family Life Assurance Co. v. United States Fire Co., 885 F.2d 826 (11th Cir. 1989); Tower Fin. Servs., Inc. v. Smith, 204 Ga. App. 910 , 423 S.E.2d 257 , cert. denied, 204 Ga. App. 922 , 423 S.E.2d 257 (1992).

Liquidated damages were damages that were in an amount that were certain and fixed, and since the trial court did not have before the court such evidence, the court erred in determining that the damages in the contract between the services provider and the corporation were liquidated, and entering a corresponding judgment. Mitchell v. Gilwil Group, Inc., 261 Ga. App. 882 , 583 S.E.2d 911 (2003).

Debt is liquidated when it is certain how much is due and when it is due. Roberts v. Prior, 20 Ga. 561 (1856); Lincoln Lumber Co. v. Keeter, 167 Ga. 231 , 145 S.E. 68 (1928); Continental Carriers, Inc. v. Seaboard Coast Line R.R., 129 Ga. App. 889 , 201 S.E.2d 826 (1973); B.G. Sanders & Assocs. v. Castellow, 154 Ga. App. 433 , 268 S.E.2d 695 (1980).

When certainty must occur. - Certainty as to amount due and when it is due need not be contemporaneous with agreement out of which it results. Bartee v. Andrews, 18 Ga. 407 (1855); Council v. Hixon, 11 Ga. App. 818 , 76 S.E. 603 (1912).

Demand for "$30,500.00 approx" did not demand liquidated damages in a fixed or certain amount. Rice v. State Farm Fire & Cas. Co., 208 Ga. App. 166 , 430 S.E.2d 75 (1993).

Liquidation of claim may be achieved by agreement of parties among other methods. Lumbermens Mut. Ins. Co. v. Cantex Mfg. Co., 262 F.2d 63 (5th Cir. 1958).

Trial court properly found that the liquidated damages provision of a contract was enforceable since the plaintiff 's damages would be difficult to assess with accuracy, the parties' intent was to provide for damages rather than a penalty, and the amount specified was a reasonable pre-estimation of the plaintiff 's probable loss. Maz Medics, Inc. v. Satellite Adv. Sys., 194 Ga. App. 583 , 391 S.E.2d 446 (1990).

Service provider was entitled to recover prejudgment interest on the liquidated damages amounts under O.C.G.A. § 7-4-15 because the liquidated damages were "fixed and certain" "by agreement" as provided in the statute. Sovereign Healthcare v. Mariner Health Care Mgmt. Co., 329 Ga. App. 782 , 766 S.E.2d 172 (2014).

Claim which one party to transaction cannot alone render certain is unliquidated. Roberts v. Prior, 20 Ga. 561 (1856); Council v. Hixon, 11 Ga. App. 818 , 76 S.E. 603 (1912); Lincoln Lumber Co. v. Keeter, 167 Ga. 231 , 145 S.E. 68 (1928); Buck Creek Indus., Inc. v. Crutchfield & Co., 133 Ga. App. 80 , 210 S.E.2d 32 (1974).

Claim unliquidated when there is a bona fide contention as to amount owing. Ryan v. Progressive Retailer Publishing Co., 16 Ga. App. 83 , 84 S.E. 834 (1915); International Indem. Co. v. Terrell, 178 Ga. App. 570 , 344 S.E.2d 239 (1986).

When there remains question of fact as to amount of money defendant owes the plaintiff, the damages are no longer liquidated, and an award of prejudgment interest would not be authorized. Spears v. Allied Eng'g Assocs., 186 Ga. App. 878 , 368 S.E.2d 818 (1988).

Claim unliquidated when entire amount in dispute. - In a suit to collect an alleged contractual indebtedness arising from the dissolution of a partnership agreement, under which each partner would receive that partner's share of the assets of the partnership, including accounts receivable to the extent that "charges made exceeded collections credited to such charges during the 180-day period immediately preceding the date of dissolution," since the entire principal amount of the indebtedness was in dispute, it necessarily followed that no portion of the claim was liquidated and that the plaintiff was not entitled to pre-judgment interest. Arora v. Thakrar, 187 Ga. App. 170 , 369 S.E.2d 524 (1988).

Dispute as to amount of surplus from real estate foreclosure sale. - When the amount of the surplus (if any) from a foreclosure sale on real estate was in dispute throughout the course of litigation (that is, it was the subject of conflicting testimony, which might be resolved only by a final court decision), this surplus figure clearly did not fall within the concept of "liquidation" under Georgia law. Walton Motor Sales, Inc. v. Ross, 736 F.2d 1449 (11th Cir. 1984).

Demand unliquidated when amount established by jury. - Award of prejudgment interest was error when demand for damages was not liquidated because its amount could only be established by submission to a jury. Marathon Oil Co. v. Hollis, 167 Ga. App. 48 , 305 S.E.2d 864 (1983); Malta Constr. Co. v. Henningson, Durham & Richardson, Inc., 716 F. Supp. 1466 (N.D. Ga. 1989), aff'd, 927 F.2d 614 (11th Cir. 1991); Jennings Enters., Inc. v. Carte, 224 Ga. App. 538 , 481 S.E.2d 541 (1997).

When the defendant is indebted to the plaintiff for a definite sum, interest is properly allowed thereon. Thompson v. Ocmulgee Bldg. & Loan Ass'n, 56 Ga. 350 (1876).

Claim resting entirely in parol may be a liquidated demand. Nisbet v. Lawson, 1 Ga. 275 (1846); Anderson v. State, 2 Ga. 370 (1847); Council v. Hixon, 11 Ga. App. 818 , 76 S.E. 603 (1912).

Unliquidated demands arising ex delicto do not bear interest as a matter of law. Western & Atl. R.R. v. Brown, 102 Ga. 13 , 29 S.E. 130 (1897).

Interest.- - If interest is allowed, it is really not interest but damages and the verdict should not express damages in an aggregate sum. Georgia R.R. & Banking Co. v. Crawley, 87 Ga. 191 , 13 S.E. 508 (1891).

In actions ex delicto, the jury may allow interest as part of damages. If interest is allowed it is not recoverable eo nomine and the verdict should express damages in the aggregate sum. Mayor of Milledgeville v. Stembridge, 139 Ga. 692 , 78 S.E. 35 (1913).

Purchase price is liquidated demand bearing interest after delivery. - Claim for purchase price, when contract of sale has been fixed at definite sum, is a liquidated demand; and, in absence of proof of either contract or custom concerning payment, such purchase price is due when material is delivered and amount bears interest at legal rate from date of delivery. McCarthy v. Nixon Grocery Co., 126 Ga. 762 , 56 S.E. 72 (1906); Howard Supply Co. v. Bunn, 127 Ga. 663 , 56 S.E. 757 (1907); Curtis v. College Park Lumber Co., 145 Ga. 601 , 89 S.E. 680 (1916); Rice-Stix Dry Goods Co. v. Friedlander Bros., 30 Ga. App. 312 , 117 S.E. 762 (1923), aff 'd, 158 Ga. 303 , 122 S.E. 890 (1924); Horkan v. Great Am. Indem. Co., 211 Ga. 690 , 88 S.E.2d 13 (1955); National Recording Corp. v. W.R. Grace & Co., 112 Ga. App. 310 , 145 S.E.2d 382 (1965).

When purchaser breached contract by failure to pay purchase-money on delivery of goods, the seller was entitled to recover agreed purchase-price as liquidated damages, with interest thereon from the time the purchaser was liable and bound to pay. Morgan v. Colt Co., 34 Ga. App. 630 , 130 S.E. 600 (1925).

Interest, due and payable, is a liquidated demand. - When interest was due and payable on installments of certain paving assessments, such accrued and matured interest was a liquidated demand, and itself bore interest from its maturity at legal rate. Steele v. City of Waycross, 187 Ga. 382 , 200 S.E. 704 (1938).

Past due interest a liquidated demand. - Stipulation in note that interest shall be paid annually renders past due interest a liquidated demand which itself bears interest. Butler v. First Nat'l Bank, 13 Ga. App. 35 , 78 S.E. 772 (1913).

Interest note is liquidated demand, which bears interest from maturity. - When obligation to pay interest is put in form of interest note, that note becomes a liquidated demand; and when the note is not paid at maturity the note bears interest as such, certainly if parties have contracted that the note should. Byrd v. Equitable Life Assurance Soc'y, 185 Ga. 628 , 196 S.E. 63 (1938).

Noninterest bearing installment note liquidated debt. - Note for sum payable in 18 monthly installments, but bearing no interest, is liquidated debt. Recordex Corp. v. Southeastern Metal Prods., Inc., 147 Ga. App. 79 , 248 S.E.2d 159 (1978).

Liquidated insurance claims are subject to prejudgment interest. - See Florida Int'l Indem. Co. v. Osgood, 233 Ga. App. 111 , 503 S.E.2d 371 (1998).

Contract stipulation for attorney's fees was liquidated demand. - When note stipulates for attorney's fees in case of collection by suit, it is part of principal debt and bears interest. Baxter v. Bates, 69 Ga. 587 (1882).

County warrant is a liquidated demand. - County warrant, which is a liquidated demand even though it does not express any date for payment, is as matter of law payable on demand, made five days after date on which it is issued, and will ordinarily bear interest from and after demand so made. Marion County v. First Nat'l Bank, 193 Ga. 263 , 18 S.E.2d 475 (1942).

Debt based on published tariffs is liquidated and bears interest from the time the party becomes liable. National Carloading Corp. v. Security Van Lines, 164 Ga. App. 850 , 297 S.E.2d 740 (1982).

Fraudulently acquired loan. - Action in fraud to recover a fixed amount of money lost in a fraudulently acquired loan is a liquidated demand eligible for prejudgment interest. Gorlin v. Halpern, 184 Ga. App. 10 , 360 S.E.2d 729 (1987), rev'd on other grounds sub nom. Burgess & Brown v. Gorlin & Long, 258 Ga. 127 , 365 S.E.2d 405 (1988).

Insured's demand for payment of attorney's fees did not become liquidated until judgment because the amount of attorney's fees was not fixed and certain until that time. American Family Life Assurance Co. v. United States Fire Co., 885 F.2d 826 (11th Cir. 1989).

Attorney's fees fixed upon foreclosure of property securing debt. - When a promissory note secured by a deed to secure debt provided for payment in a principal amount, together with interest at the rate of nine percent per annum from date until paid in full, together with all costs of collection including 15 percent as attorney's fees if collected by law or through an attorney at law, at the time of the sale of the property at a foreclosure sale after notice, the obligation to pay attorney's fees to the plaintiff had become fixed and certain, and from that time forward interest on such sum began to run. Bulman v. First Nat'l Bank, 165 Ga. App. 843 , 303 S.E.2d 29 (1983).

Award of prejudgment interest in stock purchase agreement. - In a case arising out of breach of a stock purchase agreement, in which the trial court ordered specific performance of the agreement for a purchase price of $1.2 million, the trial court erred in awarding prejudgment interest under O.C.G.A. § 13-6-13 because § 13-6-13 only allowed interest on "damages" and did not apply to specific performance. Whether the sellers were entitled to prejudgment interest on O.C.G.A. § 7-4-15 (liquidated demands) was a question for the trial court on remand. Estate of Callaway v. Garner, 297 Ga. 52 , 772 S.E.2d 668 (2015).

Prejudgment interest claims of materialmen. - No exclusion is made in O.C.G.A. § 7-4-15 to liquidated demands underpinning a materialman's lien and prejudgment interest is not precluded merely because the aggregate amount of liens exceeds the contract price under O.C.G.A. § 44-14-361.1 . Gaster Lumber Co. v. Browning, 219 Ga. App. 435 , 465 S.E.2d 524 (1995), aff'd, 267 Ga. 72 , 475 S.E.2d 576 (1996).

Fact that defendant claimed a credit against undisputed specific amount that the plaintiff claimed the plaintiff was fully owed under the executed contract would not render the plaintiff's claim unliquidated. The credit only reduced the net balance on the liquidated claim; it would not render the claim unliquidated. Gold Kist Peanuts v. Alberson, 178 Ga. App. 253 , 342 S.E.2d 694 (1986); Hendricks v. Blake & Pendleton, Inc., 221 Ga. App. 651 , 472 S.E.2d 482 (1996).

Taxes do not bear interest as liquidated demands. - Taxes are not debts in ordinary sense of word so as to bear interest as liquidated demands. State v. Southwestern R.R., 70 Ga. 11 (1883).

Prejudgment interest. - When a claim was undisputed, the defendant was entitled to prejudgment interest at the rate of seven percent per annum from the date the debt became due and the trial court's judgment of prejudgment interest of 18% per annum was in excess of the statutorily required amount. Turner Constr. Co. v. Electrical Distribs., Inc., 202 Ga. App. 726 , 415 S.E.2d 325 (1992).

Because there was no dispute about the specific amount that a realty firm was entitled to receive from the firm's owner if the firm earned the full commission set forth in the operative contracts, that amount was liquidated, and the fact that the owner offered to pay only one-half of that amount did not render the realty firm's claim unliquidated; hence, the realty firm was entitled to prejudgment interest on the unpaid commission from the date of closing. Tommy McBride Realty v. Nicholson, 286 Ga. App. 135 , 648 S.E.2d 468 (2007).

Trial court erred when the court concluded upon default that only liquidated damages were involved and awarded a manufacturer damages without an evidentiary hearing in the manufacturer's breach of contract action against a distributor because the complaint did not contain sufficient information to allow the trial court to ascertain the amount owed under the contract and that the amount was fixed and certain; the trial court could not properly award damages and pre-judgment interest under O.C.G.A. § 7-4-15 to the manufacturer without an evidentiary hearing because the manufacturer's complaint did not show that the manufacturer's claims were for liquidated damages. Kitchen Int'l, Inc. v. Evans Cabinet Corp., 310 Ga. App. 648 , 714 S.E.2d 139 (2011).

Ascertainable amount, liquidated. - Because the amount due on a note and a personal guaranty was ascertainable under their instrumental terms, the damages sought were liquidated. Consulting Constr. Corp. v. Edwards, 207 Ga. App. 296 , 427 S.E.2d 789 (1993).

Accounts

Open accounts bear interest from due date, at which time the accounts are considered liquidated demands. Intercompany Servs. Corp. v. Kleeb, 140 Ga. App. 512 , 231 S.E.2d 505 (1976).

Account not liquidated demand until amount due is expressly or impliedly fixed and determined. Rice-Stix Dry Goods Co. v. Friedlander Bros., 30 Ga. App. 312 , 117 S.E. 762 (1923), aff 'd, 158 Ga. 303 , 122 S.E. 890 (1924); Insurance Co. of N. Am. v. Folds, 42 Ga. App. 306 , 155 S.E. 782 (1930); Firemen's Ins. Co. v. Oliver, 53 Ga. App. 638 , 186 S.E. 706 (1936).

Assent to correctness of open accounts makes the accounts liquidated demands. Anderson v. State, 2 Ga. 370 (1847); Kelley & McWilliams v. Terhune, Nixon & Co., 113 Ga. 365 , 38 S.E. 839 (1901); Council v. Hixon, 11 Ga. App. 818 , 76 S.E. 603 (1912). But see Fell v. Abbot, 1 Ga. Rpt. Ann. (R.M.C. 452) 278 (1835).

Verbal acknowledgment of open account does not render it liquidated. - Verbal acknowledgment of indebtedness on open account accompanied by promise to pay does not constitute a liquidated demand. Fell v. Abbot, 1 Ga. Rpt. Ann. (R.M.C. 452) 278 (1835).

Written acknowledgment of open account renders account a liquidated demand. - Acknowledgment of open account by letter is such a liquidation of demand as will enable creditor to obtain interest from date of acknowledgment. Hicks v. Thomas, 1 Ga. Rpt. Ann. (Dud. 218) 472.

Decedent's assent, during lifetime, of correctness of account rendered account liquidated. - When decedent in decedent's lifetime assented to correctness of account rendered decedent it became after such assent, a liquidated demand. Anderson v. State, 2 Ga. 370 (1847); Bartee v. Andrews, 18 Ga. 407 (1855); Kelley & McWilliams v. Terhune, Nixon & Co., 113 Ga. 365 , 38 S.E. 839 (1901).

Written guarantee to pay future indebtedness of another, on open account, is not liquidated. Hargroves v. Cooke, 15 Ga. 321 (1854).

Insurance

Policy not liquidated demand until amount of loss and liability established. - Fire insurance policies which insure against all direct loss or damage by fire to an amount not exceeding named sums are not themselves liquidated demands, nor is there originally any amount ascertained payable under those policies. The process of adjustment may result in ascertainment of amount of loss, though liability be denied, in which case interest may be recovered when liability is established. Merchants Ins. Co. v. Lilgeomont, Inc., 84 F.2d 685 (5th Cir. 1936).

In a suit on a property damage insurance policy (e.g., fire, lightning, windstorm, etc.), when liability is not disputed but when the amount of damage is disputed, the amount is unliquidated. Braner v. Southern Trust Ins. Co., 255 Ga. 117 , 335 S.E.2d 547 (1985).

In a suit against an insurer under a policy covering rugs, because there was a bona fide dispute between the parties as to the extent of water damage to the rugs that was not resolved until trial, it was only after entry of the judgment that the claim became liquidated, and the trial court did not err in denying an award of prejudgment interest on that claim. Holloway v. State Farm Fire & Cas. Co., 245 Ga. App. 319 , 537 S.E.2d 121 (2000).

Interest accrues on loss from time amount payable becomes certain and due. - It is the general rule that interest is recoverable on a loss by fire from time when amount payable has been made certain and has become due. Insurance Co. of N. Am. v. Folds, 42 Ga. App. 306 , 155 S.E. 782 (1930); Firemen's Ins. Co. v. Oliver, 53 Ga. App. 638 , 186 S.E. 706 (1936).

Claim for face amount of policy is liquidated demand when loss total. - Claim for face amount of fire insurance policy on dwelling is to be deemed fixed, certain, and determined under contract, so as to authorize interest thereon, when loss was admittedly total, and insurance company neither prior to nor in action on policy in any way questioned the amount, but based its sole defense on alleged forfeiture of policy by breaches of its conditions. National Fire Ins. Co. v. Thompson, 51 Ga. App. 625 , 181 S.E. 101 (1935).

When jury was authorized to find that an insurance company agreed to pay the full face amount of the policy covering undisputed total loss, the verdict was not illegal because the verdict included interest. Sentinel Fire Ins. Co. v. McRoberts, 50 Ga. App. 732 , 179 S.E. 256 (1934).

Employer's claim for amount recovered by employee as a liquidated demand. - Demand of employer against insurance company under "Employers' Liability Policy," for loss or damage sustained by the employer by reason of a judgment (together with the cost and expenses thereof) recovered by an employee accidentally injured, is a liquidated demand upon which interest may be claimed. Georgia Iron & Coal Co. v. Ocean Accident & Guar. Corp., 133 Ga. 326 , 65 S.E. 775 (1909).

Liability at legal rate on optional no-fault benefits. - Insurer is indebted for prejudgment interest at the legal rate on optional no-fault benefits, from the date of demand until the date of tender, less the 30-day statutory exclusion under O.C.G.A. § 33-34-6(b) . International Indem. Co. v. Enfinger, 181 Ga. App. 420 , 352 S.E.2d 575 (1986), aff'd, 257 Ga. 385 , 359 S.E.2d 884 (1987).

O.C.G.A. § 7-4-15 is inapplicable to prejudgment interest on life insurance proceeds. Southwestern Life v. Middle Ga. Neurological, 262 Ga. 273 , 416 S.E.2d 496 (1992).

O.C.G.A. § 33-25-10 governs the entitlement to prejudgment interest on life insurance proceeds and does not require the payment of prejudgment interest when the insured dies within 12 months of issuance of the policy. O.C.G.A. § 7-4-15 is inapplicable to prejudgment interest on life insurance proceeds. Middle Ga. Neurological Specialists v. Southwestern Life Ins. Co., 967 F.2d 536 (11th Cir. 1992).

Insurer subject to prejudgment interest on claim despite agent improperly binding risk. - When an insurer had to pay the insured because of the agent's negligence in binding a risk not within insurer's guidelines, prejudgment interest was appropriate given the fact that the amount in dispute had been at all times certain and fixed, and there has been no dispute over whether the sums paid to insured were excessive or in any other way inappropriate. Valiant Ins. Co. v. Birdsong, 665 F. Supp. 918 (M.D. Ga. 1987).

Prejudgment interest but not punitive damages or attorney fees were warranted on liquidated claim. - When an insurance company was awarded damages for fraudulent claims submitted by the owner of an insured in the amount of the fraudulent claims on which the company paid, the company was entitled to prejudgment interest on the award of damages pursuant to O.C.G.A. § 7-4-15 because the award was fixed and certain, but was not entitled to interest on its claims for punitive damages and attorney fees because such claims were unliquidated. Cincinnati Ins. Co. v. Porter (In re Porter), Bankr. (Bankr. N.D. Ga. May 23, 2007).

Prejudgment interest warranted on liquidated claim for total loss with no dispute as to value. - Damages for cargo stolen from an insured's truck were liquidated under O.C.G.A. § 7-4-15 because the insured presented the invoice price of the stolen cargo at trial, and it was undisputed that the total cargo was lost; the insurer did not contest the amount of the invoices or present an alternate calculation of the amount. The insurer was therefore liable for prejudgment interest on the liquidated amount. Certain Underwriters at Lloyds, London v. DTI Logistics, Inc., 300 Ga. App. 715 , 686 S.E.2d 333 (2009).

When Interest Is Recoverable

Interest is recoverable from date when amount of claim has been liquidated and determined. Insurance Co. of N. Am. v. Folds, 42 Ga. App. 306 , 155 S.E. 782 (1930).

Interest due on amount recovered begins after entry of judgment. - Trial court properly granted a title insurance company's motion for directed verdict as to the insured's claim for prejudgment interest under O.C.G.A. § 7-4-15 because damages were properly argued and precedent has established that when on entering upon trial the insurer disputes the amount of loss claimed by the insured, interest on the amount recovered begins after entry of judgment. Old Republic Nat'l Title Ins. Co. v. RM Kids, LLC, 337 Ga. App. 638 , 788 S.E.2d 542 (2016), cert. denied, No. S16C1843, 2017 Ga. LEXIS 117 (Ga. 2017).

Prejudgment interest on liquidated demands accrues from the time of demand. International Indem. Co. v. Terrell, 178 Ga. App. 570 , 344 S.E.2d 239 (1986).

When a guardian disputed whether the guardian was owed commissions for stocks and bonds under former O.C.G.A. § 29-2-42(a) (see now O.C.G.A. § 29-5-50 ), not the amount paid for such commissions, the estate's administrator was entitled to prejudgment interest under O.C.G.A. § 7-4-15 ; the fact that the guardian disputed liability at trial did not convert the claim into a claim for an uncertain and, therefore, unliquidated amount. In re Estate of Miraglia, 290 Ga. App. 28 , 658 S.E.2d 777 (2008).

Interest on unpaid interest. - When a promissory note calls for payment of the principal at a fixed time and for payment of interest on the principal at fixed times during the term of the note, the failure to pay the interest when due renders the past due interest a liquidated demand which would itself bear interest prior to judgment. Bryant v. Kenerly, 238 Ga. App. 153 , 518 S.E.2d 172 (1999).

Rate of prejudgment interest payable on past due interest is determined by the note if the note provides for the interest to be charged on past due interest, but if no such provision is made, then the applicable statutory rate of interest would control. Bryant v. Kenerly, 238 Ga. App. 153 , 518 S.E.2d 172 (1999).

Award of interest on past due interest under O.C.G.A. § 7-4-15 is subject to the limitation that, in the absence of a contrary agreement, no such interest on interest may be awarded when the interest installments mature after the principal itself has fallen due. Bryant v. Kenerly, 238 Ga. App. 153 , 518 S.E.2d 172 (1999).

Interest on services or property of readily ascertainable value. - When amount for which recovery is sought, even though not liquidated, is based upon readily ascertainable value of services or property, the general and better considered rule is to allow interest, at least in absence of strong equities to the contrary. Erickson's Inc. v. Travelers Indem. Co., 330 F. Supp. 380 (S.D. Ga. 1971), aff 'd, 454 F.2d 884 (5th Cir.), cert. denied, 409 U.S. 847, 93 S. Ct. 51 , 34 L. Ed. 2 d 87 (1972).

Interest awarded from time of theft of bailed good. - Court does not err in instructing the jury that the jury may award interest from the time of the theft of a bailed good until trial when the jury finds that the sum awarded is a liquidated sum. Wheels & Brakes, Inc. v. Capital Ford Truck Sales, Inc., 167 Ga. App. 532 , 307 S.E.2d 13 (1983).

Award of interest on salary obligation. - Though interest on unpaid wages was not expressly claimed, jury could allow interest from time wages became due according to terms of contract for amount of money wages was liquidated by contract, and would bear interest from time payment ought to have been made. Ansley v. Jordan, 61 Ga. 482 (1878).

There is a definite contractual relation between every employee and employer, whether the employee is a public officer or not, which entitles the employee to payment of the employee's salary, and when demand is made therefor and refused, the court may award interest on the salary. Undercofler v. Scott, 220 Ga. 406 , 139 S.E.2d 299 (1964).

Interest upon valid obligation of a county. - Interest upon valid subsisting obligation of county is of same nature as principal, and is collectible upon same terms and in same manner as principal. Hartley v. Nash, 157 Ga. 402 , 121 S.E. 295 (1924).

