286.010. Definitions. [Repealed.]

286.020. Functions of department. [Repealed.]

286.030. Organization of department. [Repealed.]

286.040. Division of Motor Transportation. [Repealed.]

286.050. Division of Banking. [Repealed.]

286.060. Division of Securities. [Repealed.]

286.070. Division of Insurance. [Repealed.]

286.080. Division of Professional Regulation. [Repealed.]

286.100. Definitions for KRS 286.100 to 286.105. [Renumbered.]

286.105. Examination of contents of a decedent’s safe deposit box to find will or funeral arrangements. [Renumbered.]

286.1-010. Definitions for chapter.

As used in this chapter, unless the context requires otherwise:

1. “Commissioner” means the commissioner of the Department of Financial Institutions;
2. “Department” means the Department of Financial Institutions; and
3. “Person” means a natural person, or any type or form of corporation, company, partnership, proprietorship, association, or other legal entity.

HISTORY: 2017 ch. 87, § 1, effective June 29, 2017.

286.1-011. Department of Financial Institutions — Functions — Divisions within department — Medium for filing applications and other documents.

1. There is created within the Public Protection Cabinet a Department of Financial Institutions, which shall be headed by a commissioner of financial institutions, who shall be the executive head of the department and shall be charged with the administration of the department.
2. The Department of Financial Institutions shall exercise all administrative functions of the state in relation to the regulation, supervision, chartering and licensing of banks, trust companies, savings and loan associations, consumer loan companies, investment and industrial loan companies, and credit unions, and in relation to the regulation of securities.
3. There are established within the Department of Financial Institutions the following divisions:
   1. The Division of Depository Institutions, which shall be headed by a director appointed by the secretary of the Public Protection Cabinet in accordance with KRS 12.050 . The division shall consist of entities deemed appropriate by the director;
   2. The Division of Non-Depository Institutions, which shall be headed by a director appointed by the secretary of the Public Protection Cabinet in accordance with KRS 12.050 . The division shall consist of entities deemed appropriate by the director; and
   3. The Division of Securities, which shall be headed by a director appointed by the secretary of the Public Protection Cabinet in accordance with KRS 12.050. The division shall consist of entities deemed appropriate by the director.
4. The department may accept any application or other document required to be filed with the department in electronic format or in any other technology acceptable to the department.

History. Enact. Acts 1946, ch. 191, § 1; 1966, ch. 255, § 229; 1968, ch. 152, § 137; 1976, ch. 299, § 59; 1984, ch. 324, § 2, effective July 13, 1984; 1984, ch. 388, § 3, effective July 13, 1984; 1994, ch. 165, § 1, effective July 15, 1994; 1998, ch. 147, § 1, effective July 15, 1998; 2000, ch. 279, § 2, effective July 14, 2000; renum. 2006, ch. 247, §§ 38, 39, effective July 12, 2006; 2010, ch. 24, § 607, effective July 15, 2010.

286.1-012. Appointment of commissioner — Qualifications.

The Governor, in accordance with KRS 12.040 , shall appoint as commissioner of financial institutions a person knowledgeable in banking with not less than three (3) years’ banking experience. For this purpose, “banking experience” means service as an executive officer in a bank with its principal office located in Kentucky or service in a supervisory capacity in a state or federal agency having regulatory authority over banks or other financial institutions.

History. Enact. Acts 1946, ch. 191, § 2; 1976, ch. 86, § 13, effective March 29, 1976; 1984, ch. 324, § 3, effective July 13, 1984; 1984, ch. 388, § 4, effective July 13, 1984; renum. 2006, ch. 247, §§ 38, 39, effective July 12, 2006; 2010, ch. 24, § 608, effective July 15, 2010.

286.1-013. Financial Institutions Board — Duties.

1. There is created a Financial Institutions Board. The board shall consist of twelve (12) members appointed by the Governor who shall serve terms of four (4) years, except the initial terms shall be established as hereafter provided. It is recommended that the board appointments made by the Governor be selected from the following:
   1. Three (3) members selected from the banking industry regulated by the department with appropriate recognition as to bank size and geographic diversity;
   2. Three (3) members selected from the broker/dealer securities industry regulated by the department;
   3. One (1) member selected from the credit union industry regulated by the department;
   4. One (1) member selected from the consumer finance or industrial loan industry regulated by the department;
   5. Three (3) members selected from the public at large who are knowledgeable concerning financial institutions, the legislative process and consumer interests, two (2) of whom are not employees, officers, or directors of any financial institution; and
   6. The commissioner, who shall also serve as chairman of the board.
2. All members of the board from the banking industry, securities industry, credit union industry, consumer finance, or industrial loan industry shall be persons with practical experience in the industry so represented and currently serving at the executive level of that industry at the time of their appointment.
3. At the first meeting of the board, a drawing by lot shall be conducted to determine the length of each original member’s term. Initially, there shall be four (4) four (4) year terms, five (5) three (3) year terms, and two (2) two (2) year terms. Vacancies in the membership of the board shall be filled in the same manner as original appointments. Appointments to fill vacancies occurring before the expiration of a term shall be for the remainder of the unexpired term.
4. No member of the board, other than the commissioner, shall serve more than two (2) consecutive terms on the board.
5. The board shall first meet at the call of the Governor and thereafter as the chairman shall determine at a time and place determined by the chairman. The board may elect other officers for the conduct of its business. A majority of board members shall constitute a quorum, and a decision shall require the majority vote of those present. Each board member shall have one (1) vote, and voting by proxy shall be prohibited.
6. Board members shall receive one hundred dollars ($100) per diem for each board meeting which they attend and shall be reimbursed for other reasonable and necessary expenses incurred while engaged in carrying out the duties of the board.
7. The board shall:
   1. Prepare and submit at the Governor’s request a list of candidates qualified to serve as commissioner and recommend to the Governor a proposed salary for each nomination for commissioner;
   2. Recommend to the Governor a proposed salary structure for other department staff in order to provide competitive salaries for recruitment and retention of staff;
   3. Receive and comment on various reports relating to the department and its activities as submitted to the board by the commissioner or the Governor; and
   4. Review, consider and make recommendations to the commissioner on any matters referred to the board by the commissioner or the Governor.
8. In no event shall the board or its members interfere with the statutory duties of the commissioner whose decisions shall be governed by law.

History. Enact. Acts 1984, ch. 324, § 40, effective July 13, 1984; 1986, ch. 59, § 1, effective July 15, 1986; 1998, ch. 196, § 2, effective July 15, 1998; 2006, ch. 183, § 3, effective July 12, 2006; renum. 2006, ch. 247, §§ 38, 39, effective July 12, 2006; 2010, ch. 24, § 609, effective July 15, 2010.

286.1-020. Duties of commissioner — Seal — Administrative regulations.

1. The commissioner may promulgate, amend, and repeal any administrative regulations, forms, and orders as are necessary to interpret and carry out the provisions and intent of this chapter. The commissioner shall devise a seal for the department, a description of which, together with an impression thereof and a certificate of approval by the Governor, shall be filed in the office of the Secretary of State. The seal shall be renewed whenever necessary.
2. The commissioner of financial institutions and his or her deputies shall be allowed their necessary traveling and other expenses of conducting their office.
3. The commissioner of financial institutions may issue a finding of permissible activities, services, or products to authorize banks to engage in any banking activity in which the banks could engage were they operating as national banks at the time the authority is granted. Any finding shall be specifically limited to the activity, service, or products contained therein and shall be mailed to all banks. This section shall not apply to activities prohibited under Subtitle 9 of KRS Chapter 304.
4. Nothing herein contained shall be construed to repeal, modify, or alter the restrictions of KRS 286.3-105 relative to the leasing of motor vehicles, or of KRS 286.3-180 relative to the establishment of branches.
5. The commissioner may designate the deputy commissioner, division directors, general counsel, or branch managers to sign documents under his or her instructions.

History. 165a-2, 165a-22: amend. Acts 1970, ch. 209, § 1; 1976, ch. 234, § 1; 1984, ch. 324, § 4, effective July 13, 1984; 1984, ch. 388, § 5, effective July 13, 1984; 1992, ch. 226, § 1, effective July 14, 1992; 1996, ch. 318, § 211, effective July 15, 1996; 1998, ch. 196, § 3, effective July 15, 1998; renum. 2006, ch. 247, §§ 38, 39, effective July 12, 2006; 2010, ch. 24, § 610, effective July 15, 2010.

286.1-025. Deputy commissioner — Appointment — Service as commissioner.

The secretary of the Public Protection Cabinet may appoint a deputy commissioner of financial institutions with the prior written approval of the Governor. The deputy commissioner shall, during the absence or inability of the commissioner or under his or her instructions, or in the event of a vacancy in the office of the commissioner and until the vacancy is filled, be vested with all the powers and perform all the duties of the commissioner.

History. Enact. Acts 1946, ch. 191, § 3; 1982, ch. 251, § 3, effective April 1, 1982; 1984, ch. 324, § 5, effective July 13, 1984; 1984, ch. 388, § 6, effective July 13, 1984; renum. 2006, ch. 247, §§ 38, 39, effective July 12, 2006; 2010, ch. 24, § 611, effective July 15, 2010.

286.1-440. Appointment of examiners — Oath — Restrictions on debt and stock ownership — Contracts for services of agency’s examiners.

1. The commissioner shall appoint a sufficient number of examiners and assistant examiners to examine all institutions coming under the supervision of the department. A salary schedule for examiners and assistant examiners shall be prepared by the commissioner and presented to the secretary of the Finance and Administration Cabinet for approval. In the event an advisory state banking board is established by law, the appointment and compensation of examiners and assistant examiners shall be with the advice of such board.
2. The commissioner, the deputy commissioner, and each examiner shall take the constitutional oath of office.
3. Neither the commissioner, nor the deputy commissioner, nor any examiner or assistant examiner shall be indebted directly or indirectly either as borrower, indorser, surety, or guarantor, to any bank or trust company under his supervision or subject to his examination, nor shall he or she be a director, officer or employee in such bank or trust company, nor engage or become interested in the sale of securities as a business or in the negotiation of loans for others.
4. No person shall be assigned to examine the affairs of any bank or trust company in a county in which he holds stock in either a state or national bank or trust company.
5. The commissioner may enter into contracts with any bank supervisory agency that has concurrent jurisdiction over a state bank or the branch of an out-of-state state bank operating in this state to engage the services of the agency’s examiners at a reasonable rate of compensation, or to provide the services of the commissioner’s examiners to the agency at a reasonable rate of compensation. Any contract entered into pursuant to this subsection shall be deemed a sole source contract under the provisions of KRS 45A.095 .

History. 165a-6, 165a-7: amend. Acts 1946, ch. 27, § 8; 1946, ch. 191, § 8; 1968, ch. 104, § 1; 1982, ch. 251, § 13, effective April 1, 1982; 1984, ch. 324, § 29, effective July 13, 1984; 1996, ch. 338, § 16, effective July 15, 1996; renum. 2006, ch. 247, §§ 38, 39, effective July 12, 2006; 2010, ch. 24, § 612, effective July 15, 2010.

286.1-485. Disposition of fees collected under various KRS provisions.

All fees collected and paid into the State Treasury under the provisions of KRS Chapters 292 and 366 and of Subtitles 1, 2, 3, 4, 5, 6, 7, and 8 of KRS Chapter 286, or any industry regulated by the department shall be credited to a revolving trust or agency fund account, as provided in KRS 45.253 , for the Department of Financial Institutions and shall be separately accounted for and shall be used solely for the administration and enforcement of said KRS chapters.

History. Enact. Acts 1982, ch. 251, § 2, effective April 1, 1982; 1984, ch. 111, § 126, effective July 13, 1984; 1984, ch. 116, § 25, effective July 13, 1984; 1984, ch. 324, § 34 effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 613, effective July 15, 2010.

286.2-015. Political subdivisions prohibited from enacting or enforcing legislation governing matters preempted by state or federal law — Exception for civil rights — State law to be construed as consistent with federal law.

1. All political subdivisions of the Commonwealth shall be prohibited from enacting and from enforcing ordinances, resolutions, and regulations pertaining to the financial or lending activities of persons or entities which:
   1. Are subject to the jurisdiction of the department or the provisions of this chapter;
   2. Are subject to the jurisdiction or regulatory supervision of the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the National Credit Union Administration, the Farm Credit Administration, the Federal Deposit Insurance Corporation, or the United States Department of Housing and Urban Development; or
   3. Originate, purchase, sell, assign, securitize, assist, facilitate, or service property interests or obligations created by financial transactions or loans made, executed, or originated by persons or entities referred to in paragraph (a) or (b) of this subsection.
2. The requirements of this section shall apply to all ordinances, resolutions, or regulations pertaining to lending activities, including any ordinances, resolutions, or regulations which limit or disqualify persons or entities from doing business with a political subdivision based upon financial or lending activities or the imposition of additional reporting requirements or other obligations on such persons or entities seeking to do business with a political subdivision.
3. Any provision of this chapter preempted by federal law with respect to a national bank or federal savings association shall not apply to the same extent to an operating subsidiary of a national bank or federal savings association.
4. The provisions of this chapter shall be interpreted and applied to the fullest extent practicable in a manner consistent with applicable federal laws and regulations and with applicable policies and orders of federal regulatory agencies and shall not be deemed to constitute an attempt to override federal law.
5. Nothing in this section shall be interpreted as preventing the enforcement of ordinances, regulations, or resolutions of political subdivisions of the Commonwealth pertaining to civil rights.

History. Enact. Acts 2003, ch. 64, § 11, effective June 24, 2003; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 614, effective July 15, 2010.

286.2-020. Required disclosure of services provided by Kentucky Homeownership Protection Center.

1. “Kentucky Homeownership Protection Center” means the center established in KRS 198A.400 .
2. At the time of closing and together with the final signed loan documents, if the Kentucky Homeownership Protection Center is operational as provided in KRS 198A.400 , a mortgagee shall provide to the homeowner any brochure, pamphlet, or other brief document prepared or approved by the Kentucky Housing Corporation that describes the services provided by the Kentucky Homeownership Protection Center.

History. Enact. Acts 2008, ch. 175, § 2, effective April 24, 2008.

Research References and Practice Aids

Northern Kentucky Law Review.

2012 Kentucky Survey Issue: Article: Abusive Lending Practices: A Survey of Kentucky’s Legislative Response, 39 N. Ky. L. Rev. 1 (2012).

286.2-030. Prohibition against improperly influencing a mortgage loan real estate appraisal.