Interest recoverable from one who sells land the seller does not own. - When one fraudulently sold land which one did not own and received part of purchase money, the buyer would be entitled to recover interest on sum so paid from date of payment; if no fraud, interest from date of demand for repayment of money; and if no fraud and no demand, interest from date of filing plea of set-off. Phillips v. O'Neil, 85 Ga. 142 , 11 S.E. 581 (1890).

Application of rule for ascertaining interest recoverable on building contract. - Fair rule to be applied in building contracts is to ascertain the stated debt due at a certain time and deduct therefrom a reasonable amount for remedying defects. The former should bear interest from the date it is ascertained or demanded; the latter should bear interest only from the time the dispute is resolved, even if it is at trial. J.A. Jones Constr. Co. v. Greenbriar Shopping Ctr., 332 F. Supp. 1336 (N.D. Ga. 1971), aff 'd, 461 F.2d 1269 (5th Cir. 1972).

Interest on court orders runs as on other liquidated demands. - Orders absolute given by inferior courts of counties in this state for payment of money to persons in liquidation of debts due by those courts draw interest just as other liquidated demands do. State ex rel. Greer v. Speer, 33 Ga. 93 (1864).

Funds whose disposition is affected by court order or garnishment. - When payment of funds to rightful owner is prohibited by court order or by garnishment proceeding, interest does not accrue until order or garnishment has been dissolved. Cochran v. Bank of Hancock County, 118 Ga. App. 100 , 162 S.E.2d 765 (1968).

Note stipulating it is without interest accrues interest after demand. - When promissory note specifies that stated sum "without interest" is to be paid on certain date, phrase "without interest" refers only to time between execution of note and date of maturity as interest will accrue from date holder has right to make demand for payment. Jenkins v. Morgan, 100 Ga. App. 561 , 112 S.E.2d 23 (1959).

Interest on earnest money. - Having found there was no jury issue as to whether the buyers owed the earnest money payment plus interest to sellers under the contract, as well as under principles of promissory estoppel, the trial court erred in failing to award such interest for the period money was due until final judgment. Ware v. Renfroe, 231 Ga. App. 529 , 499 S.E.2d 907 (1998).

Cash sale of property bears interest from date, although day of payment may be postponed until a particular event transpires. Parke v. Foster, 26 Ga. 465 , 71 Am. Dec. 221 (1858).

Rent obligation which is certain and payable on a day certain bears interest therefrom at rate imposed by law if contract is silent as to rate. In re Cent. of Ga. Ry., 47 F. Supp. 786 (S.D. Ga. 1942).

Interest for remaindermen does not run until death of tenant for life, the estate being in money. McCook v. Harp, 81 Ga. 229 , 7 S.E. 174 (1888).

Judgment for support bears interest from date rendered. - When cash award of year's support to widow could not be paid until four years after judgment, the widow was entitled to interest from the date of judgment. Clark v. Georgia R.R. Bank & Trust Co., 182 Ga. 472 , 185 S.E. 716 (1936).

Factor entitled to interest upon draft paid upon faith of produce which was never received. Field & Adams v. Reid, 21 Ga. 314 (1857); Howard v. Behn & Foster, 27 Ga. 174 (1859).

Interest recoverable on money fraudulently received or wrongfully detained. - One who has fraudulently received or wrongfully detained money of another is chargeable with interest thereon from the time the person received the money. Anderson v. State, 2 Ga. 370 (1847).

Liability of agent for interest on principal's money held by agent. - Agent who admits money in agent's hands belonging to agent's principal is liable for interest thereon from time the agent received the money. Anderson v. State, 2 Ga. 370 (1847).

Partner misapplying partnership funds liable for interest. - When one partner misapplies partnership funds to the partner's own use, that partner will be held liable for the misapplication, with interest thereon from time of such misapplication. Solomon v. Solomon, 2 Ga. 18 (1847).

Interest condemnee must refund to condemnor. - When interest is computed on amount which condemnee must refund to condemnor, interest is computed only from the date of adjudication of the principal amount. State Hwy. Dep't v. Rogers, 118 Ga. App. 626 , 165 S.E.2d 172 (1968).

No interest accrued when demand not made upon surety before execution. - When there was no evidence in the record of any demand upon surety of tax commissioner prior to the date of execution, an execution against the surety could not properly be issued for interest alleged to have accrued prior to the date thereof. Keen v. Lewis, 215 Ga. 166 , 109 S.E.2d 764 (1959).

Interest runs from time county treasurer refuses payment of warrant. - Former Code 1933, § 23-1608 (see now O.C.G.A. § 36-11-5 ) assumed that the county treasurer would pay the warrant when payment was demanded, and if the treasurer failed to do so, the section contemplated that interest would run by virtue of former Code 1933, §§ 57-101 and 57-110 (see now O.C.G.A. §§ 7-4-2 and 7-4-15 ) from the date of demand. Marion County v. First Nat'l Bank, 193 Ga. 263 , 18 S.E.2d 475 (1942).

Preferred claim against insolvent bank not entitled to interest when none produced. - When bank became insolvent and was taken in charge for liquidation by superintendent of banks for this state, and one had claim to funds held for it by bank which was afterwards adjudicated to be a preferred claim for a specified sum, and when, after final adjudication in favor of standing of claim as a preferred claim, the superintendent of banks paid over amount of principal to the claimant, mandamus would not lie to compel the superintendent to pay interest accruing on amount of preferred claim after the superintendent took charge of such bank since the fund had not produced interest. Macon Grocery Co. v. Mobley, 174 Ga. 185 , 162 S.E. 711 (1931).

Award of interest in breach of contract action. - Award of prejudgment interest was proper in a hospital's breach of contract action, wherein the hospital was awarded judgment in the hospital's favor on a claim for recovery of monies due that had been loaned to a doctor, who did not repay the full sum; pursuant to O.C.G.A. §§ 7-4-15 and 13-6-13 , when the balance was a liquidated amount, as here, the court was authorized to award prejudgment interest. Walker v. Gwinnett Hosp. Sys., 263 Ga. App. 554 , 588 S.E.2d 441 (2003).

Suit by attorney to recover fee. - In breach of contract action brought by attorney to recover legal fees from a client, attorney was entitled to prejudgment interest on one-third of the cash settlement as of the date the client received a settlement check; the contract was clear that the attorney was entitled to the cash settlement and when the client received the settlement check, the attorney's one-third share of the cash payment was liquidated and due. Hardnett v. Ogundele, 291 Ga. App. 241 , 661 S.E.2d 627 (2008).

Effect of Tender

Tender to prevent running of interest must be continuing. - Using money after refusal by creditor to receive the money destroys this necessary attribute of a legal tender. Fortson v. Strickland, 23 Ga. App. 607 , 99 S.E. 147 (1919).

Interest not allowed from time tender of payment refused or waived. - Formal tender of payment of note was in effect waived by a statement on the part of the plaintiff, when the defendant offered to pay the note, that amount due thereon would not be accepted unless amount due on former note was also paid, and the plaintiff could not recover interest from that time on the first mentioned note. Washington Exch. Bank v. Smith, 23 Ga. App. 356 , 98 S.E. 418 (1919), rev'd on other grounds, 149 Ga. 650 , 101 S.E. 769 (1920).

When proof of tender is insufficient, note bears interest after maturity. Dumas v. Pepper, 43 Ga. 361 (1871).

RESEARCH REFERENCES

Am. Jur. 2d. - 44B Am. Jur. 2d, Interest and Usury, § 49.

C.J.S. - 10 C.J.S., Bills and Notes, §§ 84, 238, 308. 47 C.J.S., Interest and Usury; Consumer Credit, § 42 et seq.

ALR. - Right to interest for period before advances under a loan to be advanced to the borrower in installments, 40 A.L.R. 825 .

Time from which interest is recoverable on demand note or like demand instrument containing no provision as to interest, 45 A.L.R.2d 1202.

7-4-16. When interest runs on commercial accounts; maximum interest rate on commercial accounts.

Unless otherwise provided in writing signed by the obligor, a commercial account becomes due and payable upon the date a statement of the account is rendered to the obligor. The owner of a commercial account may charge interest on that portion of a commercial account which has been due and payable for 30 days or more at a rate not in excess of 1 1/2 percent per month calculated on the amount owed from the date upon which it became due and payable until paid. "Commercial account" means an obligation for the payment of money arising out of a transaction to sell or furnish, or the sale of, or furnishing of, goods or services other than a "retail installment transaction" as defined in paragraph (10) of subsection (a) of Code Section 10-1-2.

(Ga. L. 1858, p. 90, § 1; Code 1863, § 2030; Code 1868, § 2031; Ga. L. 1873, p. 22, § 1; Code 1873, § 2057; Code 1882, § 2057; Civil Code 1895, § 2885; Civil Code 1910, § 3435; Code 1933, § 57-111; Ga. L. 1980, p. 514, § 1.)

Law reviews. - For survey article on recent developments in Georgia law of remedies, see 34 Mercer L. Rev. 397 (1982). For annual survey on construction law, see 65 Mercer L. Rev. 67 (2013).

JUDICIAL DECISIONS

No application to security deposit. - O.C.G.A. § 7-4-16 was inapplicable in the case of a "security deposit" which represented one party's obligation to return money to another party arising out of the termination of their business relationship; since the security deposit did not represent an obligation for the payment of any goods or services, the first party's right to secure a refund of its security deposit did not render it the owner of a "commercial account." Race, Inc. v. Wade Leasing, Inc., 201 Ga. App. 340 , 411 S.E.2d 56 (1991).

O.C.G.A. § 7-4-16 is applicable only to obligations to pay for goods and services on a commercial account and is inapplicable to obligations to return money arising out of the termination of a business agreement. Hayden v. Sigari, 220 Ga. App. 6 , 467 S.E.2d 590 (1996).

Error in calculating pre-judgment interest. - Because the trial court in an action involving a tax lien encumbrance erred in calculating pre-judgment interest pursuant to O.C.G.A. § 7-4-16 , which applies to commercial accounts, remand for re-calculation based on O.C.G.A. § 7-4-15 was required. Homeland Communities, Inc. v. Rahall & Fryer, 235 Ga. App. 440 , 509 S.E.2d 714 (1998).

Trial court erred in modifying a judgment to add prejudgment interest as the court could not award prejudgment interest for the debt which was based on a contract claim, an asset purchase agreement; therefore, the debt was not a commercial debt to which O.C.G.A. § 7-4-16 applied. Capital Cargo, Inc. v. Port of Port Royal, 261 Ga. App. 803 , 584 S.E.2d 54 (2003).

In the action involving the City of Griffin and the Commissioners of the Board of Commissioners of Spalding County in which an unlawful tax was alleged, the trial court improperly assessed prejudgment interest under O.C.G.A. § 7-4-16 because that statute applied only to commercial accounts. McDaniel v. City of Griffin, 281 Ga. App. 350 , 636 S.E.2d 62 (2006).

Heating system installer's invoices did not specify terms per O.C.G.A. § 7-4-16 as the invoice did not define the interest sought as that applicable to commercial accounts, and did not list a specific rate of interest; therefore, the trial court erred when the court granted prejudgment interest at the rate allowed by that statute. Carrier Corp. v. Rollins, Inc., 316 Ga. App. 630 , 730 S.E.2d 103 (2012).

Commercial account due and payable. - Summary judgment was properly granted to a buyer as: (1) a seller's claim was time-barred under O.C.G.A. § 11-2-725 since a document dated May 5, 2000, was not an invoice to the buyer, but was a compilation of invoices previously submitted to the buyer; (2) even if the seller provided the buyer with services in conjunction with the goods it sold, O.C.G.A. § 11-2-725 applied as the predominant element of the agreement was the sale of goods; (3) under O.C.G.A. § 7-4-16 , a commercial account became due and payable upon the date a statement of the account was rendered to the obligor; and (4) the seller's claim that the six-year limitation period contained in O.C.G.A. § 9-3-24 applied was rejected as there was no contract and the claim was not raised before the trial court. All Tech Co. v. Laimer Unicon, LLC, 281 Ga. App. 579 , 636 S.E.2d 753 (2006).

In a case brought under the Perishable Agricultural Commodities Act, 1930 (PACA), 7 U.S.C. §§ 499(a)-499(o), in which: (1) a produce company's president had defalcated within the meaning of the law on the president's trust duties; (2) the president was personally liable to a produce wholesaler in the amount of the company's PACA trust for the president's failures as trustee; (3) the wholesaler's invoices provided for interest on unpaid accounts at the rate of one and one-half percent per month; and (4) the invoices provided that the customer must pay the attorney fees and costs incurred in the collection of all past due invoices, in its grant of summary judgment in favor of the wholesaler, the district court awarded the wholesaler the principal amount that was owed; in addition, pursuant to O.C.G.A. § 13-1-11 , the wholesaler was entitled to attorney fees and under O.C.G.A. § 7-4-16 the wholesaler was entitled to interest payments at the rate stated on the invoices. Cee Bee Produce, Inc. v. Tucker, F. Supp. 2d (M.D. Ga. Sept. 12, 2007).

Because account invoices sued upon by two contractors represented obligations for the payment of money arising out of transactions to furnish labor and materials, none of which involved a retail installment transaction, and involved liquidated claims, the trial court did not err in determining that those accounts were commercial accounts. Thus, an award of prejudgment interest as to the amounts owed was upheld on appeal. Hampshire Homes, Inc. v. Espinosa Constr. Servs., 288 Ga. App. 718 , 655 S.E.2d 316 (2007).

Appellate court properly dismissed an attorney's direct appeal in a case wherein the attorney sued a client for attorney fees as the judgment the attorney recovered was one for damages in an amount under $10,000, and as such, it was subject to appeal as a matter of discretion under O.C.G.A. § 5-6-35(a)(6), rather than of right. The failure of the attorney to recover on the claims of prejudgment interest or attorney fees did not transform the judgment into a finding on liability adverse to the attorney so as to render an appeal of the matter outside the ambit of § 5-6-35(a)(6). Cooney v. Burnham, 283 Ga. 134 , 657 S.E.2d 239 (2008).

Trial court did not err in awarding a seller pre-judgment interest under O.C.G.A. § 7-4-16 in the seller's breach of contract action against a buyer to recover damages for unpaid principal on shipped material and unpurchased material because the seller's invoices were a due and payable liquidated debt on a commercial account subject to interest under § 7-4-16 ; because certain materials were delivered by the seller and accepted by the buyer, the buyer was responsible for payment according to the agreed-upon price. Scovill Fasteners, Inc. v. Northern Metals, Inc., 303 Ga. App. 246 , 692 S.E.2d 840 (2010).

Jury's interest award on a supplier's claim against a guarantor was not arbitrary as the claim was based on a collection of commercial interest that had accrued on a customer's unpaid invoices and the amount of award was within the range of evidence. Fletcher v. C. W. Matthews Contr. Co., 322 Ga. App. 751 , 746 S.E.2d 230 (2013).

Section inapplicable in action for breach of contract. - Maximum allowable interest on past due licensing fees was $117,373 as provided in the parties' licensing agreement. The trial court erred in using the calculation allowed under O.C.G.A. § 7-4-16 because that statute applied in actions for open account, not actions for breach of contract. Noons v. Holiday Hospitality Franchising, Inc., 307 Ga. App. 351 , 705 S.E.2d 166 (2010).

In the absence of a liquidated demand, O.C.G.A. § 7-4-16 is inapplicable. Typo-Repro Servs., Inc. v. Bishop, 188 Ga. App. 576 , 373 S.E.2d 758 (1988).

When there was a question of adequate statement of account regarding charges to a subcontractor, the debts were not liquidated because it was not certain how much was due to the general contractor from the subcontractor. American Aluminum Prods. Co. v. Binswanger Glass Co., 194 Ga. App. 703 , 391 S.E.2d 688 (1990).

Maximum interest rate not mandatory. - O.C.G.A. § 7-4-16 merely authorizes, but does not mandate, charging the maximum interest therein specified. Nodvin v. West, 197 Ga. App. 92 , 397 S.E.2d 581 (1990).

Physician comes within purview of former Code 1933, § 57-111. Martin v. Mayer, 63 Ga. App. 387 , 11 S.E.2d 218 (1940).

Section inapplicable to suits based on quantum meruit. - When the plaintiff sought recovery on a quantum meruit basis and not for a liquidated demand former Code 1933, §§ 57-110 and 57-111 (see now O.C.G.A. §§ 7-4-15 and 7-4-16 ) were not applicable. Noble v. Hunt, 95 Ga. App. 804 , 99 S.E.2d 345 (1957).

What constitutes "statement," in the defendant's business is clearly a commercial account and is not a retail installment transaction. McNair v. Gold Kist, Inc., 166 Ga. App. 782 , 305 S.E.2d 478 (1983).

Statement. - Farm supplies supplied to a farmer in the farmer's business is clearly a commercial account. The owner of a commercial account can charge interest on that portion of the commercial account which had been due and payable for 30 days or more at a rate not in excess of 1-1/2% per month calculated on the amount owed from the date upon which the amount became due and payable until paid and that a commercial account is classified or defined as an obligation for the payment of money arising out of a transaction to sell or furnish, or the sale of, or furnishing of goods and services other than a retail installment. McNair v. Gold Kist, Inc., 166 Ga. App. 782 , 305 S.E.2d 478 (1983).

Trial court erred in failing to award interest at 18 percent per annum on the amount proved by the undisputed invoices for materials purchased by the plaintiff/subcontractor from the defendant/general contractor since the plaintiff conceded that the invoices might be construed as a "statement" within the meaning of O.C.G.A. § 7-4-16 . American Aluminum Prods. Co. v. Binswanger Glass Co., 194 Ga. App. 703 , 391 S.E.2d 688 (1990).

Claim for interest not novation. - Creditor's claim for interest in an action against the debtor and personal guarantor on an open account agreement did not result in a novation of the agreement. Charles S. Martin Distrib. Co. v. Berhardt Furn. Co., 213 Ga. App. 481 , 445 S.E.2d 297 (1994).

Action between contractor and subcontractor. - Evidence that the contractor and subcontractor had been doing business for several years, that their relationship was invoice-based and not contract-based, combined with an explicit statement on the subcontractor's bid that it did not cover the entirety of the work, supported the latter's claim based on O.C.G.A. § 7-4-16 . Wheat Enters., Inc. v. Redi-Floors, Inc., 231 Ga. App. 853 , 501 S.E.2d 30 (1998).

Subcontractor was entitled to recover from an insurer on a payment bond because a pay-when-paid clause in a contract of the contractor and subcontractor could not be used as a defense by the insurer when the insurer denied the subcontractor a federal remedy under the Miller Act. Thus, the subcontractor met the requirements of 40 U.S.C. §§ 3131 and 3133, and was entitled to summary judgment for the amount of the contractor's outstanding debt plus prejudgment interest under O.C.G.A. § 7-4-16 . United States ex rel. McKenney'S, Inc. v. Gov't Tech. Servs., LLC, 531 F. Supp. 2d 1375 (N.D. Ga. 2008).

Action by subcontractor's supplier against general contractor. - When the sums owed to the subcontractor's supplier arose out of the furnishing of goods to the subcontractor on the project, not out of the furnishing of goods by the supplier to the general contractor, the supplier's action against the general contractor and the surety on the lien bond was not based on a commercial account with the subcontractor but on the supplier's rights under the lien bond - that is, the supplier's rights as a lien claimant. Accordingly, the general contractor's liability did not arise out of failure to pay the amounts owed to the supplier on a commercial account, and O.C.G.A. § 7-4-16 thus was not applicable. Turner Constr. Co. v. Electrical Distribs., Inc., 202 Ga. App. 726 , 415 S.E.2d 325 (1992).

Contractor's claim against owner. - Although a jury did not ultimately award the entire amount of a contractor's original claim against an owner, the amount of the unpaid balance as determined by the jury was a due and payable liquidated debt on a commercial account, and therefore subject to prejudgment interest under O.C.G.A. § 7-4-16 . The trial court erred in declining to award prejudgment interest under the statute. Elec. Works CMA, Inc. v. Baldwin Tech. Fabrics, LLC, 306 Ga. App. 705 , 703 S.E.2d 124 (2010).

Action for unpaid sales commissions under an employment contract was not based on a commercial account and the trial court erred in charging the jury that the jury could award prejudgment interest at the rate of 1.5 percent a month. Southern Water Techs., Inc. v. Kile, 224 Ga. App. 717 , 481 S.E.2d 826 (1997).

Retail installment contract for purchase of automobile. - After the plaintiff filed a verified complaint, the trial court erred in granting the plaintiff's motion to strike the defendant's unverified answer and for judgment on the pleadings as the retail installment contract for the purchase of an automobile was not the type of contract that was the appropriate subject matter for a suit on an open account, and the defendant was not required to verify the defendant's responsive pleadings because retail installment transactions were expressly excluded from the definition of a commercial account; and the contract provided a number of remedies to the plaintiff in the event of non-payment by the defendant that deviated from the traditional understanding of what constituted an open account. Scott v. Prestige Fin. Servs., 345 Ga. App. 530 , 813 S.E.2d 610 (2018).

Action between attorney and client for attorney fees. - Trial court did not err in denying the client's motion for a directed verdict on the attorney's claim for prejudgment interest on attorney fees the attorney sought from the client for legal representation of the client because the fees requested were liquidated as the client did not object to the actual amount of the bill and were subject to pre-judgment interest. Patton v. Turnage, 260 Ga. App. 744 , 580 S.E.2d 604 (2003).

Attorney was authorized by statute to charge interest at the rate charged and to apply the client's payments first to the interest due and then to the principal. At all times, the client could have avoided any obligation to pay interest by paying the principal in full each month as the client agreed to do. Cooney v. Rowland, 240 Ga. App. 703 , 524 S.E.2d 730 (1999).

Interest on Retail Installment and Home Solicitation Sales Act transactions. - Charges of 11/2 percent per month on the unpaid balance on a commercial account were not authorized by the Retail Installment and Home Solicitation Sales Act, O.C.G.A. § 10-1-1 - et seq., even though the agreement involved was the form set forth in that Act because that statute applied only to purchases for personal, family, or household use. Gold Kist, Inc. v. McNair, 166 Ga. App. 66 , 303 S.E.2d 290 (1983) (decided prior to 1980 amendment).

Once there is usury, the usury infects any renewal note for the same debt or any part thereof unless the usury is purged. A determination as to the application of former O.C.G.A. § 7-4-7 , which provided for no limit of interest rates on loans of $100,000.00 or more, cannot be decided without a complete accounting to purge all usurious interest (to be applied to principal, if paid) and then a determination made as to whether or not the principal of the original note was for $100,000 or more, which would insulate it against the defense of usury. McNair v. Gold Kist, Inc., 166 Ga. App. 782 , 305 S.E.2d 478 (1983).

Application of rule that change in law will not change transaction's usurious nature. - Rule that change in the law will not change the usurious character of a transaction applies only to renewals of an originally usurious transaction, and is not applicable when separate purchases are made on an open account, resulting in an entirely new indebtedness. Gold Kist, Inc. v. McNair, 166 Ga. App. 66 , 303 S.E.2d 290 (1983).

Interest charged outside of agreement. - When the supplier made no attempt to charge interest prior to trial, an instruction to the jury, and consequent award, to increase damages by 11/2 percent per month was error. Prince v. Lee Roofing Co., 161 Ga. App. 181 , 288 S.E.2d 135 (1982).

When the creditor made no attempt to collect interest on the overdue account prior to filing suit, but alleged in the creditor's complaint that the creditor was entitled to interest, there was no error in permitting evidence concerning the accrual of interest on the indebtedness or in charging the provisions of O.C.G.A. § 7-4-16 . Tench v. United States Tsubaki, Inc., 191 Ga. App. 248 , 381 S.E.2d 319 (1989).

Summary judgment precluded. - When evidence in an action against a defendant-farmer on open account indicated that the plaintiff was basing the plaintiff's estimation of the defendant's indebtedness on the business records of another corporation it had purchased and the defendant denied indebtedness in the amount claimed by the plaintiff, and since the plaintiff's affidavit failed to establish the defendant's account to be a commercial one authorizing a certain annual finance charge pursuant to O.C.G.A. § 7-4-16 , there were issues of material fact yet to be resolved and the plaintiff was precluded from summary judgment. Paulk v. Carolina E. Inc., 172 Ga. App. 669 , 324 S.E.2d 527 (1984).

When contract specified no rate of interest and complaint merely prayed for "interest" without specifying the rate thereof, pre-judgment interest only at the applicable "legal rate" of 7 percent was authorized pursuant to O.C.G.A. § 7-4-2(a)(1). Gold Kist Peanuts v. Alberson, 178 Ga. App. 253 , 342 S.E.2d 694 (1986).

Pretrial pleading is an adequate means of invoking O.C.G.A. § 7-4-16 . Jack V. Heard Contractors, Inc. v. Moriarity, 185 Ga. App. 317 , 363 S.E.2d 822 (1987).

Request for prejudgment interest must be specific. - If the rate allowed under O.C.G.A. § 7-4-16 is sought before trial, the trial court is authorized to grant pre-judgment interest at that rate, but the request must specify the interest rate sought. Spears v. Allied Eng'g Assocs., 186 Ga. App. 878 , 368 S.E.2d 818 (1988).

Defendant was not entitled to pre-judgment interest under O.C.G.A. § 7-4-16 on the defendant's suit on account counterclaim because the defendant did not comply with the requirement that a commercial creditor make a pre-trial invocation of the applicability of that provision (while the standard terms and conditions provided that outstanding amounts would bear 1.5 percent interest, it did not apply to the debts underlying the defendant's counterclaim); the defendant's pre-trial efforts to seek interest under O.C.G.A. § 7-4-16 did not specify the rate of interest being sought. Discrete Wireless, Inc. v. Coleman Techs., Inc., F.3d (11th Cir. Apr. 5, 2011)(Unpublished).

Request for repudiation must be specific. - When a sales contract was not repudiated, and the due date was not extended as to any of the invoices at issue, the statute of limitations began to run on the date the last invoice was received; a letter requesting an offset did not qualify as repudiation since the letter only requested, but did not condition repayment upon an offset. Advance Tufting, Inc. v. Daneshyar, 259 Ga. App. 415 , 577 S.E.2d 90 (2003).

Prejudgment interest not excessive. - Prejudgment interest based on unpaid rent and unpaid taxes was not excessive. Georgia Color Farms, Inc. v. K.K.L., Ltd. Partnership, 234 Ga. App. 849 , 507 S.E.2d 817 (1998).

Prejudgment interest on invoices. - Invoices which were a liquidated debt on a commercial account were subject to prejudgment interest. Trebor Corp. v. Nutmeg Indus., Inc., 208 Ga. App. 697 , 431 S.E.2d 402 (1993).

Prejudgment interest awarded by a jury in an action on an account should have been stricken by a trial judge because a fixed sum was owed by a purchaser and the fact that the jury did not award the entire amount sought did not make the damages unliquidated; further, the parties stipulated that interest under O.C.G.A. § 7-4-16 was a matter for the court to decide. Kroger Co. v. U.S. Foodservice of Atlanta, Inc., 270 Ga. App. 525 , 607 S.E.2d 177 (2004).

Post-judgment interest. - A commercial account is not, by virtue of O.C.G.A. § 7-4-16 , transformed into such an "obligation" as would come within the exception to the standard post-judgment interest rate of 12 percent per year that is established by O.C.G.A. § 7-4-12 . ADC Constr. Co. v. Hall, 202 Ga. App. 119 , 413 S.E.2d 522 (1991).

O.C.G.A. § 7-4-16 does not authorize a creditor to recover both pre-judgment and post-judgment interest at the same rate. It would only permit creditor to recover pre-judgment interest at a rate which is "greater than the post-judgment rate" of 12 percent per year that "all judgments in this state shall bear" pursuant to O.C.G.A. § 7-4-12 . ADC Constr. Co. v. Hall, 202 Ga. App. 119 , 413 S.E.2d 522 (1991).

Portion awarding interest in a foreclosure judgment was vacated and the case remanded for recalculation of the interest rate pursuant to O.C.G.A. § 7-4-2 because § 7-4-2 governed the rate of interest in contracts when the interest rate was not specified and since the maximum legal rate specified in the declaration, which was not a commercial account, was not definite and ascertainable, the trial court erred in awarding 18 percent interest rather than the seven percent. Northside Bank v. Mountainbrook of Bartow County Homeowners Ass'n, 338 Ga. App. 126 , 789 S.E.2d 378 (2016).

Disallowing interest on open accounts does not affect law of set-off. Meriwether v. Bird, 9 Ga. 594 (1851).

Claim not barred. - Trial court erred by granting summary judgment in favor of a debtor on all of the invoices that made up a creditor's claim against the debtor on the ground that the complaint was barred by the four-year limitation period for a suit on account because the trial court's grant of summary judgment was based on a purported admission by the creditor that its claims accrued on April 3, 2001, but the trial court misread the document, and the creditor submitted authenticated invoices, which showed dates more recent than four years prior to the date suit was filed; unless otherwise provided in the agreement, claims are barred if the claims are asserted more than four years after invoices are submitted to the buyer. Avery Enters. v. Lyndhurst Builders, LLC, 304 Ga. App. 353 , 696 S.E.2d 389 (2010).

Cited in Woodfield v. Colzey, 47 Ga. 122 (1872); Prentice v. Elliott, 72 Ga. 154 (1883); Adkins v. Hutchings, 79 Ga. 260 , 4 S.E. 887 (1887); McCarthy v. Nixon Grocery Co., 126 Ga. 762 , 56 S.E. 72 (1906); Wimbush v. Curry, 8 Ga. App. 223 , 68 S.E. 951 (1910); McCluskey v. Still, 32 Ga. App. 641 , 124 S.E. 548 (1924); Donalsonville Chevrolet Co. v. Dickenson, 41 Ga. App. 392 , 153 S.E. 106 (1930); Mendenhall v. Nalley, 81 Ga. App. 517 , 59 S.E.2d 283 (1950); Housing Auth. v. New, 220 Ga. 1 , 136 S.E.2d 732 (1964); Gregory v. Townsend Roofing Co., 163 Ga. App. 836 , 296 S.E.2d 154 (1982); Belvin v. Houston Fertilizer & Grain Co., 169 Ga. App. 100 , 311 S.E.2d 526 (1983); C & H Couriers, Inc. v. American Mut. Ins. Co., 170 Ga. App. 684 , 318 S.E.2d 77 (1984); Lee v. Fuerst & Davis, 173 Ga. App. 362 , 326 S.E.2d 482 (1985); King v. AMOCO, 182 Ga. App. 838 , 357 S.E.2d 291 (1987); National Cos. Health Benefit Plan v. St. Joseph's Hosp., 929 F.2d 1558 (11th Cir. 1991); Lundy v. Low, 200 Ga. App. 332 , 408 S.E.2d 144 (1991); Stedry v. Mitchell, 201 Ga. App. 682 , 411 S.E.2d 735 (1991); Tom Barrow Co. v. St. Paul Fire & Marine Ins. Co., 205 Ga. App. 10 , 421 S.E.2d 85 (1992); Dalcor Mgt., Inc. v. Sewer Rooter, Inc., 205 Ga. App. 681 , 423 S.E.2d 419 (1992); Contract Sales & Serv. Int'l, Inc. v. American Express Travel Related Servs. Co., 216 Ga. App. 61 , 453 S.E.2d 62 (1994); Crotts Enters., Inc. v. John Payne Co., 219 Ga. App. 173 , 464 S.E.2d 844 (1995); Haughton v. Namano, Inc., 222 Ga. App. 644 , 476 S.E.2d 31 (1996); Sanders v. Commercial Cas. Ins. Co., 226 Ga. App. 119 , 485 S.E.2d 264 (1997); Owens v. McGee & Oxford, 238 Ga. App. 497 , 518 S.E.2d 699 (1999); Colonial Bank v. Boulder Bankcard Processing, Inc., 254 Ga. App. 686 , 563 S.E.2d 492 (2002); Imex Int'l v. Wires Eng'g, 261 Ga. App. 329 , 583 S.E.2d 117 (2003); Schoenbaum Ltd. Co., LLC v. Lenox Pines, LLC, 262 Ga. App. 457 , 585 S.E.2d 643 (2003); Kitchen Int'l, Inc. v. Evans Cabinet Corp., 310 Ga. App. 648 , 714 S.E.2d 139 (2011).

OPINIONS OF THE ATTORNEY GENERAL

Unpaid interest as liquidated demand. - Where a commercial account provides that unpaid interest becomes a "liquidated demand," such interest may be treated as part of that portion of the account which has been due and payable, within the meaning of O.C.G.A. § 7-4-16 ; where such interest has been due and payable for 30 days or more, it may itself accrue interest at the contract rate. 1983 Op. Att'y Gen. No. U83-9.

ADVISORY OPINIONS OF THE STATE BAR

Interest charged by attorneys on overdue bills. - State Disciplinary Board is of the opinion that an attorney may ethically unilaterally charge interest on client's overdue bills. A lawyer may ethically do so provided that the lawyer complies with all applicable law, specifically O.C.G.A. § 7-4-16 , the Federal Truth in Lending and Fair Credit Billing Acts contained in Title I of the Consumer Credit Protection Act as amended (15 U.S.C. § 1601 et seq.) and EC 2-19. Adv. Op. No. 85-45 (March 15, 1985).

RESEARCH REFERENCES

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, § 101.

7-4-17. Payment applied first to interest; no interest on unpaid interest; exceptions.

When a payment is made upon any debt, it shall be applied first to the discharge of any interest due at the time, and the balance, if any, shall be applied to the reduction of the principal. If the payment does not extinguish the interest then due, no interest shall be calculated on such balance of interest and interest shall be calculated only on the principal amount up to the time of the next payment. Notwithstanding the foregoing restrictions against charging interest on unpaid interest:

  1. On loans having first priority on real estate and on loans secured by the pledge or assignment of instruments evidencing loans having first priority on real estate, the parties by written contract may lawfully agree that unpaid interest when due shall be added to the unpaid principal balance of the indebtedness and that the increased principal balance of the indebtedness bear interest pursuant to the terms of the contract; and
  2. On loans secured by real estate or secured by real estate and other collateral, the parties by written contract may lawfully agree that, in the event of bankruptcy, the lender or creditor may include interest on its claim pursuant to the terms of the contract.

    (Orig. Code 1863, § 2028; Code 1868, § 2029; Code 1873, § 2055; Code 1882, § 2055; Civil Code 1895, § 2883; Civil Code 1910, § 3433; Code 1933, § 57-109; Ga. L. 1982, p. 420, §§ 1, 2; Ga. L. 1984, p. 949, § 6; Ga. L. 1995, p. 956, § 1.)

Law reviews. - For article discussing methods of computation of finance charges in Georgia consumer credit contracts, see 30 Mercer L. Rev. 281 (1978). For article on Georgia's usury laws and interest on interest, see 8 Ga. St. U.L. Rev. 291 (1992).

JUDICIAL DECISIONS

Prepayments applied first to interest due, absent contrary agreement. - In absence of agreement to contrary, prepayments on a loan must first be applied to interest due and owing at time they are made and then to principal. First Nat'l Bank v. Appalachian Indus., Inc., 146 Ga. App. 630 , 247 S.E.2d 422 (1978).

Section does not prohibit creditor from applying payment upon principal. - Since former Code 1910, § 3433 was for the benefit of creditor, it did not seem that the debtor could be heard to complain on account of interest-bearing principal having been reduced, with a consequent reduction to the debtor of the indebtedness, by application of the entire payment to principal instead of first extinguishing accrued interest. Rice-Stix Dry Goods Co. v. Friedlander Bros., 30 Ga. App. 312 , 117 S.E. 762 (1923), aff 'd, 158 Ga. 303 , 122 S.E. 890 (1924).

Creditor may apply payment made before interest is due to reduction of principal. - When payment was made by the debtor, before interest was due on principal of debt, and the debtor did not direct that payment be applied to any particular claim, the creditor had the right to apply the payment to reduction of the principal of the debt. Massell Realty Co. v. Chamberlin, 47 Ga. App. 718 , 171 S.E. 311 (1933).

In the case of a demand note, no time for payment is expressed; therefore, no interest would be due until payment is demanded. Unless the debtor has stipulated otherwise, the creditor has the right to apply any payments to the reduction of the principal of the debt where no interest was due at the time of payment. Spillers v. First S. Bank, 185 Ga. App. 580 , 365 S.E.2d 151 (1988).

When mortgaged property is sold proceeds go to payment of interest notes, though they may have been transferred by payee. Berrie v. Smith, 97 Ga. 782 , 25 S.E. 757 (1896).

Right to recover interest after payment of principal. - It is the general rule that the right to recover interest after payment of principal sum due depends upon whether interest is due by terms of the contract, or whether it is merely an implied incident to the debt and is allowed by way of damages. If it is due by terms of the contract, payment of principal is no bar to a subsequent recovery of interest, but if it is not due by such terms, payment of principal sum is generally a bar to recovery, except that where the obligation is one which by statute bears interest, this is taken as an equivalent contractual obligation to pay interest, and in such a case payment of entire principal does not defeat subsequent recovery of accrued interest. Rice-Stix Dry Goods Co. v. Friedlander Bros., 30 Ga. App. 312 , 117 S.E. 762 (1923), aff 'd, 158 Ga. 303 , 122 S.E. 890 (1924).

County's payment to landowners who were awarded $ 16.5 million in a condemnation action was not sufficient to pay principal and interest on the judgment the landowners obtained, and the appellate court held that the landowners were entitled to collect post-judgment interest on the amount which the county still owed. Threatt v. Forsyth County, 262 Ga. App. 186 , 585 S.E.2d 159 (2003).

Borrower waived and released the borrower's claim. - Borrower's breach of contract claim against a lender based on a violation of O.C.G.A. § 7-4-17 , forbidding the calculation of interest upon interest, was barred because the lender had executed loan modification agreements in which the borrower waived and released any claims the borrower had against the lender. Heritage Creek Dev. Corp. v. Colonial Bank, 268 Ga. App. 369 , 601 S.E.2d 842 (2004).

Payment of attorneys fees. - There is no statutory requirement that credit for proceeds must be applied to attorney fees first. Presumably, this matter is one which may be contractually agreed to by the parties. Bulman v. First Nat'l Bank, 165 Ga. App. 843 , 303 S.E.2d 29 (1983).

Attorney was authorized by statute to charge interest at the rate charged and to apply the client's payments first to the interest due and then to the principal. At all times, the client could have avoided any obligation to pay interest by paying the principal in full each month as the client agreed to do. Cooney v. Rowland, 240 Ga. App. 703 , 524 S.E.2d 730 (1999).

Res judicata. - Trial court did not err in granting a lender's motion for summary judgment because the doctrine of res judicata barred a debtor's suit alleging that the lender incorrectly charged interest on the debtor's unsecured revolving line of credit; the same matters were already litigated between the same parties in an action previously adjudicated on the merits by a court of competent jurisdiction. Rose v. Household Fin. Corp., 316 Ga. App. 282 , 728 S.E.2d 879 (2012).

Cited in Price v. Comer & Co., 87 Ga. 468 , 14 S.E. 122 (1891); Becker v. Shaw, 120 Ga. 1003 , 48 S.E. 408 (1904); Young v. First Nat'l Bank, 22 Ga. App. 58 , 95 S.E. 381 (1918); Worrill v. Hightower Mule Co., 32 Ga. App. 396 , 124 S.E. 58 (1924); Humphreys v. W.L. Jessup & Sons, 43 Ga. App. 274 , 158 S.E. 442 (1931); Reconstruction Fin. Corp. v. Puckett, 181 Ga. 288 , 181 S.E. 861 (1935).

RESEARCH REFERENCES

Am. Jur. 2d. - 44B Am. Jur. 2d, Interest and Usury, § 72.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, § 131.

ALR. - When statute of limitations begins to run against action to recover interest, 36 A.L.R. 1085 .

When contract construed to require interest to be paid in advance, 39 A.L.R. 951 .

Right to have usurious payments of interest applied as credit on principal as affected by statute of limitations, 101 A.L.R. 741 .

Check in payment of interest or installment of principal as an acknowledgment sufficient to take case out of statute of limitation, 125 A.L.R. 271 .

Option of borrower to convey or transfer to lender in full satisfaction of balance due, property covered by mortgage or collateral securing loan, as affecting character as "interest," of payments by borrower, 163 A.L.R. 719 .

What is "compound interest" within meaning of statutes prohibiting the charging of such interest, 10 A.L.R.3d 421.

7-4-17.1. Refunds from loans on which interest is calculated under the add-on interest method and which are paid off prior to maturity.

Repealed by Ga. L. 1983, p. 1146, § 8, effective March 31, 1983.

Editor's notes. - The Code section was based on Ga. L. 1981, p. 1016, § 1.

7-4-18. Criminal penalty for excessive interest.

  1. Any person, company, or corporation who shall reserve, charge, or take for any loan or advance of money, or forbearance to enforce the collection of any sum of money, any rate of interest greater than 5 percent per month, either directly or indirectly, by way of commission for advances, discount, exchange, or the purchase of salary or wages; by notarial or other fees; or by any contract, contrivance, or device whatsoever shall be guilty of a misdemeanor; provided, however, that regularly licensed pawnbrokers, as defined in Code Section 44-12-130, are limited in the amount of interest they may charge only by the limitations set forth in Code Section 44-12-131.
  2. This Code section shall not be construed as repealing or impairing the usury laws now existing but shall be construed as being cumulative thereof.
  3. Nothing contained in Code Section 7-4-2 or 7-4-3 shall be construed to amend or modify the provisions of this Code section.
  4. Notwithstanding the foregoing, fees and other charges agreed upon by a financial institution and depositor, as defined in Code Section 7-1-4, in a written agreement governing a deposit, share, or other account, including, but not limited to, overdraft and nonsufficient funds, delinquency or default charges, returned payment charges, stop payment charges, or automated teller machine charges, shall not be considered interest.

    (Ga. L. 1908, p. 83, §§ 1, 2; Civil Code 1910, §§ 3444, 3445; Penal Code 1910, § 700; Code 1933, §§ 57-117, 57-9901; Ga. L. 1983, p. 1146, § 5; Ga. L. 2000, p. 1526, § 1; Ga. L. 2014, p. 213, § 2/HB 824.)

The 2014 amendment, effective April 15, 2014, added subsection (d).

Editor's notes. - Ga. L. 2014, p. 213, § 3/HB 824, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of February 19, 2014."

Law reviews. - For article, "Business Associations," see 53 Mercer L. Rev. 109 (2001). For note discussing whether a holder in due course takes free of claims of violations of the usury laws, see 12 Ga. L. Rev. 814 (1978). For note, "State-Imposed Interest Rate Ceilings and Home Equity Loan Scandal in Georgia," see 11 Ga. St. U.L. Rev. 591 (1995). For comment on Zink v. Davis Fin. Co., 61 Ga. App. 39 , 5 S.E.2d 588 (1939), see 2 Ga. B.J. 57 (1940). For comment on Georgia Inv. Co. v. Norman, 231 Ga. 821 , 204 S.E.2d 740 (1974), see 26 Mercer L. Rev. 321 (1974).

Cross references. - Illegal payday loans, § 16-17-1 et. seq.

JUDICIAL DECISIONS

ANALYSIS

General Consideration

Former Code 1933, § 57-117 (see now O.C.G.A. § 7-4-18 ) was not designed to repeal or impair existing usury laws. Wall v. Lewis, 192 Ga. 652 , 16 S.E.2d 430 (1941).

Former Code 1933, §§ 57-102 and 57-117 (see now O.C.G.A. §§ 7-4-1 and 7-4-1 8) were to be construed and applied as one law. Wall v. Lewis, 192 Ga. 652 , 16 S.E.2d 430 (1941).

Effect of violation of statute. - Loan violative of O.C.G.A. § 7-4-18 is illegal, with the result that the lender forfeits the interest but may collect the principal. Norris v. Sigler Daisy Corp., 260 Ga. 271 , 392 S.E.2d 242 (1990).

Construed with § 7-4-2 . - O.C.G.A. § 7-4-18 has its own definition of interest which prevails over the definition of interest set forth in O.C.G.A. § 7-4-2 (a)(3). Moore v. Comfed Sav. Bank, 908 F.2d 834 (11th Cir. 1990).

Construed with § 14-12-131. - There is no conflict between O.C.G.A. §§ 7-4-18 and 44-12-131 since what is authorized by the pawnshop statute is a combination of charges up to 25% per month, not the imposition of interest alone at a rate of 25% per month. Fryer v. Easy Money Title Pawn, Inc., 183 Bankr. 654 (Bankr. S.D. Ga. 1995).

O.C.G.A. § 14-12-131, not O.C.G.A. § 7-4-18 , governs pawnshop transactions. Glinton v. And R, Inc., 271 Ga. 864 , 524 S.E.2d 481 (1999).

O.C.G.A. § 14-12-131, the pawnshop statute, and O.C.G.A. § 7-4-18 are in conflict and cannot be reconciled. Hooks v. Cobb Ctr. Pawn & Jewelry Brokers, Inc., 241 Ga. App. 305 , 527 S.E.2d 566 (1999).

Amount of interest on a pawn transaction was regulated by O.C.G.A. § 7-4-18 and was not governed by the five percent limit imposed on general loans by the usury statute. Hooks v. Cobb Ctr. Pawn & Jewelry Brokers, Inc., 241 Ga. App. 305 , 527 S.E.2d 566 (1999).

Charges included in interest. - Whether an origination fee is considered a "commission for advances," part of "other fees," or a "contrivance" or "device," it is within the scope of the word "interest" as it is used in O.C.G.A. § 7-4-18 . That being so, it is considered interest and not principal for the purpose of deciding whether a loan violates that section. Norris v. Sigler Daisy Corp., 260 Ga. 271 , 392 S.E.2d 242 (1990).

Charging a nonrebatable, prepaid finance charge may result in a rate of interest greater than five percent for the first month of the loan; if so, this violates O.C.G.A. § 7-4-18 . Evans v. Avco Fin. Servs. of Ga., Inc., 130 Bankr. 357 (Bankr. S.D. Ga. 1991).

"Per month." - Phrase "per month" implies an average. Johnson v. Fleet Fin., Inc., 785 F. Supp. 1003 (S.D. Ga. 1992), aff'd, 4 F.3d 946 (11th Cir. 1993).

O.C.G.A. § 7-4-18 prohibits loans with interest rates in excess of five percent "per month." It does not forbid a lender from collecting or accruing the right to collect more than five percent interest "in any month." Johnson v. Fleet Fin., Inc., 785 F. Supp. 1003 (S.D. Ga. 1992), aff'd, 4 F.3d 946 (11th Cir. 1993).

Despite the decision in Johnson v. Fleet Finance, Inc., 785 F. Supp. 1003 (S.D. Ga. 1992), the bankruptcy court disagreed that "per month" implied a monthly average, stating that the legislature required that a criminal usury analysis be on a "per month" basis; however, since the most recent expression of the law by the district court specifically overruled a prior decision of a bankruptcy court within the district, Johnson, supra, the bankruptcy court was bound by that district court decision. Wright v. Transamerica Fin. Servs., Inc., 144 Bankr. 943 (Bankr. S.D. Ga. 1992).

Rate of interest per month must be calculated based upon the ratio of total interest paid to the total number of months in the loan. Fleet Fin., Inc. v. Jones, 263 Ga. 228 , 430 S.E.2d 352 (1993).

Amortization of initial charges. - Initial charges in the form of discount points and other interest charges during the first month of the loan should be amortized over the life of the loan to calculate what interest rate was charged "per month." Johnson v. Fleet Fin., Inc., 785 F. Supp. 1003 (S.D. Ga. 1992), aff'd, 4 F.3d 946 (11th Cir. 1993).

Nonrefundable points and origin fees. - O.C.G.A. § 7-4-18 cannot be construed so as to attribute nonrefundable points and origination fees to the first month of a loan when those items are actually paid over the life of the loan. Fleet Fin., Inc. v. Jones, 263 Ga. 228 , 430 S.E.2d 352 (1993).

Legislative intent to protect needy by criminal statute. - It was the evident purpose of the legislature to make criminal a rate of interest which shocks the moral sense, and to protect the needy by criminal statute from a rate of interest exceeding five percent per month. Wall v. Lewis, 192 Ga. 652 , 16 S.E.2d 430 (1941).

Availability of civil remedies. - Because the wife of the debtor company's president provided the debtor with two short term loans at monthly interest rates of 27.6 percent and 41.45 percent, respectively, the trustee for the debtor was entitled to recover the amount the debtor paid in interest under O.C.G.A. § 7-4-18 . Ogier v. Johnson (In re Healing Touch, Inc.), Bankr. (Bankr. N.D. Ga. May 6, 2005).

Section intended to enhance civil penalties. - Design of former Code 1933, § 57-117 was still to condemn usury, and when usury reached such proportions as more than 5 percent per month, to enhance existing penalties of civil forfeitures by adding criminal penalty of misdemeanor, which would attach and apply to person of usurer. Wall v. Lewis, 192 Ga. 652 , 16 S.E.2d 430 (1941).

Sole purpose of section. - Sole purpose of Ga. L. 1908, p. 83, §§ 1 and 2 is to make it penal to reserve, charge, or take interest for use of money in excess of five percent per month under any contract when the relation of debtor or creditor is created or survives. Jackson v. State, 5 Ga. App. 177 , 62 S.E. 726 (1908); Wall v. Lewis, 192 Ga. 652 , 16 S.E.2d 430 (1941).

Section does not authorize five percent per month interest. - Former Code 1933, §§ 57-101 and 57-117 (see O.C.G.A. §§ 7-4-2 and 7-4-1 8) considered as they must be with former Code 1933, § 57-101 (see now O.C.G.A. § 7-4-1 ) do not authorize a regularly licensed pawnbroker who lends money on personal property which is taken into the pawnbroker's actual physical possession and stored by the pawnbroker, to charge interest on money so advanced at a rate of five percent per month. Wall v. Lewis, 192 Ga. 652 , 16 S.E.2d 430 (1941).

Application of rule that change in law does not change transaction's usurious nature. - Rule that change in the law will not change the usurious character of a transaction applies only to renewals of an originally usurious transaction, and is not applicable when separate purchases are made on an open account, resulting in an entirely new indebtedness. Gold Kist, Inc. v. McNair, 166 Ga. App. 66 , 303 S.E.2d 290 (1983).

Interest rate not in excess of maximum. - Trial court did not err by rejecting a debtor's argument that a lender's temporary acceptance of lowered payments without waiving full payment transformed the loan into a usurious transaction because the interest rate of the loan was not in excess of the maximum applicable legal rate of five percent per month under O.C.G.A. § 7-4-18(a) . Latimore v. Vatacs Group, Inc., 317 Ga. App. 98 , 729 S.E.2d 525 (2012).