1. For the purpose of this section, “person” means an individual, partnership, limited liability company, limited partnership, corporation, association, or other group engaged in joint business activities, however organized.
2. It is unlawful for any person in the course of a mortgage transaction to improperly influence the development, report, result, or review of a real estate appraisal sought in connection with a mortgage loan. Nothing in this section shall be construed to prohibit a person from requesting an appraiser to do one (1) or more of the following:
   1. Consider additional appropriate property information;
   2. Provide further detail, substantiation, or explanation for the appraiser’s conclusion of value; or
   3. Correct errors in the appraisal report.

History. Enact. Acts 2008, ch. 175, § 3, effective April 24, 2008.

286.2-040. Examination of service provider by commissioner or other state or federal regulatory agency — Confidentiality and evidentiary value of report — Examination fees — Cooperative agreements.

1. As used in this section:
   1. “Covered service” means:
      1. Data processing;
      2. Any activity that supports financial services, including but not limited to lending, funds transfer, fiduciary activity, trading activity, and deposit taking; and
      3. Internet-related services, including but not limited to Web services and electronic bill payments, mobile applications, system and software development and maintenance, and security monitoring;
   2. “Depository institution” means any:
      1. State bank as defined in KRS 286.3-010 ;
      2. Branch of an out-of-state bank as defined in KRS 286.3-010 that is doing business under the laws of this state;
      3. Trust company as defined in KRS 286.3-010; or
      4. Credit union as defined in KRS 286.6-005 ; and
   3. “Service provider” means any person that provides a covered service listed in paragraph (a) of this subsection to a depository institution, except any:
      1. Bank service company that is examined and regulated by the appropriate federal banking agency. For the purposes of this subparagraph, “bank service company” and “appropriate federal banking agency” have the meanings set forth in the Bank Service Company Act, 12 U.S.C. sec. 1861 , as amended, or any successor statute;
      2. Depository institution, holding company of a depository institution, or subsidiary of that holding company; and
      3. Federally chartered depository institution, holding company of a federally chartered depository institution, or subsidiary of that holding company. For the purposes of this subparagraph, “federally chartered depository institution” means a bank, savings association, or credit union organized pursuant to the laws of the United States.
2. The commissioner may examine a service provider for any covered service it provides to a depository institution if the examination is conducted in conjunction with an examination conducted by a properly authorized federal regulatory agency.
3. The commissioner may accept an examination made by other properly authorized state or federal regulatory agencies that have concurrent jurisdiction over a service provider in lieu of any examination authorized or required under the laws of this state.
4. A report of examination and related correspondence shall be considered confidential information. No person shall release any information contained in the examination unless required by court order. Notwithstanding this subsection, the department may furnish:
   1. A copy of a report of examination performed by the commissioner of the condition and affairs of any service provider to the depository institutions serviced by the service provider; and
   2. To and exchange information and reports of examinations with officials and examiners of other properly authorized state or federal regulatory agencies.
5. Every official report concerning a service provider, and every report of examination, shall be prima facie evidence of the facts contained in the report for any purpose in any action in which the department or service provider is a party.
6. The commissioner shall fix a scale of examination fees to be paid by service providers. The fees shall be:
   1. Sufficient to cover the cost of the examination based upon a fair compensation for time and actual expense;
   2. Assessed and paid by service providers promptly after completion of the examination; and
   3. Set by administrative regulation.
7. The commissioner may enter into cooperative agreements with other properly authorized state or federal regulatory agencies that have concurrent jurisdiction over a service provider to facilitate the examination process, including joint examination, scheduling, resources, fee collection and sharing, report of examination processing, and enforcement actions.

HISTORY: 2017 ch. 87, § 2, effective June 29, 2017.

286.2-100. Definitions for KRS 286.2-100 to 286.2-680.

As used in KRS 286.2-100 to 286.2-680 , unless the context requires otherwise:

1. “Financial institution” means a state or national bank, bank holding company, trust company, savings and loan association, savings and loan association holding company, credit union, or wholly owned subsidiary thereof;
2. “Interested person” means the surviving spouse of the lessee, an adult child of the lessee, a parent of the lessee, a person named as the personal representative in a copy of a purported will produced by such person, a person designated by the lessee in writing acceptable to the lessor that is filed with the lessor before death of the lessee, or a person named in a court order to examine the contents of a safe deposit box for a purpose listed in KRS 286.2-105 (1);
3. “Lessee” means a person who contracts with a lessor for the use of a safe deposit box;
4. “Lessor” means a financial institution or safe deposit company that rents safe deposit facilities; and
5. “Safe deposit box” means a safe deposit box, vault, or other safe deposit receptacle maintained by a lessor that may be used for the safekeeping and storage of property and documents.

History. Enact. Acts 2001, ch. 141, § 1, effective June 21, 2001; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2009, ch. 104, § 23, effective June 25, 2009.

286.2-105. Examination of contents of a decedent’s safe deposit box to find will or funeral arrangements.

1. If satisfactory proof of the death of the lessee is presented and the interested person possesses a key to the lessee’s safe deposit box, a lessor shall permit an interested person to open and examine the contents of a safe deposit box leased by a decedent in the presence of an employee of the lessor for one (1) or both of the following purposes:
   1. To conduct a will search; and
   2. To obtain any document purporting to be a deed to a burial plot or to give funeral or burial instructions.
2. If the safe deposit box is opened for the purpose of conducting a will search, an employee of the lessor shall remove any document that appears to be a will and make a true and correct machine copy thereof, replace the copy in the box, and then deliver the original thereof to the person requesting the search.
3. If the safe deposit box is opened for the purpose of obtaining any document purporting to be a deed to a burial plot or to give funeral or burial instructions, the employee of the lessor shall make a true and correct machine copy thereof, replace the copy in the box, and then deliver the original thereof to the person requesting the search.
4. No contents of a safe deposit box other than a will and a document purporting to be a deed to a burial plot or to give funeral or burial instructions may be removed under this section.

History. Enact. Acts 2001, ch. 141, § 2, effective June 21, 2001; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.2-670. Foreign financial institutions, activities deemed not transacting business in Kentucky.

1. Except as provided in subsection (2) of this section, a foreign financial institution shall not be considered to be doing, transacting, or carrying on business in this state solely by reason of engaging in any or all of the following activities, either on its own behalf or as a trustee of a pension plan, employee’s profit-sharing or retirement plan, or testamentary or inter vivos trust:
   1. The lending of money, or the acquisition by purchase, by contract to purchase, by making of advance commitments to purchase, or by assignment to it of loans, including construction loans, or any interest in loans, secured in whole or in part by mortgages, deeds of trust or other forms of security on real or personal property in this state, if such activities are carried on from outside this state by the lending institution or within this state by independent agencies on behalf of said foreign lending institution;
   2. The receipt of principal and interest on such loans;
   3. The making of physical inspections and appraisals of real or personal property which secures or is proposed to secure any loan by an officer or employee of a foreign lending institution if the officer or employee making any physical inspections and appraisals is not a resident of and does not maintain his place of business in this state;
   4. The ownership of any loans and the enforcement of any loans by trustee’s sale, judicial process, or deed in lieu of foreclosure, or otherwise;
   5. The modification, renewal, extension, transfer, or sale of loans or the acceptance of additional or substitute security therefor or the full or partial release of the security therefor or the acceptance of substitute or additional obligors thereon if the activities are carried on from outside this state by the lending institution or carried on within this state by independent agencies;
   6. The maintaining and defending of any action or suits relating to loans, mortgages, deeds of trust, security instruments or related agreements or activities referred to herein or incidental thereto;
   7. The engaging, by contractual arrangement, of a corporation, firm or association, qualified to do business in this state, which is not a subsidiary or parent of the lending institution or which is not under common management with the lending institution, to make collections and to service loans in any manner whatsoever, including the payment of ground rents, taxes, assessments, insurance and the like and the making, on behalf of the lending institution, of physical inspections and appraisals of real or personal property securing any loans or property which is proposed to secure any loans, and the performance of any such engagement;
   8. The acquisition of title to the real or personal property covered by any mortgages, deeds of trust, or other security instrument, by trustees, pledgees, or judicial sales, or by deed in lieu of foreclosure or for the purpose of transferring title to any federal agency or instrumentality as the insurer or guarantor of any loans, the maintenance or defense of any action or suit relating to the possession of the property, and the retention of title to any real or personal property as acquired pending the orderly sale or other disposition thereof; or
   9. The maintenance of bank accounts in banks, authorized or licensed to do and transact a banking business in this state.
2. The provisions of this section shall be inapplicable in determining whether a financial institution is regularly engaged in business in this Commonwealth within the meaning of that phrase as used in KRS 136.500 to 136.575 .

History. Enact. Acts 1970, ch. 228, § 1; 1996, ch. 254, § 36, effective July 15, 1996; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2009, ch. 104, § 24, effective June 25, 2009.

286.2-680. Foreign financial institutions, when not required to qualify as doing business — Nexus requirement.

No foreign financial institution solely by reason of engaging in any one (1) or more of the activities set forth in KRS 286.2-670 shall be required to qualify to do business in this Commonwealth. Notwithstanding the foregoing, a financial institution, as defined in KRS 136.500 , is subject to taxation within this Commonwealth if it meets the nexus requirement of KRS 136.520 .

History. Enact. Acts 1970, ch. 228, § 2; 1996, ch. 254, § 37, effective July 15, 1996; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2009, ch. 104, § 25, effective June 25, 2009.

286.2-685. Prohibition against use of certain banking-related words and characters or financial institution trademarks by unauthorized person — Exceptions — Enforcement and penalties.

1. No person may use the term “bank,” “banker,” “banking,” “trust,” or a similar term or a character, ideogram, phonogram, phrase, or foreign language word in its name, stationery, or advertising in a manner that would imply to the public that the person is engaged in the banking or trust business.
2. Subsection (1) of this section does not apply to a depository institution or other entity organized under the laws of this state, another state, or the United States to the extent that the depository institution or other entity is:
   1. Authorized under its charter or the laws of this state or the United States to use a term, word, character, ideogram, phonogram, or phrase prohibited by subsection (1) of this section; and
   2. Authorized by the laws of this state or the United States to conduct the activities in which it is engaged in this state.
3. For purposes of this section, unless the context requires otherwise, “financial institution” means any person or entity operating in the Commonwealth of Kentucky, as permitted under the laws of this state, any other state, or the United States, as a bank, bank holding company, credit union, savings and loan association, or any wholly owned subsidiary thereof.
4. Except as provided in subsection (5) of this section, no person that is not a financial institution may use the trade name, trademark, service mark, logo, or symbol, or any combination thereof, of any financial institution, or any trade name, trademark, service mark, logo, or symbol, or any combination thereof, that is similar to the trade name, trademark, service mark, logo, or symbol of such a financial institution, in any marketing material, solicitation, or advertising provided or directed to another person in a manner such that a reasonable person may be confused, mistaken, or deceived that the marketing material, solicitation, or advertising originated from, is endorsed by, or has been consented to by the financial institution.
5. Subsection (4) of this section shall not apply to a person who uses the trade name, trademark, service mark, logo, or symbol of a financial institution with the written consent of the financial institution.
6. The financial institution whose trade name, trademark, service mark, logo, or symbol has been used in violation of this section may institute an action in the Franklin Circuit Court or any court of competent jurisdiction against any person or entity in violation of subsection (4) of this section to enjoin a continuance of any activity in violation of subsection (4) of this section and, if injured thereby, for the recovery of damages at three (3) times the amount of any actual damages sustained and for civil penalties in the amount of one thousand dollars ($1,000). It shall not be necessary that actual damages be alleged or proved in order to recover injunctive relief or civil penalties. The penalties prescribed by this subsection shall be cumulative.

History. Enact. Acts 2006, ch. 183, § 1, effective July 12, 2006; 2010, ch. 28, § 1, effective July 15, 2010.

Legislative Research Commission Note.

(7/12/2006). This section was created in 2006 Ky. Acts. ch. 183 as a new section of KRS Chapter 287. In that same session, 2006 Ky. Acts ch. 247, sec. 38 required that all sections of KRS Chapters 287, 288, 290, 291, 294, 366, 366A, and 368 be renumbered as sections of a single KRS chapter entitled the “Kentucky Financial Services Code.” Therefore, the Statute Reviser, acting under KRS 7.136(1), has codified this section as a new section of KRS Chapter 286.

286.2-990. Civil penalty for violation of subtitle.

Unless otherwise specifically provided for in this subtitle, the commissioner may levy a civil penalty against any person who violates any provision of this subtitle, any administrative regulation promulgated under this subtitle, or any order issued by the commissioner under this subtitle. The civil penalty shall be not less than one thousand dollars ($1,000) nor more than five thousand dollars ($5,000) per violation, plus the state’s costs and expenses for the examination, investigation, and prosecution of the matter, including reasonable attorney’s fees and court costs.

History. Enact. Acts 2009, ch. 104, § 26, effective June 25, 2009; 2010, ch. 24, § 615, effective July 15, 2010.

286.3-010. Definitions for subtitle.

As used in this subtitle, unless the context requires otherwise:

1. “Bank or state bank” means any bank which is now or may hereafter be organized under the laws of this state or a combined bank and trust company;
2. “National bank” or “national bank association” means a bank created by Congress and organized pursuant to the provisions of federal law, including savings and loan associations;
3. “Out-of-state bank” means a bank chartered under the laws of any state other than Kentucky;
4. “Home state” means:
   1. With respect to a state bank or out-of-state state bank, the state by which the bank is chartered; and
   2. With respect to a national bank, the state in which the main office of the bank is located;
5. “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;
6. “Host state” means a state, other than the home state, in which the bank maintains, or seeks to establish and maintain, a branch;
7. “Commissioner” means the commissioner of financial institutions;
8. “Department” means the Department of Financial Institutions;
9. “Population” means the population as indicated by the latest regular United States census;
10. “Trust company” includes every corporation authorized by this subtitle to do a trust business;
11. “Undivided profits” means the composite of the bank’s net retained earnings from current and prior years’ operations;
12. “Capital stock” shall mean, at any particular time, the sum of:
    1. The par value of all shares of the corporation having a par value that have been issued;
    2. The amount of the consideration received by the corporation for all shares of the corporation that have been issued without par value except such part of the consideration as has been allocated to surplus in a manner permitted by law; and
    3. Such amounts not included in paragraphs (a) and (b) of this subsection as have been transferred to stated capital of the corporation, whether through the issuance of stock dividends, resolution of the bank’s board of directors under applicable corporate law or otherwise by law;
13. “Surplus” means the amount of consideration received by the corporation for all shares issued without par value that has not been allocated to capital stock or the amount of consideration received by the corporation in excess of par value for all shares with a par value, or both;
14. “Municipality” means a county, city, or urban-county government;
15. “Political subdivision” means a municipality, school district, or other municipal authority;
16. “Corporation” means either a for-profit corporation or limited liability company;
17. “Share” means the shares of stock or the unit of equity into which the proprietary interests in a corporation are divided;
18. “Stock” means the corporation’s shares;
19. “Stockholder” or “shareholder” means an owner of the corporation’s shares;
20. “Board of directors” means the governing body of a corporation elected or otherwise chosen by the shareholders, including the managers of a limited liability company;
21. “Director” means a member of the board of directors;
22. “Articles of incorporation” means the organizing documents of a corporation filed with the Secretary of State in accordance with KRS Chapter 271B or 275;
23. “Dividends” means a distribution of money, stock, or other property to shareholders of a corporation;
24. “Out-of-state trust company” means a trust company that is chartered under the laws of a state other than Kentucky; and
25. “Trust representative office” means an office at which a trust company has been authorized by the commissioner to engage in a trust business other than acting as a fiduciary.

History. 165a-1, 577, 603, 612a, 883c-1, 883c-3: amend. Acts 1946, ch. 191, § 7; 1970, ch. 92, § 82; 1982, ch. 251, § 1, effective April 1, 1982; 1984, ch. 324, § 1, effective July 13, 1984; 1984, ch. 388, § 2, effective July 13, 1984; 1996, ch. 338, § 7, effective July 15, 1996; 1998, ch. 196, § 1, effective July 15, 1998; 2003, ch. 64, § 10, effective June 24, 2003; 2006, ch. 183, § 2, effective July 12, 2006; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 616, effective July 15, 2010; 2011, ch. 67, § 2, effective June 8, 2011.

286.3-020. Approval of application for charter — Prerequisites to financial institution’s doing business under its charter.

1. The commissioner shall approve an application for a bank or trust company charter upon a finding that the public convenience and advantage will be served by opening of the proposed institution. To determine whether public convenience and advantage will be served, the commissioner shall consider the following factors:
   1. Whether conditions in the community indicate reasonable assurance of successful operation for the proposed institution;
   2. Whether the organizational and capital structure and amount of capitalization is adequate for the business plan; and
   3. Whether the officers and directors have sufficient experience, ability, standing, and reputation to provide reasonable assurance of successful operation and of compliance with the law.
2. Before any institution shall commence business, it shall obtain from the commissioner a charter authorizing it to commence doing business and shall comply with the following requirements:
   1. The oaths of all directors have been taken;
   2. The commissioner has received satisfactory proof that the accounts of the banking institution’s depositors will be insured by the Federal Deposit Insurance Corporation; and
   3. The commissioner has received satisfactory proof that the institution has subscribed and paid in the required capital and has otherwise fully complied with all pertinent laws and administrative regulations.

History. Enact. Acts 2010, ch. 28, § 2, effective July 15, 2010.

Legislative Research Commission Note.

(7/15/2010). References to the “executive director” of financial institutions in this section, as created by 2010 Ky. Acts ch. 28, sec. 2, have been changed in codification to the “commissioner” of financial institutions to reflect the reorganization of certain parts of the Executive Branch, as set forth in Executive Orders 2009-535 and 2009-1086 and confirmed by the General Assembly in 2010 Ky. Acts ch. 24. These changes were made by the Reviser of Statutes pursuant to 2010 Ky. Acts ch. 24, sec. 1938.

286.3-025. Prohibition against transacting business before issuance of charter.

An institution shall not transact any business, except business which is incidental or preliminarily necessary to its organization, until it has been issued a charter under KRS 286.3-020 .

History. Enact. Acts 2010, ch. 28, § 3, effective July 15, 2010.

286.3-030. Limitation on right to engage in business — Authorization for Kentucky chartered banks and subsidiaries to sell insurance — Names to be used by branch offices.

1. As used in this section, “person” includes a natural person, partnership, corporation, association, business trust, voting trust, or similar organization.
2. No persons, except corporations, shall engage in the business of private banking in this state.
3. No bank incorporated under the laws of another state or national bank having its principal place of business outside this state shall transact any banking business in this state except to lend money, unless specifically authorized by law or administrative regulation, or except as permitted following a merger transaction within the meaning of Section 44 of the Federal Deposit Insurance Act pursuant to 12 U.S.C. secs. 1811 et seq., approved after June 1, 1997.
4. Kentucky chartered banks, or their subsidiaries, are specifically authorized to engage in the sale of insurance.
5. No bank incorporated under the laws of the Commonwealth of Kentucky shall make any loan or discount on the security of the shares of its own capital stock, or the shares of stock of a bank holding company which controls the bank to the extent that such loan or discount secured by such shares exceeds the amounts permitted by Section 23(A) of the Federal Reserve Act (12 U.S.C. sec. 371 c) as that section reads on July 15, 1986, nor be the purchaser or holder of any such shares, except that a bank may take property of any kind to satisfy or protect a loan previously made in good faith and in the ordinary course of business; and stock so purchased or acquired, shall, within six (6) months from the time of its purchase or acquisition, be sold or disposed of at public or private sale. This subsection shall not affect or modify in any way KRS 386.025 , but said section shall remain in full force and effect.
6. Except as permitted by the commissioner, any state or national bank with branch offices in Kentucky shall use at all times the same name for all its branch offices in Kentucky. The commissioner shall permit the limited use of a different name at one (1) or more branch offices, upon written request by a state or national bank with branch offices in Kentucky, when necessary to avoid customer confusion.

History. 581, 598b-4 (1938 Supp.), 602a-1, 609: amend. Acts 1956, ch. 80, § 1; 1972, ch. 174, § 1; 1984, ch. 130, § 2, effective July 13, 1984; 1986, ch. 444, § 1, effective July 15, 1986; 1996, ch. 254, § 35, effective July 15, 1996; 1996, ch. 338, § 8, effective July 15, 1996; 1998, ch. 196, § 4, effective July 15, 1998; 1998, ch. 312, § 1, effective July 15, 1998; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 28, § 4, effective July 15, 2010.

286.3-040. Who may organize — Number of directors required.

1. Any five (5) or more natural persons may organize a banking corporation.
2. Any five (5) or more natural persons may organize a corporation for the purpose of conducting a trust business.
3. Any five (5) or more natural persons may organize a corporation for the purpose of conducting a combined banking and trust business.
4. The board of directors of a banking corporation, trust corporation, or combined bank and trust corporation shall be no less than the required number of organizers.

History. 577, 603, 612a, 883c-1, 883c-2: amend. Acts 1966, ch. 11, § 1; 1984, ch. 324, § 6, effective July 13, 1984; 1986, ch. 444, § 2, effective July 15, 1986; 1990, ch. 181, § 2, effective July 13, 1990; 2006, ch. 183, § 4, effective July 12, 2006; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 28, § 5, effective July 15, 2010.

286.3-050. Organization to be approved by commissioner.

1. Before filing the articles of incorporation of any financial institution mentioned in KRS 286.3-040 , the organizers shall present a copy of their proposed articles to the commissioner for approval.
2. In the event that the institution for which a charter is sought is to be created solely for the purpose of effectuating a merger or consolidation to facilitate the formation of a bank holding company, the commissioner may waive all or any part of the requirements of this subtitle.
3. If the commissioner determines that it is expedient and desirable to permit the proposed corporation to engage in business, the commissioner shall approve the articles of incorporation in writing, and the articles then may be filed and recorded as provided in the general corporation or limited liability company law.
4. All amendments to the articles of incorporation of any financial institution mentioned in KRS 286.3-040 shall be approved by the commissioner before filing with the Secretary of State.

History. 165a-20: amend. Acts 1946, ch. 141, § 29; 1982, ch. 251, § 4, effective April 1, 1982; 1984, ch. 324, § 7, effective July 13, 1984; 1986, ch. 444, § 3, effective July 15, 1986; 1998, ch. 196, § 5, effective July 15, 1998; 2006, ch. 183, § 5, effective July 12, 2006; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 617, effective July 15, 2010; 2010, ch. 28, § 6, effective July 15, 2010.

286.3-060. Oath required of each director before transacting business and upon any election or reelection — Oath to be filed with commissioner and subject to review.

1. Before any financial institution mentioned in KRS 286.3-040 may transact any banking or trust business, each director of the institution shall take an oath which shall state in substance:
   1. That such director is a citizen of the United States, and the State of Kentucky, or, if not, the place of his residence;
   2. That he will faithfully discharge the duties of his office and administer the affairs of the institution, so far as the duties of his office require;
   3. That he will uphold the laws of the state, and particularly the banking and trust laws.
2. The oath shall be taken before any officer authorized to administer oaths, and shall be forwarded to the commissioner for filing.
3. Upon the election of any subsequent director, or reelection of any director, the oath shall be taken and shall be maintained by the bank and be subject to review at examination.

History. 165a-20: amend. Acts 1946, ch. 175, § 1; 1970, ch. 209, § 2; 1976, ch. 234, § 2; 1984, ch. 324, § 8, effective July 13, 1984; 1996, ch. 318, § 212, effective July 15, 1996; 1998, ch. 196, § 6, effective July 15, 1998; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 618, effective July 15, 2010; 2010, ch. 28, § 7, effective July 15, 2010.

286.3-065. Officers and directors to act in good faith and with necessary and reasonable care and diligence.

Each officer and director shall discharge the duties and responsibilities of his or her respective office or position in good faith and with such ordinary care and diligence as necessary and reasonable to administer the affairs of the bank in a safe and sound manner. The provisions of this section and KRS 271B.8-300 apply to directors. The provisions of this section and KRS 271B.8-420 apply to officers.

History. Enact. Acts 1946, ch. 141, § 10; 1970, ch. 209, § 3; 1982, ch. 251, § 6, effective April 1, 1982; 1986, ch. 444, § 4, effective July 15, 1986; 1998, ch. 196, § 7, effective July 15, 1998; 2006, ch. 183, § 6, effective July 12, 2006; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2015 ch. 34, § 77, effective June 24, 2015; repealed and reenacted by 2016 ch. 33, § 1, effective July 15, 2016.

286.3-070. Minimum capital stock required.

The minimum capital stock of any newly chartered bank or trust company shall be five million dollars ($5,000,000). Additional capital may be required depending upon an investigation of the application, at the discretion of the commissioner.

History. 577, 603, 612a, 883c-1: amend. Acts 1954, ch. 182, § 2; 1998, ch. 196, § 8, effective July 15, 1998; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 619, effective July 15, 2010; 2010, ch. 28, § 8, effective July 15, 2010.

286.3-080. Minimum capital and surplus required to begin business. [Renumbered]

The minimum capital required of a financial institution by KRS 286.3-070 shall be paid in full in money. Not less than fifty percent (50%) of the minimum capital required shall be designated as surplus. Such money shall be in the custody of the directors before the corporation may commence business. None of the original minimum capital of a financial institution may be designated as undivided profits.

History. 580: amend. Acts 1962, ch. 295; 1986, ch. 444, § 5, effective July 15, 1986; 1998, ch. 196, § 9, effective July 15, 1998; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-090. Reduction of capital stock of bank or trust company to be approved by commissioner — $2,500,000 in capital stock to be maintained.

No reduction in the capital stock of a bank or trust company shall be made to an amount less than was required for organization, nor shall any reduction be valid until it has been approved by the commissioner upon his finding that the interest of creditors of the bank or trust company will not be prejudiced thereby. In no event, however, shall the capital stock be less than two million five hundred thousand dollars ($2,500,000).

History. 587: amend. Acts 1984, ch. 324, § 9, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 620, effective July 15, 2010; 2010, ch. 28, § 9, effective July 15, 2010.

286.3-095. Change in control or certain loans to be reported to commissioner — Contents of report.

1. At least sixty (60) days prior to a change occurring in the outstanding voting stock of any bank or trust company which will result in control or in a change in the control of the bank or trust company, the proposed acquiring party or parties shall report such facts to the commissioner for approval unless the commissioner finds that:
   1. The terms of the acquisition are not in accordance with the laws of this state; or
   2. The financial condition, or the competence, experience, and integrity of the acquiring party or parties are such as will jeopardize the financial stability of the bank; or
   3. The public convenience and advantage will not be served by the acquisition.
2. As used in subsection (1) of this section, the term “control” means the power to directly or indirectly direct or cause the direction of the management or policies of the bank or trust company. A change in ownership of voting stock which would result in direct or indirect ownership by a stockholder or an affiliated group of stockholders of less than twenty-five percent (25%) of the outstanding voting stock shall not be considered a change of control. If there is any doubt as to whether a change in the outstanding voting stock 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 commissioner.
3. Whenever a bank makes a loan or loans, secured, or to be secured, by twenty-five percent (25%) or more of the outstanding voting stock of a bank, the president or other chief executive officer of the lending bank shall promptly report such fact to the commissioner upon obtaining knowledge of such loan or loans, except that no report need be made in those cases where the borrower has been the owner of record of the stock for a period of one (1) year or more, or the stock is that of a newly organized bank prior to its opening.
4. The reports required by subsections (1), (2), and (3) of this section shall contain the following information to the extent that it is known by the person making the report:
   1. The number of shares involved;
   2. The names of the sellers (or transferors);
   3. The names of the purchasers (or transferees);
   4. The names of the beneficial owners if the shares are registered in another name;
   5. The purchase price;
   6. The total number of shares owned by the seller (or transferors), the purchasers (or transferees) and the beneficial owners both immediately before and after the transaction; and in the case of a loan:
      1. The name of the borrower;
      2. The amount of the loan; and
      3. The name of the bank issuing the stock securing the loan and the number of shares securing the loan.

         In addition to the foregoing, such reports shall contain such other information as may be available to inform the commissioner of the effect of the transaction upon control of the bank or trust company whose stock is involved.

5. Whenever such a change as described in subsection (1) of this section occurs, each bank or trust company shall report promptly to the commissioner any changes or replacement of its chief executive officer or of any director occurring in the next twelve (12) month period, including in its report a statement of the past and current business and professional affiliations of the new chief executive officer or directors.

History. Enact. Acts 1970, ch. 209, § 4; 1984, ch. 324, § 10, effective July 13, 1984; 1996, ch. 338, § 9, effective July 15, 1996; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 621, effective July 15, 2010.

286.3-100. Investment of bank funds — Property that may be held.