In a suit by a lender on a note and guaranties, the note's postdefault interest rate was only 3 percent higher than the predefault rate of 5 percent, so the total rate of 8 percent per year was well within the legal limit of 60 percent and was permissible under O.C.G.A. §§ 7-4-2(a)(1)(B) and 7-4-18(a) . MMA Capital Corp. v. ALR Oglethorpe, LLC, 336 Ga. App. 360 , 785 S.E.2d 38 (2016).

Cited in Patterson v. Moore, 146 Ga. 364 , 91 S.E. 116 (1917); Bennett v. Lowry, 167 Ga. 347 , 145 S.E. 505 (1928); Crowe v. State, 44 Ga. App. 719 , 162 S.E. 849 (1932); Zink v. Davis Fin. Co., 61 Ga. App. 39 , 5 S.E.2d 588 (1939); Peoples Bank v. Mayo, 61 Ga. App. 877 , 8 S.E.2d 405 (1940); Knight v. State, 64 Ga. App. 693 , 14 S.E.2d 225 (1941); Public Fin. Corp. v. State, 67 Ga. App. 635 , 21 S.E.2d 476 (1942); Jarvis v. State, 69 Ga. App. 326 , 25 S.E.2d 100 (1943); Walker v. State, 73 Ga. App. 20 , 35 S.E.2d 391 (1945); Gersh v. Peacock, 89 Ga. App. 57 , 78 S.E.2d 543 (1953); Jones v. Community Loan & Inv. Corp., 526 F.2d 642 (5th Cir. 1976); Cohen v. Northside Bank & Trust Co., 207 Ga. App. 536 , 428 S.E.2d 354 (1993); Williams v. Powell, 214 Ga. App. 216 , 447 S.E.2d 45 (1994); Fryer v. Easy Money Title Pawn, Inc., 172 Bankr. 1020 (Bankr. S.D. Ga. 1994); Ransom v. Fleet Fin., Inc., 219 Ga. App. 817 , 466 S.E.2d 686 (1996); Orix Credit Alliance, Inc. v. CIT Group/Equipment Fin., Inc., 230 Bankr. 213 (Bankr. M.D. Ga. 1998); S & A Indus. v. Bank Atlanta, 247 Ga. App. 377 , 543 S.E.2d 743 (2000); Bell v. Instant Car Title Loans (In re Bell), 279 Bankr. 890 (Bankr. N.D. Ga. 2002); Johnson v. Speedee Cash of Columbus, Inc. (In re Johnson), 289 Bankr. 251 (Bankr. M.D. Ga. 2002); Douglas v. Bigley, 278 Ga. App. 117 , 628 S.E.2d 199 (2006); Clay v. Oxendine, 285 Ga. App. 50 , 645 S.E.2d 553 (2007); Cmty. State Bank v. Strong, 651 F.3d 1241 (11th Cir. 2011).

Constitutionality

Section not a constitutional deprivation of rights. - Former Civil Code 1910, §§ 3444 and 3445 did not violate the Constitution of this state; nor did it violate the ninth or fourteenth amendments to the Constitution of United States. King v. State, 136 Ga. 709 , 71 S.E. 1093 (1911).

Former Code 1933, § 57-117 (see now O.C.G.A. § 7-4-18 ) was not violative of the Constitution of the United States on ground that it was a deprivation of the lender's rights. Atterberry v. State, 212 Ga. 778 , 95 S.E.2d 787 (1956).

Application

O.C.G.A. § 7-4-18 applies only to loans of money and is inapplicable to credit purchases. Gold Kist, Inc. v. McNair, 166 Ga. App. 66 , 303 S.E.2d 290 (1983).

Substance of transaction controls in determining legality. - When profit received by money lender, by whatever name it may be called, and whether lawful on its face or not, is in reality a contrivance or device to obtain amount greater than lawful interest, and is made with intent to violate usury laws, the transaction is illegal, and name by which it is called is altogether immaterial. Tribble v. State, 89 Ga. App. 593 , 80 S.E.2d 711 (1954).

Effect of "loan fee". - When the combination of the simple interest charged on a loan during the first month of the loan and a nonrebatable "loan fee," which attached upon the signing of the note, resulted in a total interest charge in the first month of the loan which exceeded five percent, the loan was usurious. Dent v. Associates Equity Servs. Co., 130 Bankr. 623 (Bankr. S.D. Ga. 1991).

Whether contract is mere scheme to evade usury laws is jury question. - When controlling question is whether contracts for purchase of stock by borrowers named in indictments were bona fide contracts for value received, or whether the contracts were mere schemes and devices to evade usury laws, this question is one of fact, and is for the jury to determine. Southern Loan & Inv. Co. v. State, 68 Ga. App. 75 , 22 S.E.2d 108 (1942).

Question whether one intended to exact usury under cover of contrivance or device, or whether charge alleged in contract was a bona fide one for value received, is for jury to determine in prosecutions on charges relating to taking of usurious interests. Tribble v. State, 89 Ga. App. 593 , 80 S.E.2d 711 (1954).

Absolute sale of property is not included within terms of Ga. L. 1908, p. 83, §§ 1, 2. Jackson v. State, 5 Ga. App. 177 , 62 S.E. 726 (1908).

Section does not impair right to sell and assign choses in action arising ex contractu. - Right to purchase salary or wages of another, right of latter to sell their salary or wages, and right to charge greater rate of discount on such purchases than five percent are not affected. King v. State, 136 Ga. 709 , 71 S.E. 1093 (1911); Ison Co. v. Atlantic C.L.R.R., 17 Ga. App. 459 , 87 S.E. 754 (1916).

Loan with fixed monthly payments and no threat of default. - Loans which had fixed payments every month, gave no threat of default at closing by the deduction of points and origination fees, gave no threat of default through high interest charges in any given month, and required a set amount of interest every month under the 5 percent permitted by law did not violate the intent of O.C.G.A. § 7-4-18 . Fleet Fin., Inc. v. Jones, 263 Ga. 228 , 430 S.E.2d 352 (1993).

Purchaser of interest in promissory note at discount. - When the borrower had full use of the funds it borrowed originally, the discounted sale of the note did not raise the issue of usury, even though the borrower argued that the purchaser improperly prevented it from sharing in the benefits derived from the discount and the borrower could recover the unpaid loan origination fee. First Alliance Bank v. Westover, Inc., 222 Ga. App. 524 , 474 S.E.2d 717 (1996).

Assignment of wages are not unlawful unless connected with usurious loan. Jackson v. Johnson, 157 Ga. 189 , 121 S.E. 230 (1924).

Former Civil Code 1910, §§ 3444 and 3445 (see now O.C.G.A. § 7-4-18 ) did not make unlawful a transaction wherein there was a charge by way of commission for advances, discount, exchange, or fees, or purchase of salary or wages, unless connected with a loan and directly or indirectly constituting all or part of reservation, charge, or taking, for loan or advance of money, or forbearance to enforce collection of sum of money, a rate of interest greater than 5 percent per month. King v. State, 136 Ga. 709 , 71 S.E. 1093 (1911).

Series of transactions under guise of wage assignments constituted usury. - Series of transactions under guise of successive assignments of wages, which constituted a scheme and device for purpose of evading laws against usury, by which sum of $20.00 was loaned to the defendant at interest in sum of $4.00 payable every two weeks, necessarily was usury. Jackson v. Bloodworth, 41 Ga. App. 216 , 152 S.E. 289 (1930).

Former Civil Code 1910, §§ 3444 and 3445 did not attempt to annul contracts violating the contract's provisions. West v. Atlanta Loan & Sav. Co., 22 Ga. App. 184 , 95 S.E. 721 (1918); Citizens Bank v. N.C. Hoyt & Co., 25 Ga. App. 222 , 102 S.E. 837 (1920).

Fact that the charging or taking of interest in excess of five percent per month is made a misdemeanor, punishable by fine and imprisonment, does not render the mortgage absolutely void since laws of this state provide for status of usurious contracts, including mortgages. Croom v. Jordan, 20 Ga. App. 802 , 93 S.E. 538 (1917).

Charge for procuring insurance to extent of loan not counted as interest. - Lender may by contract with borrower obtain insurance to protect former from loss to the extent of the loan, and charge cost of procuring such insurance to the borrower, and such cost cannot be counted as interest charged for money loaned. Peebles v. State, 87 Ga. App. 649 , 75 S.E.2d 35 (1953).

Effect of assignment of insurance policy to lender who is also insurer. - Good faith assignment of insurance policy by borrower to lender does not render transaction usurious merely because of fact that it is taken out with lender which is itself an insurance company, if it does not appear that premium charge was excessive or that borrower was compelled as condition precedent to loan to make a tie-in purchase of insurance with company advancing loan. Tribble v. State, 89 Ga. App. 593 , 80 S.E.2d 711 (1954).

Attorney's fees in bankruptcy proceedings. - Creditor which violated the Georgia criminal usury statute could only recover the principal. The attorney's fees provision of the note, security agreement, and deed to secure debt were unenforceable and, therefore, under § 506 of the Federal Bankruptcy Code, 11 U.S.C. § 506, there was no enforceable provision for recovery of attorney's fees. Dent v. Associates Fin. Servs., Inc., 137 Bankr. 78 (Bankr. S.D. Ga. 1992).

Pawnbrokers. - O.C.G.A. § 7-4-18 is applicable to pawn brokers by the clear direct reference to pawnbrokers in the statute and the plain language of the statute. Fryer v. Easy Money Title Pawn, Inc., 183 Bankr. 322 (Bankr. S.D. Ga. 1995).

Pawnshop charge which included a 23% service charge for the customer's use of the pawned automobile, the risk to the lender of that continued use, checking and processing the title to the automobile apparently in addition to an itemized title fee charged under the contract, verifying insurance on the automobile, and making a log for the sheriff's department, constituted interest rather than pawnshop charges since it did not reimburse specific expenses actually incurred by the pawnbroker in connection with the transaction. Fryer v. Easy Money Title Pawn, Inc., 183 Bankr. 322 (Bankr. S.D. Ga. 1995).

OPINIONS OF THE ATTORNEY GENERAL

If a second imposition of fee permitted by O.C.G.A. § 7-3-14(2) would result in a violation of usury provisions of O.C.G.A. § 7-4-18 such a second imposition would be illegal. 1982 Op. Att'y Gen. No. 82-43.

RESEARCH REFERENCES

Am. Jur. 2d. - 44B Am. Jur. 2d, Interest and Usury, § 346 et seq.

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, § 402 et seq.

ALR. - Right to have usurious payments made on previous obligation applied as payment of principal on renewal, 13 A.L.R. 1244 .

Validity of agreement to pay interest on interest, 37 A.L.R. 325 ; 76 A.L.R. 1484 .

Usury as affected by repayment, or borrower's option to repay, loan before maturity, 130 A.L.R. 73 ; 75 A.L.R.2d 1265.

Retrospective application and effect of statutory provision for interest or changed rate of interest, 4 A.L.R.2d 932; 40 A.L.R.4th 147; 41 A.L.R.4th 694.

Provision for interest after maturity at a rate in excess of legal rate as usurious or otherwise illegal, 28 A.L.R.3d 449.

Reformation of usurious contract, 74 A.L.R.3d 1239.

Practice of exacting usury as a nuisance or ground for injunction, 83 A.L.R.2d 848.

Contingency as to borrower's receipt of money or other property from which loan is to be repaid as rendering loan usurious, 92 A.L.R.3d 623.

Application of usury laws to transactions characterized as "leases,", 94 A.L.R.3d 640.

Validity and construction of state statute or rule allowing or changing rate of prejudgment interest in tort actions, 40 A.L.R.4th 147.

Retrospective application and effect of state statute or rule allowing interest or changing rate of interest on judgments or verdicts, 41 A.L.R.4th 694.

7-4-19. Civil action to enforce chapter.

The Department of Banking and Finance or the Industrial Loan Commissioner may bring an appropriate civil action to enforce any provision of this chapter whether by injunction or otherwise in any superior court of this state having jurisdiction over one or more defendants. In the case of a loan made pursuant to this chapter by a licensee under Chapter 3 of this title, relating to industrial loans, such action shall be brought by the Industrial Loan Commissioner. In the case of any other loan, the action shall be brought by the Department of Banking and Finance.

(Code 1981, § 7-4-19 , enacted by Ga. L. 1983, p. 1146, § 6; Ga. L. 1989, p. 14, § 7.)

7-4-20. Election to forgo application of federal usury laws.

In enacting Code Sections 7-4-2 through 7-4-5, the General Assembly exercises its prerogative:

  1. Under subsection (b)(2) of Section 501 of the Depository Institutions Deregulation and Monetary Control Act of 1980, Public Law 96-221 (12 U.S.C. Section 1735f-7, notes), and declares that the provisions of subsection (a)(1) of Section 501 do not apply to loans, mortgages, credit sales, and advances made in the State of Georgia on and after March 31, 1983; and
  2. Under Section 512 of that act, Public Law 96-221 (12 U.S.C. Section 86a, notes), and declares that the provisions which preempt the law of this state in Section 511 of that act do not apply to business and agricultural loans in amounts of $1,000.00 or more made in the State of Georgia on and after March 31, 1983. (Code 1981, § 7-4-20 , enacted by Ga. L. 1983, p. 1146, § 7; Ga. L. 2004, p. 631, § 7.)

7-4-21. Class action barred on claims for violation of interest laws on loans secured by real estate.

A claim of violation on any loan secured by an interest in real estate may be asserted in an individual action only and may not be the subject of a class action under Code Section 9-11-23 or any other provisions of law.

Nothing contained in this Code section shall be construed to affect any class action which was pending in any court of this state, including any United States courts, on February 15, 1983, as to the parties to and subject matter then before such court.

(Code 1981, § 7-4-21 , enacted by Ga. L. 1983, p. 1316, § 1; Ga. L. 1984, p. 22, § 7.)

Law reviews. - For annual survey article on domestic relations, see 50 Mercer L. Rev. 217 (1998).

ARTICLE 2 RESIDENTIAL SECOND MORTGAGES

7-4-30 through 7-4-36.

Reserved. Repealed by Ga. L. 1983, p. 1146, § 8, effective March 31, 1983.

Editor's notes. - The former article was based on the following Acts: Ga. L. 1966, p. 574, §§ 2-6; Ga. L. 1967, p. 637, §§ 1, 2; Ga. L. 1968, p. 1086, § 1; Ga. L. 1975, p. 1114, § 1; Ga. L. 1976, p. 726, §§ 1, 2; Ga. L. 1979, p. 1281, §§ 1, 2; Ga. L. 1980, p. 511, § 3; Ga. L. 1982, p. 3, § 7.

CHAPTER 5 CREDIT CARDS AND CREDIT CARD BANKS

Sec.

Cross references. - Criminal penalties for illegal use of credit cards, bank services cards, and other financial resources, § 16-9-30 et seq.

Editor's notes. - Ga. L. 1987, p. 268, § 1, effective March 19, 1987, repealed the Code sections formerly codified at this chapter and enacted the current chapter. The former chapter consisted of §§ 7-5-1 through 7-5-7 , which dealt with lender credit card charges and was based on Ga. L. 1969, p. 87, §§ 1-6; Ga. L. 1981, p. 732, §§ 1, 2; Ga. L. 1981, Ex. Sess., p. 8.

Law reviews. - For article discussing federal truth in lending provisions and their relation to state laws, see 6 Ga. St. B.J. 19 (1969). For note discussing transfer fees in home loan assumptions in reference to the Georgia usury laws, see 9 Ga. L. Rev. 454 (1975).

JUDICIAL DECISIONS

Cited in Bussey v. Georgia Bankamericard, 516 F.2d 452 (5th Cir. 1975).

RESEARCH REFERENCES

ALR. - Liability of holder of credit card or plate for purchases made thereon by another person, 15 A.L.R.3d 1086.

Credit card issuer's liability, under state laws, for wrongful billing, cancellation, dishonor, or disclosure, 53 A.L.R.4th 231.

7-5-1. Short title.

This chapter shall be known and may be cited as "The Credit Card and Credit Card Bank Act."

(Code 1981, § 7-5-1 , enacted by Ga. L. 1987, p. 268, § 1.)

RESEARCH REFERENCES

Violation of the Truth-In-Lending Act and Regulation Z, 73 POF3d 275.

ALR. - What constitutes Truth in Lending Act violation which "was not intentional and resulted from bona fide error not withstanding maintenance of procedures reasonably adapted to avoid any such error" within meaning of § 130(c) of Act (15 USCA § 1640(c)), 153 A.L.R. Fed. 193.

Validity, construction, and application of Truth in Lending Act (TILA) and regulations promulgated thereunder - United States Supreme Court cases, 67 A.L.R. Fed. 2d 567.

7-5-2. Definitions.

As used in this chapter, the term:

  1. "Affiliate" means the same as that set forth in paragraph (1) of Code Section 7-1-4.
  2. "Commissioner" and "department" shall have the meanings provided in paragraphs (13) and (16) of Code Section 7-1-4.
  3. "Credit card" means any type of arrangement or loan agreement pursuant to which a domestic lender or credit card bank gives a debtor the privilege of using a credit card or other credit confirmation or device of any type in transactions out of which debt arises:
    1. By the domestic lender or credit card bank honoring a draft or similar order for the payment of money created, authorized, issued, or accepted by the debtor; or
    2. By the domestic lender or credit card bank paying or agreeing to pay the debtor's obligation.
  4. "Credit card account" means an arrangement between a domestic lender or credit card bank and a debtor for the creation of debt pursuant to a credit card and under which:
    1. The domestic lender or credit card bank may permit the debtor to create debt from time to time;
    2. The unpaid balance of principal of such debt and the loan, finance, or other appropriate charges are debited to an account;
    3. A loan finance charge is computed or an interest rate imposed upon the outstanding balances of the debtor's account from time to time; and
    4. The domestic lender or credit card bank is to render bills or statements to the debtor at regular intervals, the amount of which bills or statements is payable by and due from the debtor on a specified date as stated in such bill or statement or, at the option of the debtor, but subject to the terms and conditions of the credit card account, may be paid by the debtor in installments.
  5. "Credit card bank" means a national bank located in this state or a bank organized under the laws of this state which, in either event, the activities of which are limited to those permitted under Code Section 7-5-3.
  6. "Domestic lender" means any bank, savings and loan association, savings bank, credit union, or other business organization organized or chartered under the laws of this state or the United States, which in any event is authorized by law to accept deposits and make loans and has its principal place of business in this state.
  7. "Foreign lender" means any bank, savings and loan association, savings bank, credit union, or other business organization organized or chartered under the laws of the United States, or any state other than this state, or the District of Columbia, which in any event is authorized by law to accept deposits and make loans and has its principal place of business outside this state.
  8. "Holding company" means any company that controls a domestic or foreign lender or a credit card bank. The term "company" and "control" shall have the meanings set forth in Code Section 7-1-605.
  9. "Qualifying organization" means a corporation, partnership, or other entity which at all times maintains an office in the State of Georgia at which it employs at least 250 persons residing in this state who are directly or indirectly engaged in providing the following services, either for the qualifying organization or on behalf of other domestic or foreign lenders or credit card banks:
    1. The distribution of credit cards or other devices designed and effective to access credit card accounts;
    2. The preparation of periodic statements of amounts due under credit card accounts;
    3. The receipt from credit card holders of amounts paid on or with respect to such accounts; or
    4. The maintenance of financial records reflecting the status of such accounts from time to time. The term "qualifying organization" shall also include any domestic bank and credit card bank satisfying the employment and activities requirements set forth in this paragraph. (Code 1981, § 7-5-2 , enacted by Ga. L. 1987, p. 268, § 1; Ga. L. 1988, p. 13, § 7; Ga. L. 1999, p. 674, § 41; Ga. L. 2016, p. 864, § 7/HB 737.)

The 2016 amendment, effective May 3, 2016, part of an Act to revise, modernize, and correct the Code, substituted "Holding company" for "For purposes of this chapter, 'holding company'" at the beginning of paragraph (8).

Editor's notes. - In light of the similarity of the statutory provisions, annotations decided under former O.C.G.A. § 7-5-2 are included in the annotations for this Code section.

OPINIONS OF THE ATTORNEY GENERAL

Applicability of chapter. - Line of credit arrangement accessed through special drafts drawn on the lender which the borrower may make payable to a third party is clearly governed by the Lender Credit Card Act. The drafts are "lender credit cards" within the meaning of former § 7-5-3(2) since the drafts constitute "credit confirmation or identification." 1985 Op. Att'y Gen. No. 85-32 (decided under former § 7-5-2 ).

When the financial institution issues special drafts which the borrower may make payable only to the issuing financial institution and to draw on the line of credit, the borrower must either come back to the financial institution and cash one of the drafts or deposit the draft into the borrower's checking account at the financial institution and then use the borrower's personal check drawn on the borrower's deposit account, the third party would have no reason to know that a credit transaction was transpiring. Thus, lacking the requisite "credit confirmation or identification," it would not be governed by the Lender Credit Card Act, but, rather, would be governed by Georgia's usury provisions found at O.C.G.A. § 7-4-1 . 1985 Op. Att'y Gen. No. 85-32 (decided under former § 7-5-2 ).

When the drawee bank extends a line of credit to the customer against which the customer may draw by writing checks that would otherwise overdraw the drawee's checking account, because the customer's checks do not indicate the customer has overdraft protection nor is the customer given any article which the customer could present to a third party to give notification of overdraft protection, this arrangement would be governed by Georgia's general usury provisions rather than the Lender Credit Card Act. 1985 Op. Att'y Gen. No. 85-32 (decided under former § 7-5-2 ).

RESEARCH REFERENCES

C.J.S. - 47 C.J.S., Interest and Usury; Consumer Credit, § 523 et seq.

7-5-3. Organization of credit card banks.

Subject to the provisions of this chapter and to the approval of the commissioner, any domestic lender, foreign lender, or holding company may organize, own, and control a credit card bank on the terms and conditions provided in this Code section:

  1. If the credit card bank is to be organized under the laws of this state, such bank shall be organized as provided in Part 8 of Article 2 of Chapter 1 of this title;
  2. In connection with the application to organize, or to own and control a credit card bank, the applicant shall pay applicable fees established by regulation of the department to defray the costs of the investigation and review of the application;
  3. The shares of a credit card bank shall be owned solely by a domestic lender, a foreign lender, or a holding company;
  4. The credit card bank shall conduct its limited deposit taking business only from a single location in this state;
  5. The credit card bank shall at all times maintain capital stock and paid-in surplus as required by regulatory policies of the department but in no event less than $2 million;
  6. The credit card bank may only engage in the business of soliciting, processing, and making loans pursuant to credit card accounts and conducting such other activities as may be necessary incidents thereto;
  7. The credit card bank may not accept demand deposits or deposits that the depositor may withdraw by check or similar means for payment to third parties or others, and it may not accept savings or time deposits of less than $100,000.00;
  8. The credit card bank must operate in a manner that is not likely to attract customers from the general public in this state to the substantial detriment of other domestic lenders;
  9. The credit card bank shall have, within one year of the date it commences operations, no fewer than 50 employees located in this state devoted to its credit card activities; provided, however, where the credit card bank contracts with a qualifying organization for the performance of services incidental to offering credit card activities, the minimum number of employees in this state shall be determined by the commissioner at a level to assure the continued and substantive presence of the credit card bank in this state for the purpose of conducting its corporate affairs and performing the credit underwriting function and such other activities not subject to contract with the qualifying organization as may be incidental to its servicing of credit card accounts; and
  10. A domestic lender is not required to establish a credit card bank to issue credit cards and create credit card accounts. (Code 1981, § 7-5-3 , enacted by Ga. L. 1987, p. 268, § 1; Ga. L. 1999, p. 674, § 42; Ga. L. 2003, p. 843, § 23; Ga. L. 2004, p. 631, § 7.)

7-5-4. Credit card charges and fees.

    1. Notwithstanding the provisions of any other law prescribing, regulating, or limiting interest rates, any domestic lender or credit card bank may charge and collect in connection with a credit card account:
      1. Finance charges at such periodic interest rate or rates computed or imposed on the outstanding balances on the credit card account in any manner as provided in the written agreement governing such credit card account, and such periodic interest rate or rates may vary from time to time in accordance with a schedule or formula contained in such agreement; and
      2. Such other fees and charges as the domestic lender or credit card bank and the debtor may agree upon in the written agreement governing the credit card account, including, but not limited to, cash advance charges, charges for exceeding preestablished credit limits, late fees, delinquency or default charges, returned payment charges, stop payment charges, automated teller machine charges or similar electronic or interchange fees or charges, annual or membership fees, application fees, transaction fees and minimum charges for each scheduled billing period, premiums for credit life, accident, health, or loss of income insurance, documentary evidence fees, fees or charges for services rendered or for reimbursement of expenses incurred by any domestic lender or credit card bank or their respective agents in connection with the credit card account, and other fees incident to the application for or the opening, administration, and termination of the credit card account, including, without limitation, commitment, application, and processing fees, official fees and taxes, and costs incurred by reason of examination of title, title insurance, inspection, appraisal, recording, mortgage satisfaction, filing fees, or other formal acts necessary or appropriate to the security for the credit card account.
    2. For the purposes of this Code section, Section 85 of the National Bank Act (12 U.S.C. Section 85), and Sections 521, 522, and 523 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (12 U.S.C. Sections 1831d, 1831e, and 1831f), the finance charges under subparagraph (a)(1)(A) of this Code section and the charges and fees under subparagraph (a)(1)(B) of this Code section shall be deemed to be, and may be charged and collected as, interest by the domestic lender or credit card bank.
  1. The terms and conditions contained in the written agreement governing the credit card account between the domestic lender or credit card bank and the debtor shall be deemed to be material to the determination of interest, including, but not limited to:
    1. Those provisions relating to the computation and charging of finance charges authorized by subparagraph (a)(1)(A) of this Code section;
    2. The fees and charges authorized by subparagraph (a)(1)(B) of this Code section; and
    3. All other terms and conditions of such written agreement.
  2. A credit card account between any domestic lender or credit card bank and a debtor shall be governed solely by the laws of the State of Georgia and federal law unless otherwise expressly agreed in writing by the parties.  A domestic lender or credit card bank may, as specified in the written agreement governing a credit card account, modify in any respect any terms or conditions of such credit card account, upon such prior written notice of such modification as specified by the terms of the written agreement governing the credit card account or by the Truth in Lending Act (15 U.S.C. Section 1601, et seq.). Any such notice provided by a domestic lender or credit card bank shall specify that the debtor has the right to surrender the credit card whereupon the debtor shall have the right to continue to pay off his credit card account in the same manner and under the same terms and conditions as then in effect.  The debtor's failure to surrender the credit card prior to the modification's becoming effective shall constitute a consent to the modification. (Code 1981, § 7-5-4 , enacted by Ga. L. 1987, p. 268, § 1; Ga. L. 1990, p. 1, § 1; Ga. L. 1991, p. 94, § 7; Ga. L. 1997, p. 143, § 7; Ga. L. 1999, p. 674, § 43; Ga. L. 2001, p. 4, § 7.)