A bank may:

1. Hold personal property that has been transferred to it as collateral for the payment of any debt;
2. Acquire and hold title to real estate, provided:
   1. The real estate is necessary or appropriate for the transaction of legitimate business; and
   2. The cost of the real estate, including furniture and fixtures, shall not exceed forty percent (40%) of the total paid-in capital, unimpaired surplus and undivided profits (determined on accrual basis). The investment may exceed the bank’s forty percent (40%) limit with prior written approval of the commissioner;
3. Acquire and hold for not longer than ten (10) years, any real estate conveyed to it in satisfaction of debts previously contracted in the course of its business, or that it may purchase under a judgment in its favor. A bank acquiring real estate in satisfaction of debts previously contracted in the course of business shall write down the acquisition at ten percent (10%) per year;
4. Invest in the bonds of any federal home loan bank;
5. Invest in obligations issued separately or collectively by or for federal land banks, federal intermediate credit banks and banks for cooperatives under the Act of Congress known as the Farm Credit Act of 1971, 85 Stat. 583, 12 U.S.C. sec. 2001 and amendments thereto;
6. Invest, subject to the approval of the commissioner, in the capital stock or bonds or both of any domestic realty corporation organized or existing for the sole purpose of acquiring and holding title to real property used by the bank, through lease or otherwise, for the transaction of the bank’s legitimate business;
7. Purchase, hold, and convey the shares of any open end registered investment company registered under the Investment Company Act of 1940, or a series of the company, whose shares are registered under the Securities Act of 1933 and whose investments are limited to:
   1. Bonds or other interest-bearing obligations of the United States, or those for the payment of the principal and interest on which the faith and credit of the United States is pledged;
   2. Stocks, bonds, or other interest-bearing or dividend-yielding obligations issued or guaranteed as to the payment of principal and interest or dividend by any instrumentality presently or hereafter incorporated by authority of an Act of Congress;
   3. General obligation bonds or revenue bonds issued and guaranteed as to payment of principal and interest by any state, county, or municipal governments legally authorized to issue these instruments of indebtedness;
   4. Any other obligations in which national banking associations organized under the laws of the United States are permitted to invest in directly;
8. Purchase and hold shares of a bank service corporation as that term is used in the Bank Service Corporation Act (12 U.S.C. sec. 1861 ) and any amendments thereto;
9. Invest in:
   1. Bonds or other interest-bearing obligations of the United States, or those for the payment of the principal and interest on which the faith and credit of the United States is pledged;
   2. Stocks, bonds, or other interest-bearing or dividend-yielding obligations issued or guaranteed as to the payment of principal and interest or dividend by any instrumentality presently or hereafter incorporated by authority of an Act of Congress;
   3. General obligation bonds or revenue bonds issued and guaranteed as to payment of principal and interest by any state, county, or municipal governments legally authorized to issue such instruments of indebtedness;
10. 1. Invest in other real estate in the bank’s generally accepted banking market. For purposes of this section, “the bank’s generally accepted banking market” means the geographic banking market at the time the investment is made as defined by the Federal Reserve Bank in the Federal Reserve District in which the bank is located. The investment shall not exceed ten percent (10%) of the bank’s actual paid-in capital and surplus, calculated at the time the investment is made, for each real estate investment; and (10) (a) Invest in other real estate in the bank’s generally accepted banking market. For purposes of this section, “the bank’s generally accepted banking market” means the geographic banking market at the time the investment is made as defined by the Federal Reserve Bank in the Federal Reserve District in which the bank is located. The investment shall not exceed ten percent (10%) of the bank’s actual paid-in capital and surplus, calculated at the time the investment is made, for each real estate investment; and
    2. Investment in other real estate not to exceed ten percent (10%) of the bank’s actual paid-in capital and surplus, calculated at the time the investment is made, for each real estate investment, if the bank has acquired the real estate in satisfaction of a debt previously contracted and the investment is for the purpose of improving the real estate for sale. Any real estate acquired in satisfaction of a debt previously contracted and improved by the bank shall be disposed of within five (5) years of the date of acquisition, with the commissioner authorized to extend the disposition upon written request of the bank for good cause shown on a year-to-year basis not exceeding an additional five (5) years;
11. Own or operate a discount brokerage service either through the bank or a bona fide subsidiary of the bank;
12. Own or operate a travel agency either through the bank or a bona fide subsidiary of the bank;
13. Invest, with the prior approval of the commissioner, in the capital stock or bonds of a trust company; and
14. Own or operate a courier service, either through the bank or a bona fide subsidiary of the bank, in any county where the bank has its principal office or a branch.
15. Except for real estate provided in subsection (3) of this section, acquire and hold for not more than one (1) year, or for an additional period allowed in writing by the commissioner, any assets taken as security for debts previously contracted in the ordinary course of business.

Investments in accordance with subsections (7) and (9) of this section are subject to KRS 286.3-280 and 286.3-290 . For purposes of computing the maximum investment of a bank in bonds, notes, and other investments, book value shall be used. For deep discount bonds or zero coupon bonds, accreted book value shall be used.

History. 582: amend. Acts 1960, ch. 153; 1966, ch. 77, § 1; 1970, ch. 209, § 5; 1974, ch. 382, § 1; 1976, ch. 107, § 1; 1982, ch. 251, § 7, effective April 1, 1982; 1984, ch. 324, § 11, effective July 13, 1984; 1986, ch. 351, § 1, effective July 15, 1986; 1986, ch. 444, § 6, effective July 15, 1986; 1986, ch. 472, § 2, effective July 15, 1986; 1992, ch. 77, § 2, effective July 14, 1992; 1996, ch. 338, § 10, effective July 15, 1996; 2000, ch. 279, § 3, effective July 14, 2000; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 622, effective July 15, 2010; 2010, ch. 28, § 10, effective July 15, 2010.

286.3-102. Activities permitted to state bank receiving CAMELS rating of 1 or 2 — Section not applicable to deferred deposit transactions or title pledge lending.

1. As used in this section, a CAMELS rating means a system of rating used by examiners of financial institutions to rate the institutions in six (6) categories: capital adequacy, asset quality, management effectiveness, quantity and quality of earnings, liquidity, and sensitivity to market risk.
2. In addition to all other banking activities permitted by this subtitle, a state bank receiving a CAMELS rating of 1 or 2 at its most recent state or federal bank regulatory examination may engage in any banking activity in which the bank could engage and is exempted from any statutes or administrative regulations which would be preempted if:
   1. It was operating as a national bank in Kentucky;
   2. It was operating as a state bank, state thrift, or state savings bank in any state; or
   3. It meets the qualified thrift lender test as determined by the Office of Thrift Supervision or its successor, or was operating as a federally chartered thrift or federal savings bank in any state.
3. Before a state bank may engage in any of the banking activities permitted by subsection (2) of this section, the state bank shall obtain a legal opinion specifying the statutory or regulatory provisions that permit the activity in which the state bank intends to engage and the conditions under which such activity is allowed. This legal opinion shall be maintained by the bank and provided to the department upon request.
4. This section shall not apply to exempt any laws which regulate Kentucky state banks pertaining to deferred deposit transactions in Subtitle 9 of this chapter, title pledge lending in Subtitle 10 of this chapter, visitorial or examination powers, and interest rates.

History. Enact. Acts 2000, ch. 279, § 1, effective July 14, 2000; 2006, ch. 183, § 7, effective July 12, 2006; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 623, effective July 15, 2010; 2010, ch. 28, § 11, effective July 15, 2010.

286.3-103. Investment in property.

1. It is hereby declared to be the policy of the Commonwealth of Kentucky that the investment of funds, by a bank chartered under the laws of Kentucky or a national banking association having its principal office in Kentucky, in real and personal property as now or hereafter provided by this subtitle, be recognized as a normal, proper, necessary, and integral part of the legitimate business of such state or national banks.
2. All property owned and held by a state or national bank under this section shall be deemed to be property that is proper and necessary for carrying out its legitimate business within the meaning of KRS Chapter 271B or 275, or any section of the Kentucky Revised Statutes relating to escheat.

History. Enact. Acts 1972, ch. 187, § 1; 1980, ch. 188, § 242, effective July 15, 1980; 1984, ch. 324, § 12, effective July 13, 1984; 1988, ch. 23, § 182, effective January 1, 1989; 1996, ch. 338, § 11, effective July 15, 1996; 1998, ch. 196, § 10, effective July 15, 1998; 2006, ch. 183, § 8, effective July 12, 2006; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-105. Bank may acquire and hold personal property at request of customer — Property deemed collateral. [Renumbered]

Subject to such limitations and conditions as the commissioner may from time to time prescribe by general regulations, any bank or trust company organized under the laws of this state may purchase, hold, and become the owner and lessor of personal property and may incur such additional obligations as may be incident to becoming an owner and lessor of such personal property, provided, however, that the net unrecovered investment of such bank or trust company in such personal property shall, for the purposes of KRS 286.3-280 only, be deemed to be an indebtedness of the lessee thereof, and such personal property shall be considered to be collateral securing such indebtedness.

History. Enact. Acts 1968, ch. 213, § 1; 1984, ch. 324, § 13, effective July 13, 1984; 1986, ch. 85, § 1, effective July 15, 1986; 1998, ch. 196, § 11, effective July 15, 1998; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-110. Investment of funds held in fiduciary capacity — Capital stock liable for fiduciary obligations. [Renumbered]

Funds held in a fiduciary capacity shall be invested under the order of the court, or in such manner as may be provided by law for the investment of other trust funds, and the capital stock shall be primarily liable for the obligations of the corporation in its fiduciary capacity.

History. 614: amend. Acts 1984, ch. 324, § 14, effective July 13, 1984; 1996, ch. 338, § 12, effective July 15, 1996; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-115. Capital notes and debentures may be issued — Conditions.

1. With the approval of the commissioner a bank or trust company may, at any time, by resolution of its board of directors, which resolution shall have been approved at a stockholders’ meeting by two-thirds (2/3) of the outstanding capital stock of the bank, issue and sell its capital notes or debentures in an amount not in excess of one hundred percent (100%) of its unimpaired paid-in capital stock plus fifty percent (50%) of its unimpaired surplus. The aggregate amount of such capital notes or debentures issued or sold by a bank or trust company shall be exempt from the limitations and restrictions on indebtedness, as may be provided in its articles of incorporation.
2. Such capital notes and debentures shall be subordinate to the claims of creditors and depositors, and shall be provided in any such capital notes or debentures that in the event of liquidation all depositors and other creditors of the bank shall be entitled to be paid in full, with such interest as may be provided by law, before any payment shall be made on account of principal of or interest on said capital notes or debentures, and may provide that after payment in full of all sums owing to such depositors and creditors the holders of such capital notes shall be entitled to be paid from the remaining assets of the bank, the unpaid principal amount of the capital notes or debentures, plus accrued and unpaid interest thereon, before any payment or other distribution, whether in cash, property or otherwise, shall be made on account of any capital stock of the bank.
3. The capital notes or debentures shall in no case be subject to any assessment. The holders of such capital notes or debentures shall not be liable for any debts, contracts, or engagements of such bank, nor for assessments to restore impairments in the capital of such bank, unless the holder is a stockholder in such bank.
4. Such capital notes or debentures issued or sold by a bank or trust company shall be considered as a portion of the capital and unimpaired surplus or capital structure of the issuing bank or trust company and shall be considered as such in determining the bank’s legal lending or investment limits, and for other purposes, when based upon the capital and unimpaired surplus of the bank or trust company; except that such capital notes and debentures shall not be considered in determining the amount of ad valorem taxes payable by the bank or trust company.
5. No such capital notes or debentures may be retired or paid by the bank or trust company if at the time of retirement or payment or immediately after, there be an existing deficiency of the bank’s or trust company’s capital stock, as determined by the commissioner.
6. No such capital notes or debentures shall be issued or sold by a bank or trust company except for cash, and no bank or trust company which issues such capital notes or debentures shall acquire or hold any of its capital notes or debentures in its own assets or in fiduciary capacity. Any of its own notes or debentures acquired by a bank contrary to the provisions of this section shall be forthwith disposed of by sale or charged to its undivided profits account.
7. Wherever the terms “capital,” “capital stock,” or “capital structure” are used in this section, they shall be construed to have reference only to capital actually paid in and capital stock actually issued.

History. Enact. Acts 1970, ch. 209, § 6; 1984, ch. 324, § 15, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 624, effective July 15, 2010.

286.3-135. Banker’s bank authorized — Limitations on holdings — Issuance of charter.

1. Notwithstanding any other provisions of law, any bank doing business in the Commonwealth, whether state or nationally chartered, may purchase for its own account shares of a bank or bank holding company which owns or controls such a bank provided:
   1. The stock of such bank or bank holding company is owned exclusively (except to the extent director’s qualifying shares are required by law) by depository institutions; and
   2. Such bank or bank holding company and all subsidiaries thereof are engaged exclusively in providing services for depository institutions, their parent companies, their subsidiaries, the officers, directors, and employees of each.
2. In no event shall the total amount of stock held by a bank in any bank or bank holding company described in subsection (1) above exceed at any time ten percent (10%) of a bank’s capital stock and paid in and unimpaired surplus and in no event shall the purchase of such stock result in a bank acquiring more than five percent (5%) of any class of voting securities of such bank or bank holding company.
3. The commissioner is authorized to receive applications, hold hearings on such applications, and issue charters for a banker’s bank.

History. Enact. Acts 1984, ch. 309, § 1, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 625, effective July 15, 2010.

286.3-140. Amendment of articles and reorganization to engage in a trust business — Consolidation — Transfer of fiduciary account to affiliate.

1. A bank may, with the consent of a majority in number and interest of its stockholders, amend its articles of incorporation or reorganize to permit it to engage in a trust business. The stock of the old corporation, if unimpaired, may be converted into stock in the new corporation.
2. Any bank or trust company may consolidate and the consolidated corporation shall issue stock for an equivalent amount in value of the stock of the constituent corporations.
3. Upon written approval of the commissioner, a bank or trust company may transfer one (1) or more fiduciary accounts under its administration to an affiliate of the trust company or bank, as defined in KRS 286.3-230 (6), located in the Commonwealth, if the transferring bank or trust company shall also:
   1. Not later than thirty (30) days prior to the date of the transfer of the fiduciary accounts, send written notice to the person or entity that was the recipient of the last report of the status of the account. The notice shall include notification of the recipient’s rights to object to the transfer in the probate division of District Court and shall be deemed effective when mailed by the bank or trust company; and
   2. Within ten (10) days after the date of a transfer of the fiduciary accounts, file an affidavit recording the transfer in the District Court, probate division, of the county in which its main office is located.

History. 612a, 883c-2: amend. Acts 1984, ch. 324, § 16, effective July 13, 1984; 1996, ch. 338, § 13, effective July 15, 1996; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 626, effective July 15, 2010.

286.3-145. Kentucky state trust company — Scope of activities — Acquisition of office within or outside of this state by Kentucky state trust company — Rights, privileges, obligations, and liabilities of selling trust company.

1. A Kentucky state trust company:
   1. May, at its trust office or offices in Kentucky or any other state or foreign country, act as a fiduciary and engage in trust business as permitted by Kentucky law or the applicable law of the state or foreign country; and
   2. May not, at its trust representative office or offices in Kentucky or any other state or foreign country, act as a fiduciary, but it may otherwise engage in other fiduciary related activities, including but not limited to marketing, soliciting, and operating through the trust representative office as permitted by this section.
2. A Kentucky state trust company may conduct any activities at an office outside of this state that are permissible for a trust company chartered by the host state where the office of the Kentucky state trust company is located, except to the extent the activities are expressly prohibited by the laws of Kentucky or by any applicable law of the host state or foreign country.
3. A Kentucky state trust company shall have and continuously maintain a principal office in this state.
4. A Kentucky state trust company may establish or acquire and maintain trust offices or trust representative offices in this state. A Kentucky state trust company desiring to establish or acquire and maintain an office in this state shall:
   1. File a written notice on a form prescribed by the commissioner setting forth the following:
      1. The name of the Kentucky state trust company;
      2. The location of the proposed office or offices; and
      3. The designation of the additional office or offices as trust offices or trust representative offices;
   2. Furnish the commissioner with a copy of the resolution adopted by the board of directors authorizing the office;
   3. Pay the filing fee, if any, prescribed by the commissioner;
   4. Commence business at the office no sooner than thirty-one (31) days after the date the commissioner receives notice as specified by paragraph (a) of this subsection, unless the commissioner specifies an earlier or later date. The thirty (30) day period of review may be extended by the commissioner if he or she determines the notice raises issues that require additional information or additional time for analysis. If the period of review is extended, the Kentucky state trust company may establish or acquire and maintain the additional office only on prior written approval by the commissioner. The commissioner may deny approval of the additional office if the commissioner finds that:
      1. The Kentucky state trust company lacks sufficient financial resources to undertake the proposed expansion without adversely affecting its safety or soundness;
      2. The proposed office would be contrary to the public interest; or
      3. The proposed expansion is not authorized by applicable law.
5. A Kentucky state trust company may establish or acquire and maintain a trust office or a trust representative office in a state other than this state. A Kentucky state trust company desiring to establish or acquire and maintain an office in another state shall:
   1. File a written notice on a form prescribed by the commissioner setting forth the following:
      1. The name of the Kentucky state trust company;
      2. The location of the proposed office or offices;
      3. The designation of the additional office or offices as trust offices or trust representative offices; and
      4. An affirmation that the laws of the jurisdiction where the office will be located permit the office to be maintained by the trust company;
   2. Furnish the commissioner with a copy of the resolution adopted by the board of directors authorizing the out-of-state office;
   3. Pay the filing fee, if any, prescribed by the commissioner; and
   4. Commence business at the office no sooner than thirty-one (31) days after the date the commissioner receives notice as specified by paragraph (a) of this subsection unless the commissioner specifies an earlier or later date. The thirty (30) day period of review may be extended by the commissioner if he or she determines the notice raises issues that require additional information or additional time for analysis. If the period of review is extended, the Kentucky state trust company may establish or acquire and maintain the additional office only on prior written approval by the commissioner. The commissioner may deny approval of the additional office if the commissioner finds that:
      1. The Kentucky state trust company lacks sufficient financial resources to undertake the proposed expansion without adversely affecting its safety or soundness;
      2. The proposed office would be contrary to the public interest; or
      3. The proposed expansion is not authorized by applicable law.
6. A Kentucky state trust company acquiring an office in this state or in any other state shall provide evidence to the commissioner that all fiduciary obligations and liabilities of the trust company being acquired have been properly discharged or assumed. An acquiring trust company shall succeed by operation of law to all of the rights, privileges, and obligations of the selling trust company.

History. Enact. Acts 2011, ch. 67, § 3, effective June 8, 2011.

286.3-146. Out-of-state trust company doing business in Kentucky — Scope of activities — Fiduciary-related activities limited by reciprocity — Evidence and notice to be provided to commissioner.

1. An out-of-state trust company may establish or acquire and maintain a trust office or a trust representative office in this state only if trust companies chartered under the laws of Kentucky are permitted to establish or acquire and maintain offices, and engage in substantially similar activities permissible for out-of-state trust companies as established in KRS 286.3-145 , in the state where the out-of-state trust company has its principal office. An out-of-state trust company that establishes or acquires and maintains a trust office or trust representative office in Kentucky pursuant to this section may conduct any activity in Kentucky that would be authorized under the laws of this state for a Kentucky state trust company.
2. An out-of-state trust company:
   1. May, at its trust office or offices in Kentucky, act as a fiduciary in Kentucky, and may conduct any activity at the trust office or offices that would be authorized under the laws of this state for a Kentucky state trust company; and
   2. May not, at its trust representative office or offices in Kentucky, act as a fiduciary, but it may otherwise engage in other fiduciary related activities including but not limited to marketing, soliciting, and operating through the trust representative office, but only to the extent the home state of the out-of-state trust company permits trust companies chartered in Kentucky to engage in similar activities in the other state.
3. An out-of-state trust company shall have and continuously maintain a trust office or trust representative office in this state.
4. 1. An out-of-state trust company desiring to establish or acquire and maintain a trust office in this state shall: (4) (a) An out-of-state trust company desiring to establish or acquire and maintain a trust office in this state shall:
      1. Provide, or cause its home state regulator to provide, on a form prescribed by the commissioner written notice of the proposed transaction. This form shall be provided to the commissioner on or after the date on which the out-of-state trust company applies for approval to establish or acquire and maintain an office in this state. The written notice shall set forth:
         1. The name of the out-of-state trust company;
         2. The location of the proposed office or offices; and
         3. The designation of the additional office or offices as trust offices or trust representative offices;
      2. Furnish the commissioner with a copy of the resolution adopted by the board of directors of the out-of-state trust company authorizing the office;
      3. Pay the filing fee, if any, prescribed by the commissioner;
      4. Commence business at the trust office no sooner than sixty-one (61) days after the date the commissioner receives the notice specified by this subsection, unless the commissioner specifies an earlier or later date. With respect to an out-of-state trust company that is not a depository institution and for which the commissioner shall have conditioned approval upon satisfaction by the out-of-state trust company of any requirement applicable to a Kentucky state trust company, the out-of-state trust company must have satisfied those conditions and provided the commissioner with satisfactory evidence thereof. The sixty (60) day period of review may be extended by the commissioner if he or she determines the written notice raises issues that require additional information or additional time for analysis. If the period of review is extended, the out-of-state trust company may establish or acquire and maintain the office only on prior written approval of the commissioner. The commissioner may deny approval of the office if the commissioner finds that:
         1. The out-of-state trust company lacks sufficient financial resources to undertake the proposed expansion without adversely affecting its safety or soundness;
         2. The proposed office is contrary to the public interest; or
         3. The proposed expansion is not authorized under applicable law.
5. An out-of-state trust company acquiring an office shall:
   1. Provide evidence to the commissioner of compliance with:
      1. Requirements of the trust company’s home state regulator and home state law for establishing or acquiring and maintaining the office; and
      2. Requirements to qualify as a foreign corporation under KRS Chapter 271B; and
   2. Provide evidence to the commissioner that all fiduciary obligations and liabilities of the trust company being acquired have been properly discharged or assumed. An acquiring trust company shall succeed by operation of law to all of the rights, privileges, and obligations of the selling trust company.

      Fulfillment of the requirements of this subsection shall not result in the establishment of an office of an out-of-state trust company in Kentucky until the commissioner, acting within sixty (60) days after receiving notice pursuant to this subsection, has certified to the home state regulator of the proposed out-of-state trust company that the requirements of this section have been met and the notice has been approved or, if applicable, that any conditions imposed by the commissioner pursuant to this subsection have been satisfied.

6. An out-of-state trust company that establishes or acquires and maintains an office in this state shall confirm in writing to the commissioner prior to commencing to do business in this state, and at least annually thereafter, that for so long as it maintains a trust office or trust representative office in this state it will comply with all applicable laws of this state.

History. Enact. Acts 2011, ch. 67, § 4, effective June 8, 2011.

286.3-150. Consolidation of trust companies — Method and effect. [Renumbered]

1. If any two (2) or more trust companies consolidate the separate existence of each corporation shall not cease, but shall continue.
2. The management of the consolidated corporation and the constituent corporations shall be in the directors and officers of the consolidated corporation.
3. All powers and duties, at the time of consolidation or thereafter imposed upon either of the constituent companies, may be performed by the consolidated corporation in its own name or in the name of the constituent company upon which such powers and duties were imposed, or by the constituent company upon which the powers and duties were imposed; but in every case the consolidated corporation shall be liable for the proper performance of such duty and the proper exercise of such power.

History. 603a-1, 603a-2: renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-160. State bank may reorganize as national bank. [Renumbered]

Any state bank desiring to reorganize under the laws of the United States as a national bank may, after its dissolution, and as soon as it obtains authority from the comptroller of the currency to commence business, retain any of the assets, real or personal, which it acquired as a state bank, subject to all liabilities existing against the bank at the time of its reorganization.

History. 588: renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-170. National bank may reorganize as state bank. [Renumbered]

Whenever any national bank is authorized to dissolve, a majority of the directors of the bank, upon authority in writing of the owners of two-thirds (2/3) of its capital stock, may organize a state bank. The articles of incorporation shall include a statement of the authority derived from the stockholders of the dissolved bank. All assets, real and personal, of such bank shall be vested in and become the property of the state bank, subject to all liabilities existing against the bank at the time of its reorganization.

History. 589: renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-172. Conditions of and procedure for conversion of national banking association to state bank or merger with state bank.

1. A national banking association may convert into or merge with a state bank under a state charter, provided that the action taken complies with federal law.
2. In the case of each conversion, a written plan of conversion shall be submitted, in duplicate, to the commissioner. Such plan shall be in form satisfactory to the commissioner, shall prescribe the terms and conditions of the conversion and the mode of carrying it into effect, and shall have annexed thereto and forming a part thereof the proposed articles of incorporation of the state bank which is to result from the conversion. Such articles of incorporation shall be in the form prescribed by law for the organization of state banks, with such variations, if any, as shall be satisfactory to the commissioner. With such plan of conversion there shall be submitted, in duplicate, to the commissioner a certificate of the president, secretary, or cashier of the national banking association certifying that all steps have been taken which are necessary under federal law to the consummation of the conversion. The commissioner shall approve or disapprove such plan of conversion within sixty (60) days of the submission thereof to him. In considering the approval or disapproval of the conversion plan the commissioner shall take into account:
   1. Any pending administrative or judicial action to which the bank or any officer or director of the bank is a party;
   2. The performance of the converting national bank for the five (5) years preceding the application for conversion as compared to similarly situated state-chartered banks; and
   3. The proposed name of the bank after conversion which shall not be the same as or deceptively similar to any existing state-chartered bank. If the commissioner shall approve such plan, he shall file one (1) duplicate thereof, together with one (1) duplicate of such certificate submitted therewith and the original of the approval of the commissioner, in the office of the commissioner. After such filing in the office of the commission, the conversion shall become effective upon the filing and recording of the articles of incorporation as provided in KRS 286.3-050 , unless a later date is specified in the plan, in which event the conversion shall become effective upon such later date. If the commissioner shall disapprove the conversion plan, he shall state his reasons for such disapproval in writing to which the converting national bank shall have the right of appeal as permitted by law.
3. In the case of each merger, a written plan of merger shall be submitted, in duplicate, to the commissioner. Such plan shall be in form satisfactory to the commissioner and shall prescribe the terms and conditions of the merger and the mode of carrying it into effect. Such plan may provide the name to be borne by the state bank, as receiving corporation, if such name is to be changed. Such plan may also name the persons who shall constitute the first board of directors of the state bank after the merger shall have been accomplished, provided that the number and qualifications of such person shall be in accordance with the provisions of Subtitle 3 of KRS Chapter 286 relating to the number and qualifications of directors of a state bank; or such plan may provide for a meeting of the stockholders to elect a board of directors within sixty (60) days after such merger, and may make provision for conducting the affairs of the state bank meanwhile. With such plan of merger there shall be submitted, in duplicate, to the commissioner the following:
   1. By the national banking association, a certificate of the president, secretary, or cashier of such association certifying that all steps have been taken which are necessary under federal law to the consummation of their merger;
   2. By the state bank, a certificate of the president, secretary, or cashier certifying that such plan of merger has been approved by the board of directors of the state bank by a majority vote of all the members thereof, that such plan has been submitted to the stockholders of the state bank at a meeting thereof held; upon notice of at least fifteen (15) days, specifying the time and place and object of such meeting and addressed to each stockholder at the address appearing upon the books of the state bank and published pursuant to KRS Chapter 424, and that such plan of merger has been approved at such meeting by the vote of the stockholders owning at least two-thirds (2/3) in amount of the stock of the state bank.
4. The commissioner shall approve or disapprove such plan of merger within sixty (60) days of such submission thereof to him. If the commissioner shall approve such plan, he shall file one (1) duplicate thereof, together with one (1) duplicate of each of such certificates and the original of the approval of the commissioner, in the office of the commissioner. Upon such filing in the office of the commissioner, the merger shall become effective, unless a later date is specified in the plan, in which event the merger shall become effective upon such later date.
5. At the time when such conversion or merger becomes effective:
   1. The resulting state bank shall be considered the same business and corporate entity as the national banking association, although as to rights, powers, and duties, the resulting bank is a state bank;
   2. All of the property, rights, and powers and franchises of the national banking association shall vest in the resulting state bank and the resulting state bank shall be subject to and deemed to have assumed all of the debts, liabilities, obligations, and duties of the national banking association and to have succeeded to all of its relationships, fiduciary or otherwise, as fully and to the same extent as if such property, rights, powers, franchises, debts, liabilities, obligations, duties, and relationships had been originally acquired, incurred, or entered into by the resulting state bank; provided, however, that the resulting state bank shall not, through such conversion or merger, acquire power to engage in any business or to exercise any right, privilege, or franchise which is not conferred by the provisions of Subtitle 3 of KRS Chapter 286 upon such resulting state bank;
   3. Any reference to the national banking association in any contract, will, or document, whether executed or taking effect before or after the conversion or merger, shall be considered a reference to the resulting state bank if not inconsistent with the other provisions of the contract, will, or document;
   4. A pending action or other judicial proceeding to which the national banking association is a party, shall not be deemed to have abated or to have discontinued by reason of the conversion or merger, but may be prosecuted to final judgment, order, or decree in the same manner as if the conversion or merger had not been made; or the resulting state bank may be substituted as a party to such action or proceeding, and any judgment, order, or decree may be rendered for or against it that might have been rendered for or against the national banking association if the conversion or merger had not occurred.