RESEARCH REFERENCES

ALR. - Construction and application of Consumer Credit Protection Act provisions (18 USCS §§ 891-894) prohibiting extortionate credit transactions, 106 A.L.R. Fed. 33.

What constitutes "finance charge" under § 106(a) of the Truth in Lending Act (15 USCA § 1605(a)) or applicable regulations, 154 A.L.R. Fed. 431.

7-5-5. Regulation of credit card banks; enforcement; rules and regulations.

  1. All credit card banks organized under the laws of this state shall be subject to the supervision, regulation, and examination of the department, and the department shall have all enforcement powers with respect thereto as are provided in Chapter 1 of this title.
  2. In the event any credit card bank does not conduct its activities within the limitations provided in Code Section 7-5-3, the department may require such credit card bank to cease all unauthorized activities. In the event such credit card bank fails to abide by such order, the department may in addition to all other rights, remedies, and powers it may have under Chapter 1 of this title:
    1. Impose upon the credit card bank or its parent holding company or domestic lender or foreign lender a penalty of up to $10,000.00 per day for each day such order is violated; and
    2. Require divestiture of such credit card bank by any domestic lender, foreign lender, or holding company not qualified to acquire such credit card bank on the date it ceased to operate within the limitations imposed by Code Section 7-5-3 and became a "bank" for purposes of Part 18 or Part 19 of Article 2 of Chapter 1 of this title.
  3. The department shall have the power to promulgate rules and regulations implementing the provisions of this chapter. (Code 1981, § 7-5-5 , enacted by Ga. L. 1987, p. 268, § 1.)

7-5-6. Applicability of banking laws.

  1. A credit card bank shall be subject to the provisions of Chapter 1 of this title except when any rights, powers, privileges, or provisions of Chapter 1 of this title are inconsistent with the rights, powers, privileges, provisions, or limitations of this chapter.
  2. A credit card bank shall not be considered a "bank" for the purposes of Part 18 or Part 19 of Article 2 of Chapter 1 of this title; provided, however, every domestic lender, foreign lender, or holding company owning a credit card bank shall be subject to the provisions of Code Section 7-1-607 , which concerns registration, reporting, and examination. (Code 1981, § 7-5-6 , enacted by Ga. L. 1987, p. 268, § 1; Ga. L. 1999, p. 674, § 44.)

7-5-7. Penalties for violation of chapter.

Repealed by Ga. L. 1987, p. 268, § 1, effective March 19, 1987.

Editor's notes. - For former Code section, see editor's notes following the chapter heading.

CHAPTER 6 CREDIT OR LOAN DISCRIMINATION

Sec.

Cross references. - Prohibition of discrimination in sale, lease, or financing of housing accommodations, § 8-3-200 et seq.

7-6-1. Discrimination in extending credit or making loans prohibited.

  1. No bank, lending company, financial institution, retail installment seller, or person extending credit may discriminate or provide requirements which discriminate in the extending of credit or the making of loans solely on the basis of sex, race, religion, national origin, or marital status.
  2. Any person, firm, or corporation which willfully violates any provision of this Code section shall be guilty of a misdemeanor and, upon conviction thereof, shall be punished by a fine not to exceed $1,000.00.

    (Ga. L. 1975, p. 772, §§ 1, 3.)

Law reviews. - For article, "Religious Exercise as Credit Risk," see 10 Bank. Dev. J. 119 (1993-1994).

RESEARCH REFERENCES

ALR. - Recovery of damages as remedy for wrongful discrimination under state or local civil rights provisions, 85 A.L.R.3d 351.

Discrimination based on marital status under Equal Credit Opportunity Act (15 U.S.C.A. §§ 1691 et seq.) as defense to liability for financial obligations, 16 A.L.R. Fed. 3d 9.

7-6-2. Cause of action for individual discriminated against.

Any person denied a loan or credit solely on the basis of discrimination because of sex, race, religion, national origin, or marital status shall have a right to bring an action for damages in any court of competent jurisdiction in an individual, but not in a representative, capacity against the person, firm, or corporation violating this chapter.

(Ga. L. 1975, p. 772, § 2.)

RESEARCH REFERENCES

ALR. - Recovery of damages for emotional distress resulting from discrimination because of sex or marital status, 61 A.L.R.3d 944.

Recovery of damages as remedy for wrongful discrimination under state or local civil rights provisions, 85 A.L.R.3d 351.

Requiring apology as "affirmative action" or other form of redress under State Civil Rights Act, 85 A.L.R.3d 402.

Discrimination based on marital status under Equal Credit Opportunity Act (15 U.S.C.A. §§ 1691 et seq.) as defense to liability for financial obligations, 16 A.L.R. Fed. 3d 9.

CHAPTER 6A GEORGIA FAIR LENDING ACT

Sec.

Cross references. - Underwriting and rate risking, § 33-24-90 et seq.

Law reviews. - For article, "Foreclosure Diversion and Mediation in the States," see 33 Georgia St. U.L. Rev. 411 (2017). For note on the 2002 enactment of this chapter, see 19 Ga. St. U.L. Rev. 14 (2002). For note on the 2003 amendments to O.C.G.A. §§ 7-6A-1 through 7-6A-1 1, see 20 Ga. St. U.L. Rev. 1 (2003). For comment, "Amidst the Walking Dead: Judicial and Nonjudicial Approaches for Eradicating Zombie Mortgages," see 65 Emory L.J. 795 (2016).

OPINIONS OF THE ATTORNEY GENERAL

Fingerprinting. - Offenses arising under O.C.G.A. Ch. 6A, T. 7 and designated as misdemeanors under O.C.G.A. § 7-6A-8 require fingerprinting. 2002 Op. Att'y Gen. No. 2002-7.

RESEARCH REFERENCES

Am. Jur. 2d. - 17 Am. Jur. 2d., Consumer and Borrower Protection, § 264 et seq.

17 Am. Jur. 2d, Consumer and Borrower Protection, § 292 et seq.

C.J.S. - 59 C.J.S., Mortgages, § 32 et seq.

7-6A-1. Short title.

This chapter shall be known and may be cited as the "Georgia Fair Lending Act."

(Code 1981, § 7-6A-1 , enacted by Ga. L. 2002, p. 455, § 1; Ga. L. 2003, p. 1, § 1.)

Cross references. - Vehicle protection product warranty cannot be condition to car loan, § 33-34A-9 .

Law reviews. - For survey article on real property law for the period from June 1, 2002 to May 31, 2003, see 55 Mercer L. Rev. 397 (2003).

JUDICIAL DECISIONS

Mortgage loans. - Chapter 13 debtor's allegations that a title insurance company, a bank, and the FNMA failed to honor a lender's promise that the debtor could buy down the interest rate on the debtor's mortgage and refused to cancel the debtor's mortgage after the debtor was charged a higher rate failed to state claims for relief under the RESPA, 12 U.S.C. § 2601 et seq., the TILA, 15 U.S.C. § 1601 et seq., and the Georgia Fair Lending Act, O.C.G.A. § 7-6A-1 et seq.; however, the court allowed the debtor to amend the debtor's complaint to cure deficiencies in the debtor's allegations that a LLC that serviced the debtor's loan violated the RESPA when the LLC failed to respond to qualified written requests for information the debtor sent to the LLC. Hughes v. J.P. Morgan Chase (In re Hughes), Bankr. (Bankr. N.D. Ga. Apr. 13, 2018).

7-6A-2. Definitions.

As used in this chapter, the term:

  1. "Acceleration" means a demand for immediate repayment of the entire balance of a home loan.
  2. "Affiliate" means any company that controls, is controlled by, or is under common control with another company, as set forth in 12 U.S.C. Section 1841, et seq.
  3. "Annual percentage rate" means the annual percentage rate for the loan calculated at closing according to the provisions of 15 U.S.C. Section 1606, the regulations promulgated thereunder by the Board of Governors of the Federal Reserve System, and the Official Staff Commentary on Regulation Z published by the Board of Governors of the Federal Reserve System.
  4. "Bona fide discount points" means loan discount points knowingly paid by the borrower for the express purpose of reducing, and which in fact do result in a bona fide reduction of, the interest rate applicable to the home loan; provided, however, that the undiscounted interest rate for the home loan does not exceed by more than one percentage point the required net yield for a 90 day standard mandatory delivery commitment for a home loan with a reasonably comparable term from either the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, whichever is greater.
  5. "Borrower" means any natural person obligated to repay the loan including a coborrower or cosigner.
  6. "Creditor" means a person who both regularly extends consumer credit that is subject to a finance charge or is payable by written agreement in more than four installments and is a person to whom the debt arising from the home loan transaction is initially payable. Creditor shall also mean any person brokering a home loan, which shall include any person who directly or indirectly for compensation solicits, processes, places, or negotiates home loans for others or offers to solicit, process, place, or negotiate home loans for others or who closes home loans which may be in the person's own name with funds provided by others and which loans are thereafter assigned to the person providing the funding of such loans, provided that creditor shall not include a person who is an attorney providing legal services in association with the closing of a home loan. A creditor shall not include: (A) a servicer; (B) an assignee; (C) a purchaser; or (D) any state or local housing finance agency or any other state or local governmental or quasi-governmental entity.
  7. "High-cost home loan" means a home loan in which the terms of the loan meet or exceed one or more of the thresholds as defined in paragraph (17) of this Code section.
  8. "Home loan" means a loan, including an open-end credit plan where the principal amount does not exceed the conforming loan size limit for a single-family dwelling as established by the Federal National Mortgage Association and the loan is secured by a mortgage, security deed, or deed to secure debt on real estate located in this state upon which there is located or there is to be located a structure or structures, including a manufactured home, designed principally for occupancy of from one to four families and which is or will be occupied by a borrower as the borrower's principal dwelling, except that home loan shall not include:
    1. A reverse mortgage transaction;
    2. A loan that provides temporary financing for the acquisition of land by the borrower and initial construction of a borrower's dwelling thereon or the initial construction of a borrower's dwelling on land owned by the borrower;
    3. A bridge loan made to a borrower pending the sale of the borrower's principal dwelling or a temporary loan made to a borrower and secured by the borrower's principal dwelling pending the borrower's obtaining permanent financing for such principal dwelling;
    4. A loan secured by personal property including, but not limited to, a motor vehicle, motor home, boat, or watercraft and also secured by the borrower's principal dwelling to provide the borrower with potential income tax advantages when such personal property is the primary collateral for such loan;
    5. A new loan secured by a borrower's principal dwelling as a result of a lien taken in connection with a debt previously contracted or incurred when the loan documents for such new loan do not include a mortgage, security deed, or deed to secure debt expressly securing such new loan; or
    6. A loan primarily for business, agricultural, or commercial purposes.
  9. "Make" or "makes" means to originate a loan or to engage in brokering of a home loan including the soliciting, processing, placing, or negotiating of a home loan made or offered by a person brokering a home loan.
  10. "Manufactured home" means a structure, transportable in one or more sections, which in the traveling mode is eight body feet or more in width or 40 body feet or more in length or, when erected on site is 320 or more square feet and which is built on a permanent chassis and designed to be used as a dwelling with a permanent foundation when erected on land secured in conjunction with the real property on which the manufactured home is located and connected to the required utilities and includes the plumbing, heating, air-conditioning, and electrical systems contained therein; except that such term shall include any structure which meets all the requirements of this paragraph except the size requirements and with respect to which the manufacturer voluntarily files a certification required by the secretary of the United States Department of Housing and Urban Development and complies with the standards established under the National Manufactured Housing Construction and Safety Standards Act of 1974, 42 U.S.C. Section 5401, et seq. Such term does not include rental property or second homes or manufactured homes when not secured in conjunction with the real property on which the manufactured home is located.
  11. "Open-end credit plan" or "open-end loan" means a loan in which (A) a creditor reasonably contemplates repeated transactions; (B) the creditor may impose a finance charge from time to time on an outstanding balance; and (C) the amount of credit that may be extended to the borrower during the term of the loan, up to any limit set by the creditor, is generally made available to the extent that any outstanding balance is repaid.
  12. "Points and fees" means:
    1. All items included in the definition of finance charge in 12 C.F.R. 226.4(a) and 12 C.F.R. 226.4(b) except interest or the time price differential. All items excluded under 12 C.F.R. 226.4(c) are excluded from points and fees, provided that for items under 12 C.F.R. 226.4(c)(7) the creditor does not receive direct or indirect compensation in connection with the charge and the charge is not paid to an affiliate of the creditor;
    2. All compensation paid directly or indirectly to a mortgage broker from any source, including a broker that originates a loan in its own name in a table funded transaction, including but not limited to yield spread premiums, yield differentials, and service release fees, provided that the portion of any yield spread premium that is both disclosed to the borrower in writing and used to pay bona fide and reasonable fees to a person other than the creditor or an affiliate of the creditor for the following purposes is exempt from inclusion in points and fees: fees for tax payment services; fees for flood certification; fees for pest infestation and flood determination; appraisal fees; fees for inspection performed prior to closing; credit reports; surveys; attorneys' fees, if the borrower has the right to select the attorney from an approved list or otherwise; notary fees; escrow charges, so long as not otherwise included under subparagraph (A) of this paragraph; title insurance premiums; and fire and hazard insurance and flood insurance premiums, provided that the conditions set forth in 12 C.F.R. 226.4(d)(2) are met;
    3. Premiums or other charges for credit life, credit accident, credit health, credit personal property, or credit loss-of-income insurance, debt suspension coverage or debt cancellation coverage, whether or not such coverage is insurance under applicable law, that provides for cancellation of all or part of a borrower's liability in the event of loss of life, health, personal property, or income or in the case of accident written in connection with a home loan and premiums or other charges for life, accident, health, or loss-of-income insurance without regard to the identity of the ultimate beneficiary of such insurance. In determining points and fees for the purposes of this paragraph, premiums or other charges shall only include those payable at or before loan closing and are included whether they are paid in cash or financed and whether the amount represents the entire premium for the coverage or an initial payment;
    4. The maximum prepayment fees and penalties that may be charged or collected under the terms of the loan documents. Mortgage interest that may accrue in advance of payment in full of a loan made under a local, state, or federal government sponsored mortgage insurance or guaranty program, including a Federal Housing Administration program, shall not be considered to be a prepayment fee or penalty;
    5. All prepayment fees or penalties that are charged to the borrower if the loan refinances a previous loan made or currently held by the same creditor or an affiliate of the creditor;
    6. For open-end loans, points and fees are calculated in the same manner as for loans other than open-end loans, based on the minimum points and fees that a borrower would be required to pay in order to draw on the open-end loan an amount equal to the total credit line; and
    7. Points and fees shall not include:
      1. Taxes, filing fees, recording, and other charges and fees paid or to be paid to public officials for determining the existence of or for perfecting, releasing, or satisfying a security interest;
      2. Bona fide and reasonable fees paid to a person other than the creditor or an affiliate of the creditor for the following: fees for tax payment services; fees for flood certification; fees for pest infestation and flood determination; appraisal fees; fees for inspections performed prior to closing; credit reports; surveys; attorneys' fees, if the borrower has the right to select the attorney from an approved list or otherwise; notary fees; escrow charges, so long as not otherwise included under subparagraph (A) of this paragraph; title insurance premiums; and fire and hazard insurance and flood insurance premiums, provided that the conditions in 12 C.F.R. 226.4(d)(2) are met;
      3. Bona fide fees paid to a federal or state government agency that insures payment of some portion of a home loan, including, but not limited to, the Federal Housing Administration, the Department of Veterans Affairs, the United States Department of Agriculture for rural development loans, or the Georgia Housing and Finance Authority; and
      4. Notwithstanding any provision to the contrary in this chapter, compensation in the form of premiums, commissions, or similar charges paid to a creditor or any affiliate of a creditor for the sale of: (I) title insurance; or (II) insurance against loss of or damage to property or against liability arising out of the ownership or use of property, provided that the conditions in 12 C.F.R. 226.4(d)(2) are met.
  13. "Process," "processes," or "processing" means to act as a processor.
  14. "Processor" means any person that prepares paperwork necessary for or associated with the closing of a home loan, including but not limited to promissory notes, disclosures, deeds, and closing statements, provided that processor shall not include persons on the grounds that they are engaged in data processing or statement generation services for home loans.
  15. "Servicer" means the same as set forth in 24 C.F.R. 3500.2.
  16. "Servicing" means the same as set forth in 24 C.F.R. 3500.2.
  17. "Threshold" means:
    1. Without regard to whether the loan transaction is or may be a "residential mortgage transaction" as that term is defined in 12 C.F.R. 226.2(a)(24), the annual percentage rate of the loan is such that it equals or exceeds that set out in Section 152 of the Home Ownership and Equity Protection Act of 1994, 15 U.S.C. Section 1602(aa), and the regulations adopted pursuant thereto by the Federal Reserve Board, including Section 12 C.F.R. 226.32; or
    2. The total points and fees payable in connection with the loan, excluding not more than two bona fide discount points, exceed: (i) 5 percent of the total loan amount if the total loan amount is $20,000.00 or more or (ii) the lesser of 8 percent of the total loan amount or $1,000.00 if the total loan amount is less than $20,000.00.
  18. "Total loan amount" means the amount calculated as set forth in 12 C.F.R. 226.32(a) and under the Official Staff Commentary of the Board of Governors of the Federal Reserve System. For open-end loans, the total loan amount shall be calculated using the total credit line available under the terms of the home loan as the amount financed. (Code 1981, § 7-6A-2 , enacted by Ga. L. 2002, p. 455, § 1; Ga. L. 2003, p. 1, § 1.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 2002, a comma was inserted following "are excluded from points and fees " in subparagraph (13)(A) (now subparagraph (12)(A)).

7-6A-3. Limitations of home loans.

All home loans shall be subject to the following limitations and prohibited practices:

  1. No creditor shall make a home loan that finances, directly or indirectly:
    1. Any credit life, credit accident, credit health, credit personal property, or credit loss-of-income insurance, debt suspension coverage, or debt cancellation coverage, whether or not such coverage is insurance under applicable law, that provides for cancellation of all or part of a borrower's liability in the event of loss of life, health, personal property, or income or in the case of accident written in connection with a home loan; or
    2. Any life, accident, health, or loss-of-income insurance without regard to the identity of the ultimate beneficiary of such insurance;

      provided, however, that for the purposes of this Code section, any premiums or charges calculated and paid on a monthly basis shall not be considered financed directly or indirectly by the creditor;

  2. No creditor or servicer shall recommend or encourage default on an existing loan or other debt prior to and in connection with the closing or planned closing of a home loan that refinances all or any portion of such existing loan or debt;
  3. No creditor or servicer may charge a borrower a late payment charge unless the loan documents specifically authorize the charge, the charge is not imposed unless the payment is past due for ten days or more, and the charge does not exceed 5 percent of the amount of the late payment. A late payment charge may not be imposed more than once with respect to a particular late payment. If a late payment charge is deducted from a payment made on the home loan and such deduction results in a subsequent default on a subsequent payment, no late payment charge may be imposed for such default. A lender may apply any payment made in the order of maturity to a prior period's payment due even if the result is late payment charges accruing on subsequent payments due; and
  4. No creditor or servicer may charge a fee for informing or transmitting to any person the balance due to pay off a home loan or to provide a release upon prepayment. When such information is provided by facsimile or if it is provided upon request within 60 days of the fulfillment of a previous request, a creditor or servicer may charge a processing fee up to $10.00. Payoff balances shall be provided within a reasonable time but in any event no more than five business days after the request. (Code 1981, § 7-6A-3 , enacted by Ga. L. 2002, p. 455, § 1; Ga. L. 2003, p. 1, § 1.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 2002, in paragraph (1), a colon was substituted for a comma in the introductory paragraph and "Any" was substituted for "any" at the beginning of subparagraphs (A) and (B).

JUDICIAL DECISIONS

Improper late fees. - Mortgage borrower stated a claim under O.C.G.A. § 7-6A-3(3) by alleging that a loan servicer improperly assessed late fees even though the borrower made all contractually required payments in a timely manner. However, the borrower could not recover statutory damages under O.C.G.A. § 7-6A-7 for a violation of § 7-6A-3(3) . Stroman v. Bank of Am. Corp., 852 F. Supp. 2d 1366 (N.D. Ga. 2012).

7-6A-4. "Flipping" a home loan; costs and fees.

  1. No creditor may knowingly or intentionally engage in the unfair act or practice of "flipping" a home loan. Flipping a home loan is the consummating of a high-cost home loan to a borrower that refinances an existing home loan that was consummated within the prior five years when the new loan does not provide reasonable, tangible net benefit to the borrower considering all of the circumstances including, but not limited to, the terms of both the new and refinanced loans, the cost of the new loan, and the borrower's circumstances.
  2. The home loan refinancing transaction shall be presumed to be a flipping where a high-cost home loan refinances an existing home loan that was consummated within the prior five years and that is a special mortgage originated, subsidized, or guaranteed by or through a state, tribal, or local government or a nonprofit organization, which either bears a below-market interest rate at the time the loan was originated or has nonstandard payment terms beneficial to the borrower, such as payments that vary with income, are limited to a percentage of income, or where no payments are required under specified conditions and where, as a result of the refinancing, the borrower will lose one or more of the benefits of the special mortgage. Notwithstanding any provision to the contrary contained in this chapter, home loan refinancing transactions of first mortgage loans originated by, purchased by, or assigned to the Georgia Housing and Finance Authority shall not be presumed to be a flipping under this subsection.
  3. Notwithstanding any provision to the contrary contained in this chapter regarding costs and attorneys' fees, in any action instituted by a borrower who alleges that the defendant violated this Code section, the borrower shall be entitled to costs and attorneys' fees only if the presiding judge, in the judge's discretion, allows reasonable attorneys' fees and costs to the borrower as prevailing party, such fees and costs to be taxed as a part of the court costs and payable by the losing party upon a finding by the presiding judge that the party charged with the violation has willfully engaged in the act or practice and there was unwarranted refusal by such party to fully resolve the matter which constitutes the basis of such action. (Code 1981, § 7-6A-4 , enacted by Ga. L. 2002, p. 455, § 1; Ga. L. 2003, p. 1, § 1; Ga. L. 2004, p. 631, § 7.)

JUDICIAL DECISIONS

Preemption. - Debtors' claims that a bank violated O.C.G.A. §§ 7-6A-4 and 7-6A-5 were preempted by federal law given an order issued by the Office of the Comptroller of the Currency clearly stating that the provisions of the Georgia Fair Lending Act, O.C.G.A. § 7-6A-1 et seq., affecting national banks' real estate lending were either preempted by federal law or were moot as a result of the preemption. Salvador v. Bank of Am., N.A. (In re Salvador), 456 Bankr. 610 (Bankr. M.D. Ga. 2011).

7-6A-5. Limitations of high-cost home loans.