History. Enact. Acts 1952, ch. 222, § 2; 1966, ch. 239, § 200; 1980, ch. 192, § 1, effective July 15, 1980; 2000, ch. 135, § 2, effective July 14, 2000; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 627, effective July 15, 2010; 2010, ch. 28, § 12, effective July 15, 2010.

286.3-173. Conversion of state bank to or merger with national banking association. [Renumbered]

1. A state bank may convert into, or merge or consolidate with, a national banking association under the charter of a national banking association in the manner provided by federal law and without approval of any state authority.
2. The franchise of a state bank as a state bank shall automatically terminate when its conversion into or its merger or consolidation with a national banking association under a federal charter is consummated and the resulting national banking association shall be considered the same business and corporate entity as the state bank, although as to rights, powers and duties the resulting bank is a national banking association.
3. At the time when such conversion, merger or consolidation becomes effective:
   1. All of the property, rights, powers and franchises of the state bank shall vest in the national banking association and the national banking association shall be subject to and be deemed to have assumed all of the debts, liabilities, obligations and duties of the state bank and to have succeeded to all of its relationships, fiduciary or otherwise, as fully and to the same extent as if such property, rights, powers, franchises, debts, liabilities, obligations, duties and relationships had been originally acquired, incurred or entered into by the national banking association;
   2. Any reference to the state bank in any contract, will or document, whether executed or taking effect before or after the conversion, merger or consolidation, shall be considered a reference to the national banking association if not inconsistent with the other provisions of the contract, will or document;
   3. A pending action or other judicial proceeding to which the state bank is a party, shall not be deemed to have abated or to have discontinued by reason of the conversion, merger or consolidation, but may be prosecuted to final judgment, order or decree in the same manner as if the conversion, merger or consolidation had not been made; or the national banking association may be substituted as a party to such action or proceeding, and any judgment, order or decree may be rendered for or against it that might have been rendered for or against the state bank if the conversion, merger or consolidation had not occurred.

History. Enact. Acts 1952, ch. 222, § 3, effective March 21, 1952; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-174. Provisions of KRS 286.3-172 and 286.3-173 to constitute alternative method — Legislative purpose declared. [Renumbered]

The methods and procedures set out in KRS 286.3-172 and 286.3-173 are authorized in addition to any other methods or procedures for the accomplishment of the same or similar purposes which heretofore may have been established by law. It is the purpose of KRS 286.3-172 , 286.3-173 and this section to make effective in this Commonwealth the provisions and purposes of the Act of Congress dated August 17, 1950, which is compiled as Chapter 729 of Volume 64 of the United States Statutes, and as 12 U.S.C.A. sec. 214.

History. Enact. Acts 1952, ch. 222, § 4, effective March 21, 1952; 1984, ch. 111, § 124, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-180. Banking business, where done — Branch banks.

1. Banks authorized under the laws of this state may, except as provided in subsections (2) or (3) of this section, exercise, only at their principal office, powers necessary to carry on the business of banking by discounting and negotiating notes, drafts, bills of exchange, and other evidences of debt, and by purchasing bonds, receiving deposits and allowing interest on these items, buying and selling exchange, coin, and bullion, and lending money on personal or real security.
2. A bank may establish or acquire within any state, the District of Columbia, or a territory of the United States a branch and may exercise all of the powers conferred in subsection (1) of this section at the branch. A bank, except for a bank that the commissioner may designate by the promulgation of administrative regulations, shall apply to the commissioner for permission to establish or acquire a branch. Before the commissioner shall approve or disapprove any application made under this subsection, the commissioner shall ascertain and determine that the public convenience and advantage will be served and promoted and that there is reasonable probability of the successful operation of the branch based upon the financial and managerial impact of the branch on the bank establishing or acquiring the branch. The following conditions shall apply to applications for branches:
   1. The permission to open a branch shall lapse one (1) year after the commissioner has rendered a final order as defined in KRS 13B.010 , unless it shall have been opened and business actually begun in good faith. If, for reasons beyond the control of the applicant, the branch is not opened within this time period, permission to open the branch may, with the approval of the commissioner, be extended for any period of time the commissioner deems to be necessary; and
   2. An application to establish or acquire a branch office shall be approved or disapproved by the commissioner based upon the facts existing at the date of filing of the application, except for the financial condition of the bank proposing to establish a branch office, which condition shall be subject to review until an order ruling on the application is made.
3. Any corporation which on January 1, 1966, was engaged in operating a branch bank may continue to retain and operate the branch bank under the general banking laws, and the requirements set forth in this section in respect to capital shall not apply to any existing branch bank but only as to those branch banks which may be established in the future in accordance with the terms of this section.
4. The provisions of this section shall not be construed to prohibit the merger of banks in the same county and the operation by the merged corporation of the banks, nor to prohibit the sale of any bank to, and the purchase by, any other bank in the same county and the operation of the bank by the purchasing bank as a branch, provided the commissioner shall determine that the public convenience and necessity will be served by the operation. The bank which does not survive the merger shall surrender its charter.
5. Any national banking association or any state bank member of the Federal Reserve system whose principal office is located in this state may do all things and perform all acts which state banks are permitted to do or perform under this section, subject to the conditions and restrictions provided for banks as to exercise of these powers.
6. When a branch bank has once been established, any operation of the branch bank shall not be discontinued, and the branch bank shall not be closed until after ninety (90) days’ notice in writing to the commissioner. In the discretion of the commissioner, the branch bank proposing to discontinue operation may be required to give notice of the date when its operation will cease. The consolidation of two (2) or more branches into a single location in the same vicinity or immediate neighborhood shall not be considered a branch closure subject to the provisions of this subsection.

History. 579: amend. Acts 1954, ch. 182, § 1; 1962, ch. 252; 1966, ch. 11, § 2; 1976, ch. 234, § 3; 1982, ch. 366, § 1, effective July 15, 1982; 1984, ch. 324, § 17, effective July 13, 1984; 1986, ch. 444, § 7, effective July 15, 1986; 1990, ch. 73, § 1, effective July 13, 1990; 1996, ch. 318, § 215, effective July 15, 1996; 1996, ch. 338, § 14, effective July 15, 1996; 2000, ch. 135, § 1, effective July 14, 2000; 2000, ch. 279, § 4, effective July 14, 2000; 2001, ch. 112, § 1, effective June 21, 2001; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 628, effective July 15, 2010; 2010, ch. 28, § 13, effective July 15, 2010.

286.3-183. Transfer of branches between commonly controlled banks. [Renumbered]

1. An individual or bank holding company that controls two (2) or more banks in the state may, from time to time, transfer all the branches in a county of one (1) of the commonly controlled banks to any other of the commonly controlled banks in this state, and the bank to which the branches are transferred may thereafter operate the branches as branches of the bank.
2. As used in this section, the terms “bank,” “bank holding company,” “controls,” and “individual” have the same meaning attributed to them in KRS 286.3-915 (3).

History. Enact. Acts 1996, ch. 338, § 3, effective July 15, 1996; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-185. Change of location — Approval by commissioner.

A bank may move its principal office or a branch from one (1) location to another. A bank, except for a bank that the commissioner may designate through the promulgation of administrative regulations, shall apply to the commissioner for approval to relocate its principal office or a branch. Before the commissioner shall approve or disapprove any change of location, he shall ascertain and determine that the public convenience and advantage will be served and promoted and that there is a reasonable probability of the successful operation of the branch or principal office at the new location. The relocation of a branch within the same vicinity or immediate neighborhood that does not substantially affect the nature of the business or customers served shall not be considered a branch closure subject to the provisions of KRS 286.3-180 (6).

History. Enact. Acts 1976, ch. 234, § 6; 1986, ch. 444, § 8, effective July 15, 1986; 1990, ch. 73, § 2, effective July 13, 1990; 2000, ch. 279, § 5, effective July 14, 2000; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 629, effective July 15, 2010; 2010, ch. 28, § 14, effective July 15, 2010.

286.3-187. Bank acting as agent of another financial institution — Filing — Commissioner’s approval — Scope of activities.

1. Except as set forth in subsection (7) of this section, with prior approval of the commissioner and upon compliance with the requirements of this section, any state bank may agree to receive deposits, renew time deposits, close loans, service loans, receive payments on loans and other obligations, and perform other services as may be authorized by administrative regulations, as an agent for any national bank, savings and loan, or savings bank having its principal office in Kentucky or any state bank.
2. A state bank that proposes to enter into an agency agreement under this section shall file with the commissioner, at least thirty (30) days before the effective date of the agreement:
   1. A notice of intention to enter into an agency agreement with a national bank, savings and loan, or savings bank having its principal office in Kentucky or a state bank;
   2. A description of the services to be performed under the agency agreement; and
   3. A copy of the agency agreement.
3. The commissioner shall decide whether to approve the agency agreement within thirty (30) days of the receipt of the notice required by subsection (2) of this section; except if the commissioner requests additional information after receiving such notice, the time limit for the commissioner’s decision shall be thirty (30) days after receiving the additional information.
4. The commissioner may order a state bank to cease acting as an agent or principal under any agency agreement with a state bank or a national bank, savings and loan, or savings bank having its principal office in Kentucky that the commissioner finds to be inconsistent with safe and sound banking practices.
5. A state bank acting as an agent for a state bank or a national bank, savings and loan, or savings bank having its principal office in Kentucky in accordance with this section shall not be considered to be a branch of that institution.
6. Except as set forth in subsection (7) of this section, a state bank may act as an agent for a national bank, savings and loan, or savings bank having its principal office outside Kentucky to the same extent it could act were it operating as a national bank at the time.
7. Nothing in this section authorizes a state bank to conduct any activity as an agent under this section which the bank is not permitted to conduct as a principal under any applicable federal or state law.

History. Enact. Acts 1996, ch. 338, § 1, effective July 15, 1996, retroactive to September 29, 1995; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 630, effective July 15, 2010.

286.3-190. Powers of banks. [Renumbered]

Any bank may accept for payment at a future date drafts or bills of exchange drawn upon it by its customers, issue letters of credit authorizing the holders thereof to draw drafts upon it or its correspondents at sight or on time, and accept or discount acceptances.

History. 579: amend. Acts 1982, ch. 251, § 8, effective April 1, 1982; 1984, ch. 324, § 18, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-193. Bank holidays. [Renumbered]

1. The first day of January (New Year’s Day), Easter Sunday, the last Monday in May (Memorial Day), the fourth day of July (Independence Day), the first Monday in September (Labor Day), the fourth Thursday in November (Thanksgiving Day), and the twenty-fifth day of December (Christmas) of each year are holidays on which banks shall close. If New Year’s Day, Independence Day, or Christmas falls on a Saturday or Sunday, either the preceding Friday or the succeeding Monday shall also be observed as a holiday and the offices of banks closed.
2. Except as provided in subsection (1) of this section, a bank may, at its option, either close or remain open for business on any day of the week provided the days of the week and the hours which an office of the bank will remain open are conspicuously posted in that office.
3. A bank, or an office thereof, may, because of an emergency or any other reason deemed sufficient by the bank, close on any day or days which it would normally be open for business by giving five (5) business days’ notice of the closing to the public by posting a statement to that effect in a conspicuous place in the office of the bank which will be closed unless the giving of the notice is impractical because of the existence of an emergency or other condition.
4. Any day on which a bank is closed pursuant to the provisions of this section shall not be a banking day of the bank within the meaning of KRS Chapter 355 or any other law, and no bank shall be required to permit access to its safe deposit vaults on that day. When a contract by its terms requires the payment of money or the performance of a condition by or at the bank on a day when the bank is closed, the payment shall be made or condition performed on the next business day succeeding the day when the bank was closed. The payment shall be deemed made and the condition performed with the same force and effect as if made in accordance with the terms of the contract, and no liability or loss of rights shall result from the delay.

History. Enact. Acts 1992, ch. 77, § 16, effective July 14, 1992; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-199. Closing of banks — Emergency.

1. As used in this section, unless the context requires otherwise:
   1. “Commissioner” means the commissioner of financial institutions and any other person lawfully exercising the powers of the commissioner.
   2. “Officers” means the person or persons designated by the board of directors of a bank to act for the bank in carrying out the provisions of this section.
   3. “Emergency” means any condition which interferes with the conduct of normal business operations at one (1) or more or all offices of a bank or banks, or which poses an imminent or existing threat to the safety and security of persons or property, or both. Without limiting the generality of the foregoing an emergency may arise as a result of any one (1) or more of the following: fire, flood, wind, rain or snowstorms, labor disputes, power failures, transportation failures, war and riots, civil commotions, and other acts of lawlessness or violence.
   4. “Office” means any place at which a bank transacts business or conducts operations related to the transaction of business.
   5. “Person” includes natural persons, corporations, partnerships and associations.
2. Whenever the commissioner is of the opinion that an emergency exists in this state or in any part or parts of this state, the commissioner shall, by proclamation, authorize those banks which, in the opinion of their officers, are directly or indirectly affected by such emergency to close one (1) or more or all their offices.
3. Whenever the officers of a bank are of the opinion that an emergency exists which affects one (1) or more or all the bank’s offices, they shall have authority to close one (1) or more or all such offices even though the commissioner has not issued a proclamation of emergency, and they may provide that the business normally transacted at a closed office will be transacted at another office designated by the bank until further notice. The office or offices so closed shall remain closed until the commissioner proclaims that the emergency has ended, or until such earlier time as the officers of the bank determine that one (1) or more offices, theretofore closed because of the emergency, should reopen, or, if the commissioner has issued no proclamation of emergency, until the officers of the bank determine that such office or offices should reopen. The discretion of the officers in acting pursuant to this section, when exercised in good faith, shall not be questioned in any court or place.
4. A bank closing an office or offices pursuant to this section shall give prompt notice to the commissioner as conditions will permit.
5. No bank and no director, officer or employee of a bank shall be liable to any person for any direct or indirect loss suffered by reason of the bank’s failure or inability to make access to the bank’s premises and facilities available to such person or by reason of the bank’s failure or delay in performing any contractual, statutory or other duty assumed by or imposed upon the bank in any capacity when such failure, inability or delay is caused by an emergency as defined by this section. The immunity from liability provided for herein shall endure during the period of such emergency and for such time thereafter as may reasonably be necessary to afford such access or perform such duty.
6. The provisions of this section shall be construed and applied as being in addition to any other law of this state or United States excusing delays by banks in the performance of duties or obligations, or authorizing the closing of banks because of emergencies or conditions beyond the bank’s control, or otherwise.
7. The commissioner may make such orders and regulations, not inconsistent with this section, as he or she shall deem necessary during an emergency to provide for the uninterrupted continuance of business by banks to the extent consistent with the safety and security of persons and property.

History. Enact. Acts 1972, ch. 111, § 1; 1984, ch. 324, § 20, effective July 13, 1984.; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 631, effective July 15, 2010.

286.3-200. Certain banks may continue to act as fiduciaries. [Renumbered]

Any bank which obtained a permit prior to May 31, 1938 to act as a fiduciary under the Act of 1920, Chapter 128, may continue to act as a fiduciary under that act.

History. 598b-1 to 598b-3: renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-210. Powers of banks or trust companies. [Renumbered]

Any bank or trust company organized under the laws of this state may:

1. Be appointed and act as guardian of infants, executors, administrator or curator of estates of decedents, guardian or conservator of persons adjudged mentally disabled, receiver or trustee for persons or estates;
2. Act as agent for the transaction of any business or the management of estates, the collection of rents, accounts, interest, dividends, notes, bonds, securities for money and debts, and demands of every character;
3. Receive on deposit and for safekeeping, gold, silver, jewelry, money and other personal property of every kind, and shall have a lien upon all personal property deposited with it for its charge.

History. 606: amend. Acts 1982, ch. 141, § 82, effective July 1, 1982; 1984, ch. 324, § 21, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-212. Deposit of securities with district federal reserve bank by bank acting as fiduciary or custodian for fiduciary — Accounting and crediting of deposits.

1. Notwithstanding any other provision of law, any bank, when acting as a fiduciary or when holding securities as custodian for a fiduciary, is authorized to deposit, or arrange for the deposit, with the federal reserve bank in its district of any securities, the principal and interest of which the United States or any department, agency or instrumentality thereof has agreed to pay, or has guaranteed payment, to be credited to one (1) or more accounts on the books of said federal reserve bank in the name of such bank, to be designated fiduciary for safekeeping accounts, to which account other similar securities may be credited. A bank so depositing securities with a federal reserve bank shall be subject to such rules and regulations with respect to the making and maintenance of such deposit as, in the case of a bank organized under the laws of this state, the commissioner, and, in the case of the national banking associations, the comptroller of the currency, may from time to time issue. The records of such bank shall at all times show the ownership of the securities held in such account. Ownership of, and other interests in, the securities credited to such account may be transferred by entries on the books of said federal reserve bank without physical delivery of any securities. A bank acting as custodian for a fiduciary shall, on demand by the fiduciary, certify in writing to the fiduciary the securities so deposited by such bank with such federal reserve bank for the account of such fiduciary. A fiduciary shall, on demand by any party, to its accounting or on demand by the attorney for such party, certify in writing to such party the securities deposited by such fiduciary with such federal reserve bank for its account as such fiduciary.
2. This section shall apply to any fiduciary, and any custodian for fiduciaries, acting on June 21, 1974, or who thereafter may act regardless of the date of the agreement, instrument or court order by which it is appointed.
3. As used in this section, “fiduciary” includes an executor, administrator, trustee under any trust, express, implied, resulting or constructive, guardian, conservator, receiver, trustee in bankruptcy, assignee for the benefit of creditors, partner, agent, officer of a corporation, public or private, public officer or any other person acting in a fiduciary capacity for any person, trust or estate.

History. Enact. Acts 1974, ch. 193, § 1; 1982, ch. 141, § 83, effective July 1, 1982; 1984, ch. 324, § 22, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 632, effective July 15, 2010.

286.3-214. Rate of interest allowed on loans of $15,000 or less — Trust company not to extend credit — Exception. [Renumbered]

Notwithstanding the provisions of any other law, a bank may take, receive, reserve, and charge on money due or to become due on any contract or other obligation in writing, where the original principal amount is fifteen thousand dollars ($15,000) or less, interest at any rate allowed national banking associations by the laws of the United States of America. A trust company shall not make any extensions of credit on its own account, but may make extensions of credit for trust assets under management.

History. Enact. Acts 1979 (Ex. Sess.), ch. 17, § 1, effective February 13, 1979; 1984, ch. 324, § 23, effective July 13, 1984; 1998, ch. 196, § 12, effective July 15, 1998; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-215. Authority to charge interest in advance — Installment loans with interest in advance — Exceptions — Restrictions on installment loans. [Renumbered]

1. 1. In addition to the powers heretofore granted, any bank or trust company or combined bank and trust company shall have the power to lend money repayable in installments; to charge or to receive in advance interest therefor in the case of a loan having a maximum maturity of not more than five (5) years and thirty-two (32) days; to contract for a charge for a secured or unsecured installment loan, and which under its terms shall be repayable in installments over a period of not exceeding ten (10) years and thirty-two (32) days, which charge shall be at a rate not exceeding eight dollars ($8) per one hundred dollars ($100) per annum upon the principal amount of the loan which charge or charges shall be for the entire period of the loan and may be collected in advance only if the maximum maturity of the loans does not exceed five (5) years and thirty-two (32) days. (1) (a) In addition to the powers heretofore granted, any bank or trust company or combined bank and trust company shall have the power to lend money repayable in installments; to charge or to receive in advance interest therefor in the case of a loan having a maximum maturity of not more than five (5) years and thirty-two (32) days; to contract for a charge for a secured or unsecured installment loan, and which under its terms shall be repayable in installments over a period of not exceeding ten (10) years and thirty-two (32) days, which charge shall be at a rate not exceeding eight dollars ($8) per one hundred dollars ($100) per annum upon the principal amount of the loan which charge or charges shall be for the entire period of the loan and may be collected in advance only if the maximum maturity of the loans does not exceed five (5) years and thirty-two (32) days.
   2. If the maturity of the loan exceeds five (5) years and thirty-two (32) days but does not exceed ten (10) years and thirty-two (32) days the charge of interest may not be discounted or received in advance but may be added on to the principal amount of the loan and shall not be discounted.
   3. If any scheduled payment or deferred payments are more than twice as large as the average of the earlier scheduled payments, the debtor and creditor shall agree that the debtor has the right to finance the amount of such payment or deferred payments at the time they are due without penalty. The terms of the refinancing which are agreed to by the debtor and the creditor shall be no less favorable to the debtor than the terms of the original loan.
2. In addition to the charge permitted by this section, no further amount shall be directly or indirectly charged, contracted for, or received on any such installment loan, except lawful fees actually paid to a public officer for filing, recording, or releasing any instrument securing the loan and delinquent charges as hereinafter set out, and except an investigation fee not exceeding one dollar ($1) for each fifty dollars ($50) or fraction thereof upon the first eight hundred dollars ($800) of the principal amount of such loans.
3. Delinquency charges may be made not to exceed five cents ($0.05) for each dollar of each installment more than ten (10) days in arrears, and only one (1) delinquency charge shall be made on any one (1) installment. No delinquency charge shall exceed five dollars ($5) on any one (1) installment. In addition to such delinquency charges, attorney’s fees not exceeding fifteen percent (15%) of the unpaid balance and court costs may be collected, provided that the note is referred to an attorney not a salaried employee of the holder for collection.
4. The lending institution shall permit the borrower to repay his loan in whole or in part at any time. If a loan is paid in full prior to maturity, the lending institution shall make a rebate at a rate not less than in accordance with the Rule of 78s if the maximum financing charge permitted hereunder has been taken. If a lesser charge has been taken, the rebate shall be at not less than a proportional rate. Provided, however, the lending institution shall be permitted in computing rebates to retain a minimum charge of ten dollars ($10) to cover its acquisition costs and where the amount of credit for anticipation of repayment is less than one dollar ($1), no rebate need be made.
5. In the case of loans made under this section the corporation shall not take any assignment, pledge or transfer of wages to be earned or paid in the future, nor any first lien or first mortgage on real estate as security, except such lien as is created by virtue of a judgment or decree or first mortgage liens on loans on unimproved real estate not exceeding ten (10) acres in size or on real estate on which there is located or to be located a residential mobile home. Nothing in this section is intended to prevent lending institutions from making loans under the provisions of the National Housing Act or any other federal legislation, which loans are hereby authorized.
6. No lending institution under this section shall split up or divide a loan or permit any person to become obligated to it under more than one (1) contract of loan at the same time for the purpose of obtaining a greater charge than would otherwise be permitted by this section.
7. Every note evidencing a loan made under this section shall contain the following information and provisions: The original principal amount of the loan excluding any charge made under this section; a statement of the total charge for the loan; the amount and the date of each installment; the date of final maturity; an agreement that the borrower may repay the loan in whole or in part at any time, and that if the loan is paid in full before final maturity, the borrower will receive a refund of the unearned portion of the charge as required by this section. At the time the loan is made, the lending institution shall give the borrower either a copy of the note, or a statement of the transaction containing the provisions and information required to be contained in the note. The lending institution shall deliver a receipt for each payment.
8. In advertising for loans subject to this section, every advertisement shall conform to the following requirement: Any statement of the amount of the loan shall be the original principal amount showing in detail any charge made under this section.
9. KRS 286.4-420 , 286.4-620 and 360.010 shall not apply to loans made under authority of this section, but said sections shall remain in full force and effect for all other purposes. Nothing in this section shall be construed to impair the validity or effect of said sections with respect to loans other than those made pursuant to this section nor shall anything in this section be construed to impair the validity or effect of KRS 360.025.
10. Any contract of loan in the making or collection of which any act shall have been done which constitutes a willful violation of any provision of this section shall be void, and the bank, trust company, or combined bank and trust company shall have no right to collect or receive any interest or charges whatsoever on such loan, but the unpaid principal of the loan shall be paid in full to the lending institution.

History. Enact. Acts 1946, ch. 60; 1962, ch. 79; 1972, ch. 267, § 1; 1974, ch. 184, § 1; 1980, ch. 78, § 1, effective April 1, 1980; 1984, ch. 111, § 125, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-218. Definitions for KRS 286.3-219 and 286.3-220.

As used in KRS 286.3-219 and 286.3-220 :

1. “Life beneficiary” means a beneficiary who is a current permissible or mandatory recipient of income or principal from the trust, or, if more than one (1), the beneficiary or beneficiaries of the oldest generation;
2. “Remainder beneficiary” means a beneficiary who would have received the trust property in fee but for the continuation of the trust by the corporate trustee;
3. “A portion or all of the trust” means a portion, including all, of any remainder beneficiary’s share of the trust to which the remainder beneficiary would be entitled in fee following the death of the life beneficiary. The portion of each of the remainder beneficiary’s share that is continued shall be held as a separate trust;
4. “Trust” has the same meaning as set forth in KRS 386B.1-010 ; and
5. “Corporate trustee” means a trust company or a bank empowered as a fiduciary.

History. Enact. Acts 2000, ch. 440, § 1, effective July 14, 2000; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2014, ch. 25, § 98, effective July 15, 2014.

286.3-219. Continuation of trust by corporate trustee — Limitations — Application. [Renumbered]

1. A corporate trustee administering a trust may continue the term of a portion of the trust so long as the period of the continuation does not extend beyond the term allowable under KRS 381.224 , 381.225 , and 381.226 that is applicable to the trust.
2. Subject to KRS 381.224 , 381.225 , and 381.226 , the portion of the trust continued by the corporate trustee shall continue for the life of the remainder beneficiary of the trust, upon the same terms and conditions as provided in the trust, for the term preceding the life beneficiary’s death. In addition, commencing with the death of the life beneficiary, the remainder beneficiary may withdraw that portion of the trust that has been continued by giving written notice to the corporate trustee. However, each year five percent (5%) of the remainder beneficiary’s right of withdrawal shall lapse on December 31, and the lapses shall be cumulative.
3. The corporate trustee’s authority granted in subsection (1) of this section shall not apply to any portion of a trust which:
   1. Continues by its terms after the death of the life beneficiary; or
   2. Has been pledged to secure a debt.
4. This section shall apply to any trust that was irrevocable on January 1, 1976.

History. Enact. Acts 2000, ch. 440, § 2, effective July 14, 2000; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 21, § 11, effective July 15, 2010.

286.3-220. Corporate fiduciaries subject to laws governing individuals — Security on bonds — Ability to serve as trustee of multiple trusts with common or nonidentical beneficiaries. [Renumbered]

1. When acting as a fiduciary or in any other capacity in which the duties, powers, liabilities, rights, and compensation are regulated by law, or under the control or supervision of the court, banks and trust companies shall, except as provided in subsections (2) and (3) of this section, be subject to the same duties and responsibilities, have the same rights and powers, and receive the same compensation as is allowed the individual holding or exercising similar offices or trusts.
2. Upon all bonds required to be executed by such corporation before any court, the capital stock shall be the only security required for the faithful performance of its duties, unless the court or officer before whom the bond is executed, or some party in interest demands additional security.
3. A bank or trust company serving as a trustee of multiple trusts having one (1) or more common beneficiaries or remainder beneficiaries, need not obtain court approval for performance or execution of its duties, and it shall not be considered a conflict of interest solely because all beneficiaries or remainder beneficiaries of the trusts are not identical.

History. 598b-4, 611; 2000, ch. 440, § 3, effective July 14, 2000; renum. 2006, ch. 247, § 38, effective July 12, 2006.

Legislative Research Commission Note.

(7/12/2006). In accordance with 2006 Ky. Acts ch. 247, secs. 38 and 39, this statute has been renumbered as a section of the Kentucky Financial Services Code, KRS Chapter 286.

286.3-225. Appointment of a nominee by banking institutions acting in a fiduciary capacity.