High-cost home loans shall be subject to the following limitations and prohibited practices:

  1. No prepayment fees or penalties shall be provided for in the loan documents for a high-cost home loan or charged the borrower after the last day of the twenty-fourth month following the loan closing or which exceed in the aggregate:
    1. In the first 12 months after the loan closing, more than 2 percent of the loan amount prepaid; or
    2. In the second 12 months after the loan closing, more than 1 percent of the amount prepaid;
  2. A high-cost home loan shall not contain a scheduled payment that is more than twice as large as the average of earlier scheduled payments. This provision does not apply when the payment schedule is adjusted to the seasonal or irregular income of the borrower;
  3. A high-cost home loan shall not include payment terms under which the outstanding principal balance will increase at any time over the course of the loan because the regular periodic payments do not cover the full amount of interest due;
  4. A high-cost home loan shall not contain a provision that increases the interest rate after default. This provision does not apply to interest rate changes in a variable rate loan otherwise consistent with the provisions of the loan documents, provided that the change in the interest rate is not triggered by the event of default or the acceleration of the indebtedness;
  5. A high-cost home loan shall not include terms under which more than two periodic payments required under the loan are consolidated and paid in advance from the loan proceeds provided to the borrower;
  6. Without regard to whether a borrower is acting individually or on behalf of others similarly situated, any provision of a high-cost home loan agreement that allows a party to require a borrower to assert any claim or defense in a forum that is less convenient, more costly, or more dilatory for the resolution of a dispute than a judicial forum established in this state where the borrower may otherwise properly bring the claim or defense or limits in any way any claim or defense the borrower may have is unconscionable and void;
  7. A creditor shall not make a high-cost home loan without first receiving certification from a counselor with a third-party nonprofit organization approved by the United States Department of Housing and Urban Development or the Georgia Housing and Finance Authority that the borrower has received counseling on the advisability of the loan transaction. No creditor, servicer, or its institution shall be required to contribute to the funding of any nonprofit organization that provides counseling required pursuant to this paragraph;
  8. A creditor shall not make a high-cost home loan unless a reasonable creditor would believe at the time the loan is consummated that the borrower residing in the home will be able to make the scheduled payments associated with the loan based upon a consideration of his or her current and expected income, current obligations, employment status, and other financial resources, other than the borrower's equity in the collateral that secures repayment of the loan. There is a rebuttable presumption that the borrower residing in the home is able to make the scheduled payments to repay the obligation if, at the time the loan is consummated, said borrower's total monthly debts, including amounts under the loan, do not exceed 50 percent of said borrower's monthly gross income as verified by tax returns, payroll receipts, and other third-party income verification;
  9. A creditor or servicer shall not pay a contractor under a home improvement contract from the proceeds of a high-cost home loan unless:
    1. The creditor or servicer is presented with an affidavit of the contractor that the work has been completed, which affidavit meets the requirements of Code Section 44-14-361.2; and
    2. The proceeds are disbursed in an instrument payable to the borrower or jointly to the borrower and the contractor or, at the election of the borrower, through a third-party escrow agent in accordance with terms established in a written agreement signed by the borrower, the drafter of the instrument, and the contractor prior to the disbursement;
  10. A creditor or servicer shall not charge a borrower any fees or other charges to modify, renew, extend, or amend a high-cost home loan or to defer any payment due under the terms of a high-cost home loan;
  11. A creditor who makes a high-cost home loan and who has the legal right to foreclose shall provide notice of the intent to foreclose to the borrower in writing by certified mail, return receipt requested, to the address of the borrower last known to the creditor. Such notice shall be sent to the borrower at least 14 days prior to the publication of the legal advertisement required by Code Section 44-14-162;
  12. If a creditor or servicer asserts that grounds for acceleration of a high-cost home loan exist and requires the payment in full of all sums secured by the security instrument, the borrower or anyone authorized to act on the borrower's behalf shall have the right at any time, up to the time title is transferred by means of foreclosure by judicial proceeding and sale or otherwise, to cure the default and reinstate the high-cost home loan by tendering the total amount of principal, interest, late fees, and escrow deposits in arrears, not including any acceleration. Cure of default as provided in this paragraph shall reinstate the borrower to the same position as if the default had not occurred and shall nullify as of the date of the cure any acceleration of any obligation under the security instrument or note arising from the default;
    1. To cure a default under this Code section, a borrower shall not be required to pay any charge, fee, or penalty attributable to the exercise of the right to cure a default as provided for in this Code section, other than the fees specifically allowed by this Code section. The borrower shall not be liable for any attorneys' fees relating to the borrower's default that are incurred by the creditor or servicer prior to or during the 30 day period set forth in this paragraph, nor for any such fees in excess of $100.00 that are incurred by the creditor or servicer after the expiration of the 30 day period but prior to the time the creditor or servicer files a foreclosure action or takes other action to seize or transfer ownership of the home. After the creditor or servicer files a foreclosure action or takes other action to seize or transfer ownership of the home, the borrower shall only be liable for attorneys' fees that are reasonable and actually incurred by the creditor or servicer based on a reasonable hourly rate and a reasonable number of hours plus any other reasonable and necessary expenses incurred by the creditor or servicer.
    2. If a default is cured prior to the initiation of any action to foreclose or to seize or transfer a home, the creditor or servicer shall not institute the foreclosure proceeding or other action for that default. If a default is cured after the initiation of any action to foreclose, the creditor or servicer shall take such steps as are necessary to terminate the foreclosure proceeding or other action.
    3. Before any action is filed to foreclose upon the home or other action is taken to seize or transfer ownership of a home, a notice of the right to cure the default must be delivered to the borrower informing the borrower of the following:
      1. The nature of the default claimed on the high-cost home loan and of the borrower's right to cure the default by paying the sum of money required to cure the default. If the amount necessary to cure the default will change during the 30 day period after the effective date of the notice due to the application of a daily interest rate or the addition of late fees as allowed by this chapter, the notice shall give sufficient information to enable the borrower to calculate the amount at any point during the 30 day period;
      2. The date by which the borrower shall cure the default to avoid acceleration and initiation of foreclosure or other action to seize the home which date shall not be less than 30 days after the date the notice is effective and the name and address and phone number of a person to whom the payment or tender shall be made;
      3. That, if the borrower does not cure the default by the date specified, the creditor or servicer may take steps to terminate the borrower's ownership in the property by commencing a foreclosure proceeding or other action to seize the home; and
      4. The name and address of the creditor or servicer and the telephone number of a representative of the creditor or servicer whom the borrower may contact if the borrower disagrees with the creditor's or servicer's assertion that a default has occurred or the correctness of the creditor's or servicer's calculation of the amount required to cure the default;
  13. A high-cost home loan shall not contain nor shall a creditor or servicer enforce a provision that permits a creditor or servicer, in its sole discretion, to accelerate the indebtedness. This paragraph does not prohibit acceleration of the loan in good faith due to the borrower's failure to abide by the material terms of the loan; and
  14. All high-cost home loan documents that create a debt or pledge property as collateral shall contain the following notice on the first page in a conspicuous manner: "Notice: This is a mortgage subject to special rules under the 'Georgia Fair Lending Act.' Purchasers or assignees of this mortgage may be liable for all claims and defenses by the borrower with respect to the mortgage." (Code 1981, § 7-6A-5 , enacted by Ga. L. 2002, p. 455, § 1; Ga. L. 2003, p. 1, § 1; Ga. L. 2004, p. 631, § 7.)

JUDICIAL DECISIONS

Preemption. - Debtors' claims that a bank violated O.C.G.A. §§ 7-6A-4 and 7-6A-5 were preempted by federal law given an order issued by the Office of the Comptroller of the Currency clearly stating that the provisions of the Georgia Fair Lending Act, O.C.G.A. § 7-6A-1 et seq., affecting national banks' real estate lending were either preempted by federal law or were moot as a result of the preemption. Salvador v. Bank of Am., N.A. (In re Salvador), 456 Bankr. 610 (Bankr. M.D. Ga. 2011).

RESEARCH REFERENCES

C.J.S. - 59 C.J.S., Mortgages, §§ 335 et seq., 461 et seq.

7-6A-6. Affirmative claims and defenses against creditors; conditions for relief; actions intending to evade chapter prohibited.

  1. Notwithstanding any other provision of law, where a home loan was made, arranged, or assigned by a person selling home improvements to the dwelling of a borrower, the borrower may assert against the creditor all affirmative claims and any defenses that the borrower may have against the seller or home improvement contractor, provided that this subsection shall not apply to loans other than high-cost home loans unless applicable law requires a certificate of occupancy, inspection, or completion to be obtained and said certificate is not obtained.
  2. Notwithstanding any other provision of law, any person who purchases, is assigned, or otherwise becomes a holder of a high-cost home loan shall be subject to all affirmative claims and any defenses with respect to the high-cost home loan that the borrower could assert against the creditor of the high-cost home loan, unless the purchaser or holder demonstrates, by a preponderance of the evidence, that the purchaser or holder exercised reasonable due diligence at the time of purchase of the home loans, or within a reasonable time thereafter, intended to prevent the purchaser or holder from purchasing or taking assignment of high-cost home loans.
  3. The relief granted in an action pursuant to subsection (b) of this Code section:
    1. May be asserted by the borrower only in an individual action and shall not exceed the sum of the amount of all remaining indebtedness of the borrower under such loan and reasonable attorneys' fees in such individual action;
    2. May be sought by the borrower of a high-cost home loan after notice of acceleration or foreclosure of the high-cost home loan, asserting a violation of Code Section 7-6A-4 or 7-6A-5 in an individual action to enjoin foreclosure or to preserve or obtain possession of the home secured by the high-cost home loan; and
    3. Must be brought within one year from the date of the occurrence of the violation; provided, however, a borrower shall not be barred from asserting a violation of Code Section 7-6A-5 in an action to collect the debt which was brought more than one year from the date of the occurrence of such a violation as a matter of defense by recoupment or set-off in such action except as otherwise provided by law.
  4. It shall be a violation of this chapter for any person to attempt in bad faith to avoid the application of this chapter by dividing any loan transaction into separate parts or structuring a home loan transaction as an open-end loan for the purpose of evading the provisions of this chapter when the loan would have been a high-cost home loan if the loan had been structured as a closed-end loan or engaging in any other subterfuge with the intent of evading any provision of this chapter. (Code 1981, § 7-6A-6 , enacted by Ga. L. 2002, p. 455, § 1; Ga. L. 2003, p. 1, § 1.)

RESEARCH REFERENCES

C.J.S. - 59 C.J.S., Mortgages, §§ 461 et seq., 564 et seq. 59A C.J.S., Mortgages, § 639 et seq.

7-6A-7. Violation of chapter.

  1. Any creditor found by a preponderance of the evidence to have violated this chapter shall be liable to the borrower for the following:
    1. Actual damages, including consequential and incidental damages;
    2. Statutory damages equal to the recovery of two times the interest paid under the loan and forfeiture of interest under the loan for any violation of paragraph (1) or (2) of Code Section 7-6A-3, any violation of Code Section 7-6A-4, or any violation of Code Section 7-6A-5;
    3. Punitive damages subject to Code Section 51-12-5.1; and
    4. Costs and reasonable attorneys' fees.
  2. A borrower may be granted injunctive, declaratory, and such other equitable relief as the court deems appropriate in an action to enforce compliance with this chapter including, but not limited to, the following:
    1. Notwithstanding any other provision of law, a court shall have the discretion not to require a borrower of a high-cost home loan seeking injunctive or other equitable relief under the provisions of this chapter to make a tender upon a showing that the borrower has a reasonable likelihood of being successful on the merits. When tender is not required by the court, upon application to the court by the creditor, the court shall require the borrower to pay into the registry of the court all regularly scheduled home loan payments including property taxes and homeowners hazard insurance premiums if required by escrow agreement which are the responsibility of the borrower payable to the creditor or servicer under the terms of the home loan agreement which become due after the filing of the legal action, said home loan payments to be paid as such become due, and such other expenses provided under the home loan agreement as the court may deem just, provided that regularly scheduled payments shall not include any payments allegedly due under any acceleration provision of the home loan. If the creditor or servicer and the borrower disagree as to the amount of the home loan payments due, either or both of them may submit to the court any written home loan agreement for the purpose of establishing the amount of home loan payments to be paid into the registry of the court;
    2. If the borrower should fail to make any regularly scheduled payment under a high-cost home loan as it becomes due after the filing of this action, upon application to the court by the creditor or servicer, the court may issue an order denying the borrower's petition for injunctive or other equitable relief, and vacating any decree for injunctive or equitable relief previously entered by the court; and
    3. The court shall order the clerk of the court to pay to the creditor or any person the creditor may designate the payments claimed under the high-cost home loan agreement paid into the registry of the court as said payments are made; provided, however, that, if the borrower claims that he or she is entitled to all or any part of the funds and such claim is an issue of controversy in the litigation, the court shall order the clerk to pay to the creditor or any person the creditor may designate without delay only that portion of the funds to which the borrower has made no claim in the proceedings or may make such other order as is appropriate under the circumstances. That part of the funds which is a matter of controversy in the litigation shall remain in the registry of the court until a determination of the issues by the trial court. If either party appeals the decision of the trial court, that part of the funds equal to any sums found by the trial court to be due from the creditor or servicer to the borrower shall remain in the registry of the court until a final determination of the issues. The court shall order the clerk to pay to the creditor or any person the creditor may designate without delay the remaining funds in court and all payments of future home loan payments made into court pursuant to paragraph (1) of this subsection unless the borrower can show good cause that some or all of such payments should remain in court pending a final determination of the issues.
  3. The remedies provided in this chapter shall be cumulative.
  4. Any violation of this chapter may be enforced pursuant to Code Section 9-11-23.
  5. The right of rescission granted and defined under 15 U.S.C. Section 1601, et seq., and a right of rescission for any violation of paragraph (1) or (2) of Code Section 7-6A-3, any violation of Code Section 7-6A-4, or any violation of Code Section 7-6A-5 shall be available to a borrower of a high-cost home loan at any time during the term of the loan not to exceed a period of five years after the consummation of the loan.
  6. The brokering of a home loan by a broker registered or licensed or required to be registered or licensed as a broker under the laws of this state or any other jurisdiction that violates the provisions of this chapter shall constitute a violation of such provisions.
  7. Without regard to whether a borrower is acting individually or on behalf of others similarly situated, any provision of a home loan agreement that allows a party to require a borrower to assert any claim or defense in a forum that is less convenient, more costly, or more dilatory for the resolution of a dispute than a judicial forum established in this state where the borrower may otherwise properly bring the claim or defense or limits in any way any claim or defense the borrower may have is unconscionable and void.
  8. An action under this chapter may be brought within five years after the date of the first scheduled payment by the borrower under the home loan.
  9. The remedies provided in this chapter are not intended to be the exclusive remedies available to a borrower nor must the borrower exhaust any administrative remedies provided under this chapter or any other applicable law before proceeding under this Code section. (Code 1981, § 7-6A-7 , enacted by Ga. L. 2002, p. 455, § 1; Ga. L. 2003, p. 1, § 1.)

JUDICIAL DECISIONS

Statutory damages. - Mortgage borrower stated a claim under O.C.G.A. § 7-6A-3(3) by alleging that a loan servicer improperly assessed late fees even though the borrower made all contractually required payments in a timely manner. However, the borrower could not recover statutory damages under O.C.G.A. § 7-6A-7 for a violation of § 7-6A-3(3) . Stroman v. Bank of Am. Corp., 852 F. Supp. 2d 1366 (N.D. Ga. 2012).

7-6A-8. Enforcement of chapter; penalties for violations.

  1. The Attorney General, the district attorneys of this state, and the commissioner of banking and finance shall have jurisdiction to enforce this chapter through their general regulatory powers and through civil process. The Commissioner of Insurance shall have like authority to enforce paragraph (1) of Code Section 7-6A-3.
  2. Any person, including members, officers, and directors of a creditor, who knowingly violates this chapter is guilty of a misdemeanor and, on conviction, is subject to a fine not exceeding $1,000.00 for each violation or to imprisonment not exceeding six months, or both. (Code 1981, § 7-6A-8 , enacted by Ga. L. 2002, p. 455, § 1; Ga. L. 2003, p. 1, § 1.)

OPINIONS OF THE ATTORNEY GENERAL

Offenses arising under O.C.G.A. Ch. 7-6A and designated as misdemeanors under O.C.G.A. § 7-6A-8 require fingerprinting. 2002 Op. Att'y Gen. No. 2002-7.

7-6A-9. Terms of insurer providing insurance through financed premiums.

A creditor or servicer or an insurer providing insurance through premiums financed by a creditor of a home loan who, when acting in good faith, fails to comply with the provisions of this chapter will not be deemed to have violated this chapter if the creditor or servicer or insurer providing insurance through premiums financed by a creditor establishes that either:

  1. Within 90 days of the loan closing and prior to receiving any notice from the borrower of the compliance failure, (A) the creditor or servicer has offered appropriate restitution to the borrower and appropriate adjustments are made to the loan or (B) to correct a compliance failure of paragraph (1) of Code Section 7-6A-3, an insurer providing insurance through premiums financed by a creditor may provide appropriate restitution to the borrower by returning premiums paid plus interest charged on the premiums to the borrower upon receipt of notice of the compliance failure; or
  2. Within 90 days of discovering a compliance failure and prior to receiving any notice of the compliance failure and the compliance failure was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid such errors, the borrower is notified of the compliance failure, appropriate restitution is offered to the borrower, and appropriate adjustments are made to the loan. Examples of a bona fide error include clerical, calculation, computer malfunction and programming, and printing errors. An error of legal judgment with respect to a person's obligations under this chapter is not a bona fide error. (Code 1981, § 7-6A-9 , enacted by Ga. L. 2002, p. 455, § 1; Ga. L. 2003, p. 1, § 1.)

7-6A-10. Severability of chapter.

The provisions of this chapter shall be severable and, if any phrase, clause, sentence, or provision is declared to be invalid or is preempted by federal law or regulation, the validity of the remainder of this chapter shall not be affected thereby. If any provision of this chapter is declared to be inapplicable to any category of persons or any specific category, type, or kind of loan or portions thereof, the provisions of this chapter shall nonetheless continue to apply with respect to all other persons and all other loans or portions thereof.

(Code 1981, § 7-6A-10 , enacted by Ga. L. 2002, p. 455, § 1; Ga. L. 2003, p. 1, § 1.)

7-6A-11. Municipality or county not able to regulate terms of home loans.

No municipality or county shall enact any ordinance or law that regulates the terms of home loans or that makes the eligibility of any person or entity to do business with the municipality or county dependent upon the terms of home loans originated or serviced by such person or entity.

(Code 1981, § 7-6A-11 , enacted by Ga. L. 2002, p. 455, § 1; Ga. L. 2003, p. 1, § 1.)

7-6A-12. Application; preemption by federal law.

The provisions of this chapter shall not apply to any bank, trust company, savings and loan, savings bank, credit union, or subsidiary thereof, respectively, that is chartered under the laws of this state or any other state only to the extent federal law precludes or preempts or has been determined to preclude or preempt the application of the provisions of this chapter to any federally chartered bank, trust company, savings and loan, savings bank, or credit union, respectively, and such federal preclusion or preemption shall apply only to the same type of state chartered entity as the federally chartered entity affected; provided, however, the provisions of this chapter, including subsection (f) of Code Section 7-6A-7, shall be applicable to an independent mortgage broker for any loan originated or brokered by the broker that is initially funded by any state or federally chartered bank, trust company, savings and loan, savings bank, or credit union.

(Code 1981, § 7-6A-12 , enacted by Ga. L. 2003, p. 1, § 1.)

Law reviews. - For note on the 2003 enactment of this Code section, see 20 Ga. St. U.L. Rev. 1 (2003).

7-6A-13. Promulgation of rules and regulations; creditor's good faith reliance on guidance from department constituting prima-facie evidence of compliance.

Without limitations on the power conferred by Chapter 1 of this title, the Department of Banking and Finance shall have the authority to promulgate rules and regulations not inconsistent with law for the enforcement of this chapter to effectuate the purposes of this chapter and to clarify the meaning of terms. In complying with this chapter, a creditor's good faith reliance on any formal or informal written guidance of the Department of Banking and Finance previously made available to the general public shall constitute prima-facie evidence of compliance with this chapter. The provisions of this Code section shall apply even if, following the reliance, such guidance is amended, rescinded, or determined by any judicial or other authority to be invalid.

(Code 1981, § 7-6A-13 , enacted by Ga. L. 2003, p. 1, § 1.)

Law reviews. - For note on the 2003 enactment of this Code section, see 20 Ga. St. U.L. Rev. 1 (2003).

CHAPTER 7 LOAN BROKERS

Sec.

7-7-1. Definitions.

As used in this chapter, the term:

  1. "Advance fee" means any consideration which is assessed or collected, prior to the closing of a loan, by a loan broker.
  2. "Borrower" means a person obtaining or desiring to obtain a loan of money, a credit card, or a line of credit.
  3. "Loan broker" means any person, firm, or corporation who does not operate or maintain an office that is open regularly to the public for the transaction of business and where potential borrowers actually visit to transact, discuss, or negotiate potential loans and:
    1. For or in expectation of consideration, arranges or attempts to arrange or offers to fund a loan of money, a credit card, or a line of credit;
    2. For or in expectation of consideration, assists or advises a borrower in obtaining or attempting to obtain a loan of money, a credit card, a line of credit, or related guarantee, enhancement, or collateral of any kind or nature;
    3. Acts for or on behalf of a loan broker for the purpose of soliciting borrowers; or
    4. Holds himself out as a loan broker.

      "Loan broker" does not include any regulated lender or any third party soliciting borrowers for a regulated lender pursuant to a written contract with the regulated lender or any mortgage banker or mortgage broker approved by a regulated lender or the federal Department of Housing and Urban Development, the Veterans' Administration, the Federal National Mortgage Corporation, or the Federal Home Loan Mortgage Corporation.

  4. "Mortgage" means any indebtedness secured by a mortgage, deed of trust, security deed, or other lien on real property.
  5. "Mortgage banker" means any person who in the regular course of business:
    1. Holds himself out as being able to make mortgage loans;
    2. Holds himself out as being able to service mortgage loans; or
    3. Holds himself out as being able to buy or sell mortgage loans.
  6. "Mortgage broker" means any person who in the regular course of business for compensation or gain or in the expectation of compensation or gain holds himself out as being able to assist a person in obtaining a mortgage loan.
  7. "Principal" means any officer, director, partner, joint venturer, branch manager, or other person with similar managerial or supervisory responsibilities for a loan broker.
  8. "Regulated lender" means any person, firm, corporation, or subsidiary thereof that is licensed by and subject to regulation or supervision of any agency of the United States or this state and is acting within the scope of the license. (Code 1981, § 7-7-1 , enacted by Ga. L. 1992, p. 1123, § 1.)

Code Commission notes. - Pursuant to Code Section 28-9-5, in 1992, a period was substituted for a semicolon at the end of paragraph (4).

7-7-2. Prohibited practices by loan brokers.

No loan broker shall:

  1. Engage in unfair or deceptive acts or practices that are declared to be unlawful by Part 2 of Article 15 of Chapter 1 of Title 10, the "Fair Business Practices Act of 1975";
  2. Assess, collect, or solicit an advance fee from a borrower to provide services as a loan broker; provided, however, that nothing contained in this paragraph shall preclude a loan broker from soliciting a potential borrower to pay for or preclude a potential borrower from paying for actual services necessary to apply for a loan, including but not limited to a credit check or an appraisal of security where such payment is made by check or money order payable to a party independent of the loan broker;
  3. Make or use any false or misleading representations or omit any material fact in the offer or sale of the services of a loan broker or engage, directly or indirectly, in any act that operates or would operate as fraud or deception upon any person in connection with the offer or sale of the services of a loan broker, notwithstanding the absence of reliance by the buyer;
  4. Make or use any false or deceptive representation in its business dealings or to the department or conceal a material fact from the department; or
  5. Offer the services of a loan broker by making, publishing, disseminating, circulating, or placing before the public within this state an advertisement in a newspaper or other publication or an advertisement in the form of a book, notice, handbill, poster, sign, billboard, bill, circular, pamphlet, letter, photograph, or motion picture or an advertisement circulated by radio, loud-speaker, telephone, television, telegraph, or in any other way, where said offer or advertisement does not disclose the name, business address, and telephone number of the loan broker. For purposes of this Code section, the loan broker shall disclose the actual address and telephone number of the business of the loan broker in addition to the address and telephone number of any forwarding service that the loan broker may use. (Code 1981, § 7-7-2 , enacted by Ga. L. 1992, p. 1123, § 1.)

7-7-3. Liability of principals.

Each principal of a loan broker may be sanctioned for the actions of the loan broker, including its agents or employees, in the course of business of the loan broker.

(Code 1981, § 7-7-3 , enacted by Ga. L. 1992, p. 1123, § 1.)

7-7-4. Borrower's remedies for violation of chapter.

  1. Any borrower injured by a violation of this chapter may bring civil action in a court of competent jurisdiction for recovery of damages. Judgment shall be entered for actual damages and in no case shall be less than the amount paid by the borrower to the loan broker, plus reasonable attorney's fees and costs.  An award may also be entered for punitive damages.
  2. Any borrower injured by a violation of this chapter may bring an action against the surety bond or trust account, if any, of the loan broker.
  3. The remedies provided under this chapter are in addition to any other procedures or remedies for any violation or conduct provided for in any other law. (Code 1981, § 7-7-4 , enacted by Ga. L. 1992, p. 1123, § 1.)

7-7-5. Operation of chapter not limitable by contract or agreement.

A loan broker may not by contract, agreement, or otherwise limit the operation of this chapter, notwithstanding any other provision of law.

(Code 1981, § 7-7-5 , enacted by Ga. L. 1992, p. 1123, § 1.)

7-7-6. Penalties.

Any person who violates any provision of this chapter shall be guilty of a felony and upon conviction shall be subject to a fine not to exceed $5,000.00 or by imprisonment for not less than one nor more than five years, or both.

(Code 1981, § 7-7-6 , enacted by Ga. L. 1992, p. 1123, § 1.)

CHAPTER 8 SAFE USE OF REMOTE SERVICE TERMINALS

Sec.

Law reviews. - For article, "Introduction to the Symposium: Consumer Financial Services Law in the 1990s," see 9 Ga. St. U.L. Rev. 737 (1993). For article, "Electronic Money in the 1990s: A Net Benefit or Merely a Trade-Off?," see 9 Ga. St. U.L. Rev. 747 (1993). For article, "Consumer Pricing for ATM Services: Antitrust Constraints and Legislative Alternatives," see 9 Ga. St. U.L. Rev. 839 (1993).

7-8-1. Definitions.

As used in this chapter, the term:

  1. "Access area" means any paved walkway or sidewalk which is within 50 feet of any remote service terminal.  The term does not include any street or highway open to the use of the public or any adjacent sidewalk.
  2. "Access device" shall have the same meaning as set forth in Federal Reserve Board Regulation E, 12 C.F.R. Part 205, promulgated pursuant to the federal Electronic Fund Transfer Act, 15 U.S.C. Section 1601, et seq.
  3. "Candlefoot power" means the light intensity of candles on a horizontal plane at 36 inches above ground level and five feet in front of the area to be measured.
  4. "Control" of an access area or defined parking area means to have the present authority to determine how, when, and by whom such access area or defined parking area is to be used, maintained, lighted, and landscaped.
  5. "Customer" means a natural person to whom an access device has been issued for personal, family, or household use.
  6. "Defined parking area" means that portion of any parking area open for customer parking which is:
    1. Contiguous to an access area with respect to a remote service terminal;
    2. Regularly, principally, and lawfully used for parking by users of the remote service terminal while conducting remote service terminal transactions during the hours of darkness; and
    3. Owned or leased by the operator of the remote service terminal or owned or controlled by the party leasing the remote service terminal site to the operator.

      The term does not include any parking area which is not open or regularly used for parking by users of the remote service terminal who are conducting remote service terminal transactions during the hours of darkness. A parking area is not open if it is physically closed to access or if conspicuous signs indicate that it is closed. If a multiple-level parking area satisfies the conditions of this paragraph and would therefore otherwise be a defined parking area, only the single parking level deemed by the operator of the remote service terminal to be the most directly accessible to the users of the remote service terminal shall be a defined parking area.

  7. "Financial institution" means such an institution as defined in Code Section 7-1-4.
  8. "Hours of darkness" means the period that commences 30 minutes after sunset and ends 30 minutes before sunrise.
  9. "Operator" means any bank, savings association, credit union, savings bank, or other business entity or any person who operates a remote service terminal, but does not include any person or entity whose primary function is to provide for the exchange, transfer, or dissemination of electronic fund transfer data.
  10. "Owner of an automated teller machine" means the person having the right to determine the financial institutions which will be permitted to use, or participate in the usage of, the automated teller machine but does not include any person or entity whose primary function is to provide for the exchange, transfer, or dissemination of electronic fund transfer data.
  11. "Public road" means any public right of way, including, but not limited to, structures, sidewalks, facilities, and appurtenances incidental thereto.
  12. "Remote service terminal" means any electronic information processing device which accepts or dispenses cash in connection with a credit, deposit, or convenience account. The term does not include devices used solely to facilitate check guarantees or check authorizations or which are used in connection with the acceptance or dispensing of cash on a person-to-person basis, such as by store cashier. (Code 1981, § 7-8-1 , enacted by Ga. L. 1993, p. 917, § 12; Ga. L. 1994, p. 97, § 7.)

7-8-2. Procedures for evaluating safety of remote service terminals.

  1. On or before July 1, 1994, with respect to all existing installed remote service terminals in this state, and any remote service terminals installed after July 1, 1993, the operator shall adopt procedures for evaluating the safety of the remote service terminals.  These procedures shall include a consideration of the following:
    1. The extent to which the lighting for the remote service terminal complies or will comply with applicable standards;
    2. The presence of landscaping, vegetation, or other obstructions in the area of the remote service terminal, the access area, and the defined parking area; and
    3. The incidence of crimes of violence in the immediate neighborhood of the remote service terminal as reflected in the records of the local law enforcement agency and of which the operator has actual knowledge.
  2. It is not the intent of the General Assembly in enacting this chapter to impose a duty to relocate or modify remote service terminals upon the occurrence of any particular events or circumstances, but rather to establish a standard of good faith for the evaluation of all remote service terminals as provided in this chapter. A violation of the provisions of this chapter or any regulation made pursuant thereto will not constitute negligence per se. (Code 1981, § 7-8-2 , enacted by Ga. L. 1993, p. 917, § 12.)

7-8-3. Date of compliance; provision of adequate lighting.

  1. Each operator of a remote service terminal installed on or after July 1, 1993, shall comply with the provisions of this chapter commencing on the date the remote service terminal is installed.  Compliance with the provisions of this chapter by operators as to remote service terminals existing as of July 1, 1993, shall be optional until July 1, 1994, and mandatory thereafter.  This Code section shall apply to an operator of a remote service terminal only to the extent that the operator controls the access area or defined parking area to be lighted.
  2. If an access area or defined parking area is not controlled by the operator of the remote service terminal, and if the person who leased the remote service terminal site to the operator controls the access area or defined parking area, the person who controls the access area or defined parking area shall comply with the provisions of this chapter as to any remote service terminals installed on or after July 1, 1994, commencing on the date the remote service terminal is installed and as to any remote service terminal existing as of July 1, 1993, commencing no later than on July 1, 1994.
  3. The operator, owner, or other person responsible for the remote service terminal shall provide lighting during the hours of darkness with respect to an open and operating remote service terminal and any defined parking area, access area, and the exterior of an enclosed remote service terminal installation according to the following standards:
    1. There shall be a minimum of ten candlefoot power at the face of the remote service terminal and extending in an unobstructed direction outward five feet;
    2. There shall be a minimum of two candlefoot power within 50 feet from all unobstructed directions from the face of the remote service terminal. In the event the remote service terminal is located within ten feet of the corner of the building and the remote service terminal is generally accessible from the adjacent side, there shall be a minimum of two candlefoot power along the first 40 unobstructed feet of the adjacent side of the building; and
    3. There shall be a minimum of two candlefoot power in that portion of the defined parking area within 60 feet of the remote service terminal. (Code 1981, § 7-8-3 , enacted by Ga. L. 1993, p. 917, § 12.)

7-8-4. Notices to customers of basic safety precautions.

Customers receiving access devices shall be furnished by the respective issuers thereof with notices of basic safety precautions which customers should employ while using a remote service terminal. This information shall be furnished by personally delivering or mailing the information to each customer whose mailing address as to the account to which the access device relates is in this state. This information shall be furnished with respect to access devices issued on or after July 1, 1994, at or before the time the customer is furnished with his or her access device. With respect to a customer to whom an access device has been issued prior to July 1, 1993, the information shall be delivered on or before July 1, 1994. Only one notice need be furnished per household, and if access devices are furnished to more than one customer for a single account or set of accounts or on the basis of a single application or other request for access devices, only a single notice need be furnished in satisfaction of the notification responsibilities as to those customers. The information may be included with other disclosures related to the access device furnished to the customer, such as with any initial or periodic disclosure statement furnished pursuant to the federal Electronic Fund Transfer Act.

(Code 1981, § 7-8-4 , enacted by Ga. L. 1993, p. 917, § 12.)

7-8-5. Terminals to which chapter not applicable.

The provisions of this chapter shall not apply to any remote service terminal which is located:

  1. Inside a building, unless it is a freestanding installation which exists for the sole purpose of providing an enclosure for the remote service terminal;
  2. Inside a building, except to the extent a transaction can be conducted from outside the building; or
  3. In any area, including any access area, building, enclosed space, or parking area, which is not controlled by the operator. (Code 1981, § 7-8-5 , enacted by Ga. L. 1993, p. 917, § 12.)

7-8-6. Rules and regulations.

The commissioner of the Department of Banking and Finance is empowered to enforce the provisions of this chapter and is empowered to make all necessary rules and regulations for the purpose of carrying out the purposes of this chapter.

(Code 1981, § 7-8-6 , enacted by Ga. L. 1993, p. 917, § 12.)

7-8-7. Inapplicability to persons or entities that are not a financial depository institution or operator.

The provisions of this chapter shall not be construed to create any duty, responsibility, or obligation for any person or entity whose primary function is to provide for the exchange, transfer, or dissemination of electronic fund transfer data and is not otherwise a financial depository institution or an operator, as defined in this chapter, and such person or entity shall have no liability of any nature to any customer or user of a remote service terminal and shall not be named in any action by a customer or user of a remote service terminal for any claim concerning any provision of this chapter or relating to the use or attempted use of a remote service terminal.

(Code 1981, § 7-8-7 , enacted by Ga. L. 1993, p. 917, § 12.)

7-8-8. Preemption.

This chapter supersedes and preempts all rules, regulations, codes, statutes, or ordinances of all cities, counties, consolidated cities and counties, municipalities, and local agencies regarding customer safety at remote service terminals.

(Code 1981, § 7-8-8 , enacted by Ga. L. 1993, p. 917, § 12.)

CHAPTER 9 GEORGIA MERCHANT ACQUIRER LIMITED PURPOSE BANK

Sec.

Effective date. - This chapter became effective March 28, 2012.

7-9-1. Short title.

This chapter shall be known and may be cited as the "Georgia Merchant Acquirer Limited Purpose Bank Act."

(Code 1981, § 7-9-1 , enacted by Ga. L. 2012, p. 43, § 1/HB 898.)

Law reviews. - For annual survey on business corporations, see 64 Mercer L. Rev. 61 (2012).

7-9-2. Definitions.

As used in this chapter, the term:

  1. "Commissioner" means the commissioner of banking and finance.

    (1.1) "Control person" means any individual who directs the affairs or controls or establishes policy for a merchant acquirer limited purpose bank.

  2. "Corporation" means a corporation organized under the laws of this state, the United States, or any other state, territory, or dependency of the United States or under the laws of a foreign country.
  3. "Department" means the Department of Banking and Finance.
  4. "Eligible organization" means a corporation that at all times maintains an office in the State of Georgia at which it or its parent, affiliates, or subsidiaries employ at least 250 persons residing in this state who are directly or indirectly engaged in merchant acquiring activities or settlement activities, including providing the following services related to merchant acquiring activities or settlement activities, either for the eligible organization or on behalf of others:
    1. Administrative support;
    2. Information technology support;
    3. Financial support; and
    4. Tax and finance support.
  5. "Holding company" means any company that controls a merchant acquirer limited purpose bank. For purposes of this paragraph, the terms "company" and "control" shall have the meanings set forth in Code Section 7-1-605.
  6. "Merchant" means an individual or entity authorized by a payment card network to accept payments in exchange for goods or services.
  7. "Merchant acquirer limited purpose bank" means a corporation organized under this chapter and the activities of which are limited to those permitted under Code Section 7-9-12.
  8. "Merchant acquiring activities" means the various activities associated with effecting transactions within payment card networks, including obtaining and maintaining membership in one or more payment card networks; signing up and underwriting merchants to accept payment card network branded payment cards; providing the means to authorize valid card transactions at client merchant locations; facilitating the clearing and settlement of the transactions through a payment card network; providing access to one or more payment card networks to merchant acquirer limited purpose bank affiliates, customers, or customers of its affiliates; sponsoring the participation of merchant acquirer limited purpose bank affiliates, customers, or customers of its affiliates in one or more payment card networks; and conducting such other activities as may be necessary, convenient, or incidental to effecting transactions within payment card networks.

    (8.1) "Merchant funds" means funds received by a merchant acquirer limited purpose bank as a result of its performance of clearing, settlement, or any other authorized activities which are ultimately payable to a merchant.

  9. "Payment card network" means any organization, group, system, or other collection of individuals or entities that is organized to allow participants to accept or make payments for goods or services using a credit card, debit card, or any other payment device.
  10. "Self-acquiring activities" means the act of a merchant, for itself or through an affiliated entity, engaging in merchant acquiring or settlement activities on its own behalf for payments it, or its affiliated entity, receives for goods and services it, or its affiliated entity, provides to consumers.
  11. "Settlement activities" means the processing of payment card transactions to send to a payment card network for processing, to make payments to a merchant, and, ultimately, for cardholder billing. (Code 1981, § 7-9-2 , enacted by Ga. L. 2012, p. 43, § 1/HB 898; Ga. L. 2014, p. 226, § 1/HB 883; Ga. L. 2015, p. 344, § 35/HB 184.)

The 2014 amendment, effective July 1, 2014, substituted "Code Section 7-9-12" for "Code Section 7-9-11" at the end of paragraph (7).

The 2015 amendment, effective July 1, 2015, added paragraphs (1.1) and (8.1).

7-9-3. Chartering of merchant acquirer limited purpose banks; regulation limited.

A corporation that performs merchant acquiring activities or settlement activities in this state may elect to obtain a charter from the department. Those corporations chartered by the department shall be subject to the provisions of this chapter and any rules and regulations adopted by the department for purposes of regulating chartered merchant acquirer limited purpose banks. The department shall have no authority to regulate a corporation performing merchant acquiring activities or settlement activities that has not been chartered by the department.

(Code 1981, § 7-9-3 , enacted by Ga. L. 2012, p. 43, § 1/HB 898.)

7-9-4. Application; fees; minimum number of employees.

  1. A corporation that seeks to be chartered shall file an application with the department and shall pay applicable fees established by regulation of the department to defray the costs of the investigation and review of the application.
  2. The department shall, by regulation, prescribe annual examination fees, charter fees, registration fees, and supervision fees to be paid by each merchant acquirer limited purpose bank. In addition, the department may, by regulation, prescribe reasonable application and related fees, special investigation fees, hearing fees, and fees to provide copies of any book, account, report, or other paper filed in its office or for any certification thereof or for processing any papers as required by this title. The department, in its discretion, may require the payment of such fees in any manner deemed to be efficient, including collection through automated clearing-house arrangements or other electronic means, so that the state receives funds no later than the date the payment is required to be made. The department is authorized to net the fees authorized in this subsection to recover any costs incurred by the department related to any investigation or examination of a merchant acquirer limited purpose bank.
  3. The merchant acquirer limited purpose bank shall have, within one year after the date it receives its charter, no fewer than 50 employees located in this state devoted to merchant acquiring activities; provided, however, a merchant acquirer limited purpose bank may contract with an eligible organization for the performance of merchant acquiring activities, settlement activities, or any of the other services identified in paragraph (4) of Code Section 7-9-2 , and when a merchant acquirer limited purpose bank enters into such contracts with an eligible organization for merchant acquiring activities, settlement activities, or any other services identified in paragraph (4) of Code Section 7-9-2 , the minimum number of employees in this state shall be determined by the commissioner at a level to assure the continued and substantive presence of the merchant acquirer limited purpose bank in this state for the purpose of conducting its corporate affairs and operations. If a merchant acquirer limited purpose bank contracts with an eligible organization that is an affiliate of the merchant acquirer limited purpose bank, the commissioner shall consider the eligible organization's or its parent's, affiliates', or subsidiaries' employees engaged on behalf of the merchant acquirer limited purpose bank as employees of the merchant acquirer limited purpose bank for purposes of complying with this subsection. (Code 1981, § 7-9-4 , enacted by Ga. L. 2012, p. 43, § 1/HB 898; Ga. L. 2015, p. 344, § 36/HB 184.)

The 2015 amendment, effective July 1, 2015, added the last sentence in subsection (b).

7-9-5. Articles of incorporation; filing; publication; registered agent; administration by board of directors.

  1. A merchant acquirer limited purpose bank shall have articles of incorporation signed by the incorporator and shall set forth in the English language:
    1. The name of the merchant acquirer limited purpose bank;
    2. The street address and county where the main office will be located;
    3. The name of the initial registered agent;
    4. The street address where its initial registered office will be located;
    5. A statement that "This corporation is subject to the 'Georgia Merchant Acquirer Limited Purpose Bank Act'";
    6. The aggregate number of shares which the merchant acquirer limited purpose bank shall have authority to issue, and:
      1. If the shares are to consist of one class only, the par value of each of the shares; or
      2. If the shares are to be divided into classes, the number of shares of each class, the par value of each share of each class, a description of each class, and a statement of the preferences, redemption provisions, qualifications, limitations, restrictions, and the special or relative rights granted to or imposed upon the shares of each class;
    7. The term for which the merchant acquirer limited purpose bank is to exist, which shall be perpetual unless otherwise limited; and
    8. Any provision not inconsistent with law which the incorporators may choose to include for the regulation of the internal affairs and business of the merchant acquirer limited purpose bank.
  2. It shall not be necessary to set forth in the articles of incorporation any of the corporate or operational powers set forth in this chapter.
  3. The applicant shall file with the department the articles of incorporation, together with any fee required by the department. Such filing shall constitute an application for a charter and approval to operate as a merchant acquirer limited purpose bank. Immediately upon the filing of the articles of incorporation, the department shall certify a copy of the articles and return it to the applicant, who shall, in conformity with Code Section 7-1-7 and on the next business day following the filing of the articles, transmit for publication in the newspaper which is the official organ of the county where the merchant acquirer limited purpose bank will be located a copy of the articles or, in lieu thereof, a statement that reads substantially as follows:

    "An application for a charter to operate as a merchant acquirer limited purpose bank to be known as the ________ and to be located at __________ in __________ County, Georgia, will be made to the Secretary of State of Georgia in accordance with Chapter 9 of Title 7 of the Official Code of Georgia Annotated, the 'Georgia Merchant Acquirer Limited Purpose Bank Act.' A copy of the articles of incorporation of the proposed merchant acquirer limited purpose bank and the application have been filed with the Department of Banking and Finance."

    The articles of incorporation or the statement must be published once a week for two consecutive weeks with the first publication occurring within ten days of receipt by the newspaper of the articles of incorporation or statement.

  4. Each merchant acquirer limited purpose bank shall name a registered agent and inform the department and the Secretary of State of its current registered agent.
  5. The administration of business and affairs of a merchant acquirer limited purpose bank shall be the responsibility of a board of directors consisting of at least three directors, a majority of whom shall be residents of this state. (Code 1981, § 7-9-5 , enacted by Ga. L. 2012, p. 43, § 1/HB 898; Ga. L. 2015, p. 344, § 37/HB 184.)

The 2015 amendment, effective July 1, 2015, in subsection (c), deleted ", in triplicate," following "department" near the beginning, substituted "a copy of the articles" for "one copy thereof " in the third sentence, and deleted "known as" following "Annotated," in the form.

7-9-5.1. Meetings.

  1. The board of directors shall hold regular meetings at such times as may be fixed by the bylaws and shall, at all times, be subject to call by the chairperson of the board, the chief executive officer, the president, or any two members of the board. The board shall meet at least once in ten different months of each calendar year unless an alternative schedule is approved in writing by the department, but in no event shall the board meet less frequently than once in each calendar quarter.
  2. Unless otherwise provided in the articles or bylaws:
    1. A majority of all the directors in office shall constitute a quorum for the transaction of business; and actions of a majority of those present at a meeting at which a quorum is present shall be actions of the board;
    2. The board of directors may designate by resolution three or more of its number to constitute an executive committee or other committee which, to the extent provided in such resolution, shall have and exercise the authority of the board of directors in regard to the business of the merchant acquirer limited purpose bank; and
    3. Any action which may be taken at a meeting of the directors or of the members of an executive or other committee may be taken without a meeting if a consent or consents in writing setting forth the action shall be signed by all of the directors or all of the members of the executive or other committee and filed with the secretary of the merchant acquirer limited purpose bank. (Code 1981, § 7-9-5.1 , enacted by Ga. L. 2016, p. 390, § 4-1/HB 811.)

Effective date. - This Code section became effective July 1, 2016.

7-9-5.2. Bylaws.

The board of directors shall have the power to adopt, amend, or repeal bylaws governing the regulation and management of affairs of the merchant acquirer limited purpose bank unless such power is reserved exclusively to the shareholders by the articles or bylaws previously adopted by shareholders; provided, however, that any bylaws adopted by the board of directors may be altered, amended, or repealed and new bylaws adopted by shareholders. Shareholders may prescribe that any bylaw or bylaws adopted shall not be altered, amended, or repealed by the board of directors. Copies of the bylaws and any change, addition, or amendment thereto shall be filed with the department immediately upon adoption by the directors or the shareholders.

(Code 1981, § 7-9-5.2 , enacted by Ga. L. 2016, p. 390, § 4-1/HB 811.)

Effective date. - This Code section became effective July 1, 2016.

7-9-5.3. Merchant acquirer limited purpose bank.

  1. A merchant acquirer limited purpose bank shall maintain a chief executive officer, chief information officer, chief risk officer, and such other officers the department may require by rule or regulation. A person may hold more than one office; provided, however, that no person shall serve as both chief executive officer and chief risk officer.
  2. Except as otherwise provided for in the articles or bylaws, the board of directors shall elect officers, fix their compensation, and fill vacancies. An officer elected or appointed by the board may be removed without prejudice to any contract right of such officer upon determination by the board that such removal is in the best interests of the merchant acquirer limited purpose bank. The merchant acquirer limited purpose bank shall immediately notify the department in writing upon a change in the position of chief executive officer or president.
  3. Officers of a merchant acquirer limited purpose bank shall have such authority and perform such duties as provided for in the bylaws adopted by the board.
  4. A merchant acquirer limited purpose bank may employ such agents or employees as necessary for the prompt and orderly discharge of its business. (Code 1981, § 7-9-5.3 , enacted by Ga. L. 2016, p. 390, § 4-1/HB 811.)

Effective date. - This Code section became effective July 1, 2016.

7-9-5.4. Oath of office; administration of affairs.

  1. Prior to assuming office, each director shall take an oath or affirmation that he or she will diligently and honestly perform his or her duties in the administration of the affairs of the merchant acquirer limited purpose bank; he or she will not permit a willful violation of law by the merchant acquirer limited purpose bank; and he or she meets the eligibility requirements of this chapter, the regulations of the department, and the articles and bylaws of the merchant acquirer limited purpose bank.
  2. Each director shall sign a copy of the oath required by this Code section and include such documentation in the meeting minutes. No director shall participate in the affairs of the board or receive any compensation for service as a director until such oath has been executed. Any person seeking to act in the capacity of a director before subscribing to the oath required by this Code section or otherwise qualifying for service pursuant to the bylaws of the merchant acquirer limited purpose bank or the laws and regulations governing the operations of the merchant acquirer limited purpose bank shall be liable for his or her actions to the same extent as if that person had qualified to serve as a director of the merchant acquirer limited purpose bank. (Code 1981, § 7-9-5.4 , enacted by Ga. L. 2016, p. 390, § 4-1/HB 811.)

Effective date. - This Code section became effective July 1, 2016.

7-9-6. Information to be included on charter application.

  1. An application to the department to charter a merchant acquirer limited purpose bank shall include:
    1. Any information desired by the department in order to evaluate the proposed institution which shall be made available in the form specified by the department;
    2. A certificate of the Secretary of State showing that the proposed name of the merchant acquirer limited purpose bank has been reserved pursuant to Code Section 7-1-131; and
    3. Applicable fees established by regulation of the department to defray the expense of the investigation required by Code Section 7-9-7.
  2. An application to the department to own or control a merchant acquirer limited purpose bank shall include:
    1. Any information desired by the department in order to evaluate the proposed transaction which shall be made available in the form specified by the department; and
    2. Applicable fees established by regulation of the department to defray the expense of the investigation. (Code 1981, § 7-9-6 , enacted by Ga. L. 2012, p. 43, § 1/HB 898.)

7-9-7. Investigation; approval or disapproval of charter application; "conviction data" defined; background checks; impact of disapproval.

    1. Upon receipt of the articles of incorporation and the filings and fees from the applicant as required under this chapter, the department shall conduct such investigation as it may deem necessary to ascertain whether it should approve the proposed merchant acquirer limited purpose bank. The department shall approve the charter of a merchant acquirer limited purpose bank if it determines in its discretion that:
      1. The articles of incorporation and supporting items satisfy the requirements of this chapter;
      2. The character and fitness of the applicant, directors, and proposed officers are such as to warrant the belief that the business of the proposed merchant acquirer limited purpose bank will be honestly and efficiently conducted; and
      3. The capital structure of the merchant acquirer limited purpose bank is adequate in relation to the amount and character of the anticipated business of the merchant acquirer limited purpose bank.
    2. Within 90 days after receipt of the articles of incorporation and the filings and fees from the applicant as required by this chapter, the department shall approve or disapprove the charter of the proposed merchant acquirer limited purpose bank. The department may impose conditions to be satisfied prior to the issuance of its approval of the charter of a merchant acquirer limited purpose bank. If the department, in its discretion, approves the charter of the proposed merchant acquirer limited purpose bank with or without conditions, it shall deliver its written approval of the articles of incorporation and charter to the Secretary of State and notify the applicant of its action. If the department, in its discretion, disapproves the charter of the proposed merchant acquirer limited purpose bank, it shall notify the applicant of its disapproval of the charter and state generally the unfavorable factors influencing its decision. The decision of the department shall be conclusive, except that it may be subject to judicial review as provided in Code Section 7-1-90.
  1. No charter shall be issued if the department finds that the applicant, or any holding company, control person, director, officer, partner, or employee of the applicant, has been convicted of a felony in any jurisdiction or of a crime which, if committed within this state, would constitute a felony under the laws of this state. No control person, director, officer, partner, or employee of a merchant acquirer limited purpose bank shall have been convicted of a felony in any jurisdiction or of a crime which, if committed within this state, would constitute a felony under the laws of this state. For any merchant acquirer limited purpose bank that is transacting business under a charter approved by the department, the department shall have the suspension and removal powers provided for in Code Section 7-1-71 with respect to any control person, director, officer, partner, or employee of the merchant acquirer limited purpose bank who has been convicted of a felony in any jurisdiction or of a crime which, if committed within this state, would constitute a felony under the laws of this state. For the purposes of this article, a person shall be deemed to have been convicted of a crime if such person shall have pleaded guilty or nolo contendere to a charge thereof before a court or federal magistrate or shall have been found guilty thereof by the decision or judgment of a court or federal magistrate or by the verdict of a jury, irrespective of the pronouncement of sentence or the suspension thereof, and regardless of whether first offender treatment without adjudication of guilt pursuant to the charge was entered, or an adjudication or sentence was otherwise withheld or not entered on that charge, unless and until such plea of guilty or such decision, judgment, or verdict shall have been set aside, reversed, or otherwise abrogated by lawful judicial process or until probation, sentence, or both probation and sentence of a first offender have been successfully completed and documented, or unless the person convicted of the crime shall have received a pardon thereon from the President of the United States or the governor or other pardoning authority in the jurisdiction where the conviction occurred, or shall have received an official certification of pardon granted by the state's pardoning body where the conviction occurred which removes the legal disabilities resulting from such conviction and restores civil and political rights.
  2. As used in this Code section, the term "conviction data" means a record of a finding, verdict, or plea of guilty or plea of nolo contendere with regard to any crime, regardless of whether an appeal of the conviction has been sought. The department shall be authorized to obtain conviction data with respect to any applicant, holding company, merchant acquirer limited purpose bank, or person who is a control person, director, officer, partner, or employee of the applicant or merchant acquirer limited purpose bank. The department may directly submit to the Georgia Crime Information Center two complete sets of fingerprints of such person, together with the required records search fees and such other information as may be required. Fees for background checks that the department administers shall be sent to the department by applicants and merchant acquirer limited purpose banks together with such fingerprints.
  3. Upon request by the department, each applicant, holding company, or merchant acquirer limited purpose bank or any person who is a control person, director, officer, partner, or employee of the applicant or merchant acquirer limited purpose bank shall submit to the department two complete sets of fingerprints, the required records search fees, and such other information as may be required. Fees for background checks that the department administers shall be submitted to the department by applicants and merchant acquirer limited purpose banks together with two complete sets of fingerprints, and the department is authorized to net such fees to recover any costs incurred by the department related to running the background checks. Upon receipt of fingerprints, fees, and other required information, the Georgia Crime Information Center shall promptly transmit one set of fingerprints to the Federal Bureau of Investigation for a search of bureau records and an appropriate report and shall retain the other set and promptly conduct a search of its own records and records to which it has access. The Georgia Crime Information Center shall notify the department in writing of any derogatory finding, including, but not limited to, any conviction data regarding the fingerprint records check, or if there is no such finding. All conviction data received by the department or by the applicant or merchant acquirer limited purpose bank shall be used by the party requesting such data for the exclusive purpose of carrying out the responsibilities of this article, shall not be a public record, shall be confidential, and shall not be disclosed to any other person or agency except to any person or agency which otherwise has a legal right to inspect the file. All such records shall be maintained by the department and the applicant or merchant acquirer limited purpose bank pursuant to laws regarding such records and the rules and regulations of the Federal Bureau of Investigation and the Georgia Crime Information Center, as applicable.
  4. Every applicant and merchant acquirer limited purpose bank shall be authorized and required to obtain and maintain the results of background checks on employees. Such background checks shall be handled by the Georgia Crime Information Center pursuant to Code Section 35-3-34 and the rules and regulations of the Georgia Crime Information Center. Applicants and merchant acquirer limited purpose banks shall be responsible for any applicable fees charged by the Georgia Crime Information Center. An applicant or merchant acquirer limited purpose bank may only employ a person whose background data has been checked and been found to be in compliance with all lawful requirements prior to the initial date of hire. This provision does not apply to control persons, directors, officers, or partners, whose backgrounds have been investigated through the department before taking office, beginning employment, or securing ownership. Upon receipt of information from the Georgia Crime Information Center that is incomplete or that indicates an employee has a criminal record in any state other than Georgia, the employer shall submit to the department two complete sets of fingerprints for such person, together with the applicable fees and any other required information. The department shall submit such fingerprints as provided in subsection (d) of this Code section.
  5. Upon request by the department, an applicant or merchant acquirer limited purpose bank must take all steps necessary to have an international criminal history background check performed on any control person, director, officer, partner, or employee. The results of such international criminal history background check must be provided to the department.
  6. Applicants and merchant acquirer limited purpose banks shall have the primary responsibility for obtaining background checks on employees. The department shall be entitled to review the files of any applicant or merchant acquirer limited purpose bank to determine whether the required background checks have been run and whether all employees are qualified. The department shall be authorized to discuss the status of employee background checks with applicants or merchant acquirer limited purpose banks. Notwithstanding any other provisions in this article, the department shall retain the right to obtain conviction data on employees of applicants and merchant acquirer limited purpose banks.
  7. In the event the department denies an application to charter a merchant acquirer limited purpose bank or an application to own or control a merchant acquirer limited purpose bank, the applicant may submit a new application at any time following notice of final denial. The applicant shall not be prejudiced by any prior denials by the department. (Code 1981, § 7-9-7 , enacted by Ga. L. 2012, p. 43, § 1/HB 898; Ga. L. 2015, p. 344, § 38/HB 184; Ga. L. 2016, p. 864, § 7/HB 737.)

The 2015 amendment, effective July 1, 2015, added subsections (b) through (g) and redesignated former subsection (b) as present subsection (h).

The 2016 amendment, effective May 3, 2016, part of an Act to revise, modernize, and correct the Code, in subsection (c), inserted "the term" following "Code section," and at the end of the third sentence of subsection (g) substituted "banks" for "bank".

7-9-8. Issuance of certificate of incorporation by Secretary of State.

The Secretary of State shall immediately issue a certificate of incorporation to a proposed merchant acquirer limited purpose bank upon submission of:

  1. Written approval of the articles of incorporation by the department with a copy attached;
  2. An affidavit executed by the duly authorized agent or publisher of a newspaper swearing that the articles of incorporation or a summary statement publication as provided for in Code Section 7-9-5 have been published; and
  3. All required fees and charges required by law so long as name of the proposed merchant acquirer limited purpose bank continues to be reserved or is available. The Secretary of State shall retain on file a copy of the certificate, the articles of incorporation, the department's approval of the articles of incorporation, and the publisher's certificate. (Code 1981, § 7-9-8 , enacted by Ga. L. 2012, p. 43, § 1/HB 898.)

7-9-9. Corporate existence; shareholders; authority to regulate and supervise sale of shares; legal effect of incorporation certificate; when business may begin.

  1. The corporate existence of the merchant acquirer limited purpose bank shall begin upon the issuance of a certificate of incorporation by the Secretary of State. Those persons who subscribed for shares prior to filing of the articles, or their assignees, shall be shareholders in the merchant acquirer limited purpose bank. The department shall have full authority to regulate and supervise the activities of promoters, incorporators, subscribers for shares, and all persons soliciting offers to subscribe for shares in any merchant acquirer limited purpose bank established under this chapter. Any corporation in the process of seeking approval of a charter as a merchant acquirer limited purpose bank shall be classified as a merchant acquirer limited purpose bank in formation and persons named in the articles of incorporation or approved by the department as initial directors of such entity shall not be considered "agents" or "broker-dealers" as defined in Code Section 10-5-2.
  2. A certificate of incorporation shall be conclusive evidence that a merchant acquirer limited purpose bank has been incorporated; however, the state may institute proceedings to dissolve, wind up, and terminate a merchant acquirer limited purpose bank in conformity with Code Section 7-1-92 and applicable provisions of this chapter.
  3. A merchant acquirer limited purpose bank may begin business when:
    1. Capital stock of the merchant acquirer limited purpose bank satisfies the requirements of Code Section 7-9-11 ;
    2. Bylaws of the merchant acquirer limited purpose bank have been filed with the department;
    3. A registered agent and registered office for the merchant acquirer limited purpose bank has been designated in conformity with Code Section 7-1-132 ;
    4. The merchant acquirer limited purpose bank has been organized and is ready to begin the business for which it was incorporated;
    5. All conditions imposed by the department in giving its approval of the charter of the proposed merchant acquirer limited purpose bank under this chapter have been satisfied; and
    6. The department has received an affidavit attesting that the requirements of this subsection have been satisfied signed by the president or secretary and at least a majority of the directors of the merchant acquirer limited purpose bank. (Code 1981, § 7-9-9 , enacted by Ga. L. 2012, p. 43, § 1/HB 898.)

7-9-10. Liability of applicant beginning business before authorized.

The applicant who charters a merchant acquirer limited purpose bank which transacts business before its capital stock have been paid in as required under this chapter shall be jointly and severally liable to creditors for the amounts not paid in by subscribers or any other deficiencies. Such liability shall be deemed an asset of the merchant acquirer limited purpose bank and may be enforced by it, its successors or assignees, by a shareholder suing derivatively, or by a receiver appointed by the department.

(Code 1981, § 7-9-10 , enacted by Ga. L. 2012, p. 43, § 1/HB 898.)

7-9-11. Capital stock and paid-in surplus requirements.

A merchant acquirer limited purpose bank shall at all times maintain capital stock and paid-in surplus as required by policies of the department but in no event less than $3 million.

(Code 1981, § 7-9-11 , enacted by Ga. L. 2012, p. 43, § 1/HB 898.)

7-9-11.1. Merger or consolidation of limited purpose bank; compliance with provisions of Chapter 9.

  1. Merchant acquirer limited purpose banks may merge or consolidate upon compliance with the requirements of this chapter and other applicable laws and regulations.
  2. A corporation other than a merchant acquirer limited purpose bank may be merged into or may be consolidated with a merchant acquirer limited purpose bank, provided that:
    1. The resulting institution of the merger or consolidation is a merchant acquirer limited purpose bank;
    2. The resulting institution of the merger or consolidation holds only assets and liabilities and is engaged only in activities which may be held or engaged in by a merchant acquirer limited purpose bank; and
    3. The merger or consolidation is not otherwise unlawful.
  3. A merger or consolidation pursuant to subsection (b) of this Code section shall be made by compliance with the requirements of this chapter. Title 14 shall not be applicable to such a merger or consolidation.
  4. In the case of a merger of a merchant acquirer limited purpose bank with any other corporation or corporations, with the merchant acquirer limited purpose bank as the resulting entity, any assets, lines of business, activities, or powers which may accrue to the resulting entity which would be prohibited for a merchant acquirer limited purpose bank shall be provided for in the plan of merger. Such plan shall include a proposal for the disposal of such prohibited assets or the termination of such prohibited line of business, activity, or power. The department shall review such plan to determine whether the prohibited asset, line of business, activity, or power should be a basis for denial of the requested merger or consolidation or phased out within a reasonable period of time, which shall be determined by the department. (Code 1981, § 7-9-11.1 , enacted by Ga. L. 2016, p. 390, § 4-1/HB 811.)

Effective date. - This Code section became effective July 1, 2016.

7-9-11.2. Terms and conditions of merger or consolidation.

  1. The parties to a merger or consolidation of a merchant acquirer limited purpose bank shall:
    1. Adopt a plan stating the method, terms, and conditions of the merger or consolidation, including the rights under the plan of the shareholders of each of the parties and any agreement concerning the merger or consolidation. Such plan shall specify:
      1. The name that such merchant acquirer limited purpose bank shall have upon and after such merger or consolidation;
      2. The persons who shall constitute the board of directors of the merchant acquirer limited purpose bank after the merger or consolidation;
      3. The manner and basis of converting the shares of each merged or consolidated entity into shares or other securities or obligations of the surviving merchant acquirer limited purpose bank and, if any shares of any of the merged or consolidated entities are not to be converted solely into shares or other securities of the surviving merchant acquirer limited purpose bank, the amount of cash or securities of any other corporation, or combination of cash and such securities, which is to be paid or delivered to the holders of such shares in exchange for, or upon the surrender of, such shares. Such cash or securities may be in addition to, or in lieu of, the shares or other securities of the surviving merchant acquirer limited purpose bank;
      4. Such other provisions with respect to the proposed merger or consolidation which are deemed desirable to the parties of the merger or consolidation plan; and
      5. Any other requirements of the department, adopted through rule or regulation, deemed essential to ensure protection of creditors or shareholders of the merging or consolidating entities;
    2. Adopt a merger or consolidation plan upon affirmative vote of at least:
      1. A majority of the directors; and
      2. At a meeting of shareholders, a majority of the shareholders entitled to cast votes or the majority of holders of outstanding shares of a class, if a class of shares is entitled to vote thereon as a class; and
    3. Include a copy or summary of the merger or consolidation plan and a full statement of the rights and remedies of dissenting shareholders, the method of exercising such rights, and any limitations on such rights and remedies in the meeting notice for which a merger or consolidation is to be voted upon.
  2. Any modification of a merger or consolidation plan which has been adopted shall be made by any method provided therein or, in the absence of such provision, by the same vote as required for adoption. (Code 1981, § 7-9-11.2 , enacted by Ga. L. 2016, p. 390, § 4-1/HB 811.)

Effective date. - This Code section became effective July 1, 2016.

7-9-11.3. Notice of merger or consolidation; filing.

  1. Upon adoption of the plan of merger or consolidation as provided in Code Section 7-9-11.2, parties to a merger or consolidation shall file with the department articles of a merger or consolidation pursuant to the requirements of this Code section together with the fee required by Code Section 7-1-862.
  2. The articles of merger or consolidation shall be signed by two duly authorized officers of each party to a merger or consolidation plan under their respective seals and shall contain:
    1. The names of parties to a merger or consolidation plan and the name of the resulting merchant acquirer limited purpose bank;
    2. The street address and county location of the main office and registered agent and office of each party;
    3. The votes by which the merger or consolidation plan was adopted, a copy of the notice of each meeting held in connection with such adoption, and the time and place such meeting or meetings were held;
    4. The names and addresses of the initial directors of the resulting merchant acquirer limited purpose bank;
    5. In the case of a merger, any amendments to the articles of the resulting merchant acquirer limited purpose bank;
    6. In the case of a consolidation, the requirements for articles of a new merchant acquirer limited purpose bank as provided for by paragraphs (4) through (8) of subsection (a) of Code Section 7-9-5; and
    7. The merger or consolidation plan.
  3. Together with the articles of merger or consolidation, parties to a merger or consolidation shall deliver to the department a copy of the notice of merger or consolidation and an undertaking, which may appear in the articles of merger or consolidation or be set forth in a letter or other instrument executed by an officer or any person authorized to act on behalf of such merchant acquirer limited purpose bank, that the request for publication of a notice of filing the articles of merger or consolidation and payment therefor will be made as required by subsection (d) of this Code section.
  4. No later than the next business day after filing the articles of merger or consolidation with the department, parties to a merger or consolidation shall transmit for publication, to the publisher of a newspaper which is the official organ of the county where the main office of each party is located, a notice which shall contain a statement that the articles of merger or consolidation have been filed with the department, the names of entities which are parties to the proposed merger or consolidation, and, in the case of a merger, the proposed name of the surviving merchant acquirer limited purpose bank. The parties shall include in the notice a designated location where a copy of the articles of merger or consolidation may be examined. Such notice shall be published once a week for two consecutive weeks commencing within ten days after receipt of the notice by the newspaper.
  5. In the event a merger or consolidation plan is amended as provided for in Code Section 7-9-11.2 , parties shall promptly file with the department an amendment to the articles of consolidation or merger reflecting such amendment of the merger or consolidation plan. (Code 1981, § 7-9-11.3 , enacted by Ga. L. 2016, p. 390, § 4-1/HB 811.)

Effective date. - This Code section became effective July 1, 2016.

7-9-11.4. Parties to merger or consolidation plan to file application; requirements.

In addition to the filing of articles of merger and consolidation under Code Section 7-9-11.3, the parties to a merger or consolidation plan shall also file with the department:

  1. An application including any information desired by the department in order to evaluate the proposed merger or consolidation, which shall be made available in the form specified by the department;
  2. Applicable fees established by regulation of the department to defray the expenses of the investigation required by Code Section 7-9-11.5; and
  3. If the merger or consolidation involves the adoption of a new name, a certificate issued by the Secretary of State reserving such name under Code Section 7-1-131 . (Code 1981, § 7-9-11.4 , enacted by Ga. L. 2016, p. 390, § 4-1/HB 811.)

Effective date. - This Code section became effective July 1, 2016.

7-9-11.5. Investigation of merger or consolidation plan; approval or disapproval.

  1. Upon receipt of the articles of merger or consolidation and the filings required by Code Section 7-9-11.4, the department shall conduct such investigation as it may deem necessary to ascertain whether:
    1. The articles of merger or consolidation and supporting items satisfy the requirements of this chapter;
    2. The merger or consolidation plan and any modification thereof adequately protect the interests of creditors and shareholders;
    3. The requirements for a merger or consolidation under all applicable laws have been satisfied and the resulting merchant acquirer limited purpose bank would satisfy the applicable requirements of this chapter; and
    4. The merger or consolidation would not adversely impact the merchant acquirer limited purpose bank, entities engaged in merchant acquiring activities or settlement activities, or the payment card network. In making such a determination, the department will take into consideration competitive, financial, managerial, safety and soundness, compliance, and other concerns with respect to the merger or consolidation plan and all parties.
  2. Within 90 days after receipt of the articles of merger or consolidation and the filings required by Code Section 7-9-11.4 or within an additional period of not more than 30 days after an amendment to the application is received within the initial 90 day period, the department shall, in its discretion, approve or disapprove such articles on the basis of its investigation and the criteria set forth in subsection (a) of this Code section. Except as provided in Code Section 7-9-11.6 , the department shall provide written notice of its approval along with a copy of the articles of merger or consolidation to the Secretary of State. The department shall provide parties to the merger or consolidation plan written notice of its decision and, in the event of disapproval, a general statement of explanation for its decision. The decision of the department shall be conclusive; provided, however, that such decision may be subject to judicial review as provided for in Code Section 7-1-90 . (Code 1981, § 7-9-11.5 , enacted by Ga. L. 2016, p. 390, § 4-1/HB 811.)

Effective date. - This Code section became effective July 1, 2016.

7-9-11.6. Issuance of certificate of merger or consolidation.

Upon payment of all required taxes, fees, and charges, the Secretary of State shall issue to any resulting merchant acquirer limited purpose bank a certificate of merger or consolidation with the approved articles of merger or consolidation attached thereto, provided that the name of the resulting merchant acquirer limited purpose bank in a merger or consolidation has been reserved by a merging or consolidating party or is available on the records of the Secretary of State. The resulting merchant acquirer limited purpose bank shall retain a copy of such certificate, articles, and approval by the department.

(Code 1981, § 7-9-11.6 , enacted by Ga. L. 2016, p. 390, § 4-1/HB 811.)

Effective date. - This Code section became effective July 1, 2016.

7-9-11.7. Certificate effective upon issuance by Secretary of State; evidence of satisfactory performance; effect of merger.

  1. A merger or consolidation of a merchant acquirer limited purpose bank shall become effective upon the issuance of a certificate of merger or consolidation by the Secretary of State.
  2. A certificate of merger or consolidation shall be conclusive evidence of satisfactory performance of all conditions precedent to a merger or consolidation and of the existence or creation of a merchant acquirer limited purpose bank, except as against the state.
  3. When a merger or consolidation becomes effective, each party to the merger or consolidation plan, except the resulting merchant acquirer limited purpose bank, shall cease to exist as a separate entity. Upon merger or consolidation, any parties to a merger or consolidation plan shall become a single corporation which shall be the merchant acquirer limited purpose bank and which shall have, without further act or deed, all property, rights, powers, duties, and obligations of each party to a merger or consolidation plan.
  4. The articles of a resulting merchant acquirer limited purpose bank established from a merger shall be the same as its articles prior to the merger with any change stated in the articles of merger. The articles of a resulting merchant acquirer limited purpose bank established from a consolidation shall be the same as its articles prior to the consolidation with any change stated in the articles of consolidation.
  5. A resulting merchant acquirer limited purpose bank shall be authorized to engage only in such business and exercise only such powers as are then permissible upon original incorporation under this chapter and shall be subject to the same prohibitions and limitations as it would then be subject to upon original incorporation.
  6. No liability of any party to a merger or consolidation plan or of its shareholders, directors, or officers shall be affected nor shall any lien on any property of a party to the plan be impaired by a merger or consolidation. Any claim existing or action pending by or against any party to a merger or consolidation plan may be prosecuted to judgment as if a merger or consolidation had not taken place or a resulting merchant acquirer limited purpose bank may be substituted in place of such appropriate party of a plan of proposed merger or consolidation. (Code 1981, § 7-9-11.7 , enacted by Ga. L. 2016, p. 390, § 4-1/HB 811.)

Effective date. - This Code section became effective July 1, 2016.

7-9-11.8. Rights and remedies of shareholders.

  1. A shareholder of a merchant acquirer limited purpose bank which is a party to a plan of proposed merger or consolidation under this chapter who objects to such plan shall be entitled to the rights and remedies of a dissenting shareholder as determined under Chapter 2 of Title 14, known as the "Georgia Business Corporation Code."
  2. A resulting merchant acquirer limited purpose bank into which other or others have been merged or consolidated may require the return of original certificates of stock held by each shareholder in each or either of the merged or consolidated institutions, or in lieu thereof may:
    1. Issue to each shareholder new certificates for such number of shares of the resulting acquirer limited purpose bank; or
    2. Cause to be paid or delivered to each shareholder the amount of cash or securities of any other corporation or combination of cash and such securities as, under the plan of merger or consolidation, such shareholder is entitled to receive. (Code 1981, § 7-9-11.8 , enacted by Ga. L. 2016, p. 390, § 4-1/HB 811.)

Effective date. - This Code section became effective July 1, 2016.

7-9-12. Limitations on depositors and deposit-taking activities; deposit insurance; self-acquiring activities not permitted.

  1. A merchant acquirer limited purpose bank shall only accept deposits from a corporation that owns a majority of the shares of the merchant acquirer limited purpose bank. A merchant acquirer limited purpose bank shall not operate in any manner that attracts depositors from the general public, and no deposit shall be withdrawn by the depositor by check or similar means for payment to third parties or others. A merchant acquirer limited purpose bank shall not accept "brokered deposits" as that term is defined in the Federal Deposit Insurance Act as such existed on January 1, 2012, or the regulations adopted by the Federal Deposit Insurance Corporation in force and effect on January 1, 2012.
  2. A merchant acquirer limited purpose bank shall conduct its deposit-taking activities only from a single location within this state.
  3. A merchant acquirer limited purpose bank may apply to receive deposit insurance from the Federal Deposit Insurance Corporation or its successor agency.
  4. Notwithstanding subsection (a) of this Code section, the business conducted by a merchant acquirer limited purpose bank shall be merchant acquiring activities.
  5. A merchant acquirer limited purpose bank shall not engage in self-acquiring activities. (Code 1981, § 7-9-12 , enacted by Ga. L. 2012, p. 43, § 1/HB 898.)

U.S. Code. - The Federal Deposit Insurance Act, referred to in this Code section, is codified at 12 U.S.C. § 1811 et seq.

7-9-12.1. Treatment of merchant funds.

  1. All merchant funds shall constitute a trust fund until paid to the individual merchant. A merchant acquirer limited purpose bank shall have a fiduciary duty to preserve and account for merchant funds, and merchant acquirer limited purpose banks shall be liable for merchant funds.
  2. All merchant funds shall be deposited immediately by the merchant acquirer limited purpose bank and shall remain in an account at a financial institution that is federally insured and authorized to do business in this state until paid over to the individual merchant; provided, however, that nothing in this Code section shall preclude a merchant acquirer limited purpose bank from making appropriate deductions for chargebacks, fees, reserves, and other costs related to providing authorized merchant acquiring services owed by the individual merchant prior to remitting the net amount to the individual merchant. At the time of deposit into the account, the funds of the individual merchant in the account shall be deemed to be the property of the individual merchant. The merchant acquirer limited purpose bank shall maintain account records that identify individual merchants and the total amount held for each individual merchant. Such records shall be maintained in good faith and in the ordinary course of business and in a manner that can be readily ascertained. (Code 1981, § 7-9-12.1 , enacted by Ga. L. 2015, p. 344, § 39/HB 184.)

Effective date. - This Code section became effective July 1, 2015.

7-9-13. Enforcement by department; rules and regulations.

  1. All merchant acquirer limited purpose banks chartered by the department shall be subject to supervision, regulation, and examination by the department, including, but not limited to, the examination powers as provided in Code Sections 7-1-64 through 7-1-73, and the department shall have all enforcement powers provided in this title.
  2. In the event any chartered merchant acquirer limited purpose bank does not conduct its activities within the limitations provided in Code Section 7-9-12, the department may require such merchant acquirer limited purpose bank to cease all unauthorized activities. In the event such chartered merchant acquirer limited purpose bank fails to abide by such order, the department may:
    1. Impose upon the chartered merchant acquirer limited purpose bank or its parent holding company a penalty of up to $10,000.00 per day for each day such order is violated; and
    2. Require divestiture of such chartered merchant acquirer limited purpose bank by any holding company not qualified to acquire such chartered merchant acquirer limited purpose bank on the date it ceased to operate within the limitations imposed by Code Section 7-9-12 and became a bank for purposes of this title.
  3. The department shall have the power to promulgate rules and regulations implementing the provisions of this chapter. (Code 1981, § 7-9-13 , enacted by Ga. L. 2012, p. 43, § 1/HB 898; Ga. L. 2014, p. 226, § 2/HB 883.)

The 2014 amendment, effective July 1, 2014, substituted "Code Section 7-9-12" for "Code Section 7-9-11" in the middle of the first sentence of subsection (b) and near the end of paragraph (b)(2).