1. Any bank or trust company when acting as executor, administrator, guardian, conservator, agent, or trustee, whether alone or jointly with an individual or individuals, may with the consent of the individual fiduciary or fiduciaries, if any (who are hereby authorized to give such consent), cause any stock or other securities held in any such capacity to be registered and held in the name of a nominee or nominees of such bank or trust company, or in its own name.
2. Any such bank or trust company shall be absolutely liable for any loss occasioned by the acts of any nominees of such bank or trust company with respect to such stock or other securities so registered. But no liability for any loss occasioned by the acts of any such bank or trust company, or the nominee of either of them with respect to such stock or securities so registered, shall be imposed upon the corporation, its transfer agent or registrar, which registers its stock or other securities in the name of such bank or trust company, or the nominee of either of them, in accordance with the provisions of this section.
3. The records of such bank or trust company shall at all times show the ownership of any such stock or other securities. Such stock or other securities shall at all times be kept separate and apart from the assets of such bank or trust company.

History. Enact. Acts 1944, ch. 11; 1982, ch. 141, § 84, effective July 15, 1982; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-230. Common trust funds — Consent of cofiduciary.

1. Any trust company or bank empowered to act as a fiduciary under the laws of this state and subject to examination by state or federal banking authorities may establish and maintain one (1) or more common trust funds for the collective investment of funds held in any fiduciary capacity by such trust company or bank or by an affiliate of the trust company or bank including, without limitation, funds held as agent where the trust company, bank, or affiliate exercises investment discretion and assumes fiduciary responsibilities.
2. Before establishing a common trust fund as provided in subsection (1) of this section, the trust company or bank shall file with the commissioner a statement of the plan under which it proposes to establish, maintain, operate, and ultimately liquidate the trust fund, and shall secure the written approval of the plan by the commissioner.
3. After such a trust fund has been established, it may be modified or amended by filing with the commissioner a statement setting forth the proposed modification or amendment, and securing the written approval of the change by the commissioner.
4. The bank, trust company, or affiliate shall at all times maintain definite records showing all securities and properties held in such fund.
5. The trust company, bank, or affiliate may invest funds held by it in any fiduciary capacity in one (1) or more common trust funds established as provided in subsection (1) of this section, or one (1) or more common trust funds wherever located established, owned, or controlled by an affiliate of the trust company, bank, or affiliate so long as:
   1. The investment is not specifically prohibited by the instrument, judgment decree, or order creating the fiduciary relationship; and
   2. In the case of cofiduciaries, the trust company, bank, or affiliated bank procures the written consent of its cofiduciary or cofiduciaries to the investment, which consent the cofiduciary or cofiduciaries are hereby authorized to grant.
6. As used in subsection (1) of this section, “affiliate of the trust company or bank” means any trust company, bank, or other entity that controls, is controlled by, or is under common control with the trust company, bank, or other entity.

History. 4706a: amend. Acts 1946, ch. 176; 1962, ch. 134; 1986, ch. 391, § 3, effective July 15, 1986; 1996, ch. 338, § 15, effective July 15, 1996; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 633, effective July 15, 2010.

286.3-235. Common trust fund not separate entity for tax purposes — Circumstances when no gain or loss to be recognized. [Renumbered]

1. Common trust funds shall not be considered as an entity for income or other tax purposes, nor shall investment in such fund make taxable any property which is otherwise exempt therefrom; and for purposes of taxation, the status of the common trust fund and of each participant therein shall be determined as though there were no common fund and as though each participant was the owner of its proportionate share of every asset held in the common fund. The bank or trust company maintaining said fund shall file a report of said fund with the property valuation administrator as of the ad valorem tax date and shall file annually such income tax information as may be required by the Department of Revenue.
2. Notwithstanding subsection (1) of this section, if a common trust fund transfers substantially all of its assets to one (1) or more regulated investment companies in exchange solely for stock in the company or companies to which such assets are transferred and such stock is distributed by such common trust fund to the participants in such common trust fund in a transaction which would qualify under Section 584(h) of the Internal Revenue Code of 1986, as amended, for the nonrecognition of gain or loss of such transfer or distribution by the common trust fund, then no gain or loss shall be recognized for Kentucky income tax purposes by the common trust fund by reason of such transfer or distribution or by the participants in such common trust fund by reason of such exchange.

History. Enact. Acts 1950, ch. 191; 1974, ch. 308, § 48; 1998, ch. 196, § 31, effective July 15, 1998; 2005, ch. 85, § 675, effective June 20, 2005; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-240. Real estate mortgage investment fund — Participation certificates. [Renumbered]

1. A trust company or bank empowered to act as a fiduciary under the laws of this state, and subject to examination by either state or federal banking authorities, may:
   1. Set apart, in a separate real estate mortgage investment fund, real estate mortgages, which conform to the Kentucky requirements as to trust investments;
   2. Issue against such investment fund participation certificates covering fractional interests therein; and
   3. Invest trust funds in its hands for investment in such participation certificates.
2. Such trust company or bank shall at all times maintain definite records, fully and accurately setting forth all mortgages held in such investment fund, including all cash collections and any real estate acquired in foreclosure; and all participation certificates issued against the investment fund. Participation certificates shall not be issued in the aggregate so as to exceed the aggregate principal amount of the investment fund.
3. The participation certificates shall be substantially in the following form:

(Insert place and date) The undersigned hereby certifies: That (insert description of trust estate or name of beneficial owner) is the owner of an interest in a real estate mortgage investment fund, which fund is shown on the records and accounts of the undersigned, and which interest is equivalent to the fraction which would result from using (insert amount) dollars ($) as the numerator and the aggregate principal amount of the investment fund as the denominator. This certificate is issued in accordance with and subject to the terms and conditions of KRS 286.3-240 to 286.3-270 . (Signature of trust company or bank)

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History. 4706: renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-250. Operation of real estate mortgage investment fund. [Renumbered]

1. To provide for losses that might occur in an investment fund established by a trust company or bank under KRS 286.3-240 , such trust company or bank may reserve from the interest collected on the mortgages held in the fund, not over one-half of one percent (0.5%) per annum on the principal of such mortgages. The reserved amount shall be set aside in a separate reserved account, and used primarily for the purpose of covering any losses that might be sustained in connection with any of the mortgages, or in foreclosing any of the mortgages, or from actual outlays in connection with any mortgaged property or property acquired under any foreclosure proceedings. Such reserve account, or the balance thereof after the payment of any such losses, shall belong entirely to the beneficial owners of the investment fund.
2. All income earned by the investment fund, except that amount reserved in the manner and for the purposes set out in subsection (1), shall be periodically, and at least semiannually, distributed ratably to the holders of participation certificates issued against the investment fund. Principal cash that accumulates in the investment fund by reason of payments on mortgages may be used in the redemption and cancellation of participation certificates, or may be used in making further mortgage loans. The trust company or bank may advance cash to the investment fund to be used in making additional desirable mortgage loans in anticipation of trust funds becoming available for investment in participation certificates, but in no event shall the trust company or bank be entitled to any profit on any such transactions other than the interest earned on its advancements.
3. If any participation certificates issued under the provisions of KRS 286.3-240 should become distributable by reason of the termination or removal of a trust, the trust company or bank may at its option either distribute such certificates in kind, or redeem and cancel such certificates for the account of the investment fund, or purchase such certificates for the account of other trust estates in its hands.

History. 4706: renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-260. Liquidation of investment fund. [Renumbered]

If any trust company or bank, having established an investment fund as provided in KRS 286.3-240 , determines that there is an apparent loss in such fund, over and above the account to be reserved to cover such loss, then the trust company or bank shall at once proceed to liquidate the investment fund. In such liquidation the trust company or bank shall, except as hereinafter provided, distribute pro rata on account of the principal of the outstanding participation certificates, all principal realized from the investment fund, and shall likewise distribute on account of interest all income earned by the fund. Where the principal and interest on a particular mortgage is not collected in full, then the amount realized shall, after the payment of any costs incurred in its collection, be first used in making whole the principal of the mortgage debt, and any balance remaining shall be applied to interest. In such liquidation the trust company or bank, instead of distributing pro rata on account of participation certificates all cash realized from the investment fund, may use a portion of such cash in retiring and canceling participation certificates, but in retiring and canceling participation certificates under these conditions, the trust company or bank shall estimate the apparent loss in principal and interest in the investment fund, over and above the reserve account to cover such loss, and shall pay for the certificates to be retired and canceled, the amount invested in such certificates, less the loss as to principal and interest determined as provided above. Any person entitled to the distribution in kind of such certificates who is not satisfied with the trust company’s or bank’s determination of loss, may demand and receive distribution in kind of such certificates.

History. 4706: renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-270. Fiduciary may act in own name — Records — Investments not subject to debts of fiduciary. [Renumbered]

1. In making real estate mortgage loans for the purpose of investing trust funds, a trust company or bank empowered to act as a fiduciary may make such mortgage loans in its individual name, and in connection with such loans may prosecute all suits and foreclosure actions, and may buy in, manage, lease, repair, and sell foreclosed property in its individual name, without reference to any trust or beneficial ownership.
2. Such trust company or bank shall at all times keep definite records showing fully and accurately all beneficial ownership in such loans, suits, or property, which records shall at all times be subject to the inspection and examination of either state or federal banking authorities.
3. Such mortgage loans and foreclosed property shall not be subject to the individual debts of the trust company or bank but shall belong to the beneficial owners thereof as shown by the records free from any claims against the trust company or bank.

History. 4706: renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-272. Investment of fiduciary assets in company or trust associated with investing institution — Fee. [Renumbered]

1. Notwithstanding any other law, a bank empowered to act as a fiduciary or a trust company, to the extent that it exercises investment discretion as a fiduciary, custodian, managing agent, or otherwise with respect to the investment and reinvestment of assets that it holds in a fiduciary capacity, may invest and reinvest the fiduciary assets in an investment company or investment trust established, owned, or controlled by the bank or trust company or an affiliate of the bank or trust company.
2. The fact that the bank or trust company, or any affiliate of the bank or trust company, is providing services to the investment company or trust as investment advisor, sponsor, distributor, custodian, transfer agent, registrar, or otherwise, and receiving reasonable remuneration for the services, does not preclude the bank or trust company from investing in the investment company or trust.
3. The bank or trust company making an investment of fiduciary assets in the investment company or investment trust may charge a reasonable fee for investment advisory, brokerage, transfer agency, register, management, or other similar services provided to the investment company. The fee may be in addition to the compensation which the bank or trust company is otherwise entitled to receive from the fiduciary account provided that the fee is disclosed at least annually, by prospectus, account statement, or any other written means to all persons entitled to receive statements of account activity.
4. As used in subsection (1) of this section, “affiliate of the bank or trust company” means any bank, trust, or other entity that controls, is controlled by, or is under common control with the bank, trust company, or other entity.

History. Enact. Acts 1996, ch. 338, § 4, effective July 15, 1996; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-275. Limits on liability of bank or trust company acting as fiduciary. [Renumbered]

1. When an instrument, under which a bank empowered to act as a fiduciary or trust company acts, reserves in the grantor, or vests in an advisory or investment committee or in one (1) or more other persons, any power, including, but not limited to, the authority to direct the acquisition, disposition, or retention of any investment or the power to authorize any act that the bank or trust company may propose, the fiduciary is not liable, either individually or as a fiduciary, for either of the following:
   1. Any loss that results from compliance with an authorized direction of the grantor, committee, person, or persons; or
   2. Any loss that results from a failure to take any action proposed by the bank or trust company that requires the prior authorization of the grantor, committee, person, or persons if the bank or trust company timely sought but failed to obtain that authorization.
2. The bank or trust company referred to in subsection (1) of this section is relieved from any obligation to perform investment reviews and make recommendations with respect to any investments to the extent the grantor, an advisory or investment committee, or one (1) or more other persons have authority to direct the acquisition, disposition, or retention of any investment.
3. This section shall not apply to the extent that the instrument, under which the bank or trust company referred to in subsection (1) of this section acts, contains provisions that are inconsistent with this section.

History. Enact. Acts 1996, ch. 338, § 5, effective July 15, 1996; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-277. Standards for bank or trust company acting as fiduciary.

1. Notwithstanding the provisions of any other law, a bank empowered to act as a fiduciary or trust company, when investing, reinvesting, purchasing, acquiring, exchanging, selling, and managing property held in a fiduciary capacity, shall act as a prudent investor would, in light of the purposes, terms, distribution requirements, and other circumstances of the fiduciary account.
2. The standard described in subsection (1) of this section requires the exercise of reasonable care, skill, and caution, and is to be applied to investments not in isolation but in the context of the account portfolio and as part of an overall investment strategy, which should incorporate risk and return objectives reasonably suitable to the account.
3. In making and implementing investment decisions, the bank or trust company has a duty to diversify the investments of the account unless, under the circumstances, it is prudent not to do so.
4. In addition, the bank or trust company shall:
   1. Conform to fundamental fiduciary duties of loyalty and impartiality;
   2. Act with prudence in deciding whether and how to delegate authority and in the selection and supervision of agents; and
   3. Incur only costs that are reasonable in amount and appropriate to the investment responsibilities of the account.
5. The duties of the bank or trust company under this section are subject to the rule that in investing the funds of the account, the bank or trust company:
   1. Has a duty to the beneficiaries of the account to conform to any applicable statutory provisions governing investment by fiduciaries; and
   2. Has the power expressly or impliedly granted by the terms of the account or applicable instrument and has a duty to the beneficiaries of the account to conform to the terms of the account directing or restricting investments by the bank or trust company.

History. Enact. Acts 1996, ch. 338, § 6, effective July 15, 1996; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-280. Maximum debt of persons to bank or trust company.

1. Except as provided in subsection (2) of this section, no bank or trust company shall permit any person to become indebted to it or to become obligated as guarantor or surety to it in an amount exceeding twenty per cent (20%) of its capital stock actually paid in and its actual amount of surplus, unless the person pledges with it good collateral security or executes to it a mortgage upon real or personal property which at the time is of more than the cash value of the indebtedness or obligation above all other encumbrances; but the indebtedness or obligation of any person shall not exceed thirty percent (30%) of the paid-in capital and actual surplus of the bank or trust company. When computing the total capital stock and surplus, the negative balance of a bank’s undivided profits account shall be deducted.
2. A bank organized as a limited liability company shall not be covered by subsection (1) of this section, but shall comply with the legal lending limits applicable to national banks set forth in 12 U.S.C. sec. 84 and 12 C.F.R. sec. 32.4, as may be amended.
3. No bank or trust company shall permit any of its directors or executive officers to become indebted to it or become obligated as guarantor or surety to it in an amount which exceeds that which any other person is authorized by this section to become indebted or obligated.
4. In computing the indebtedness of any person:
   1. The liability of any partnership in which the person acts as a general partner, and any obligation entered into for the benefit of a person, partnership, or association, shall be included in the total liabilities of the person, partnership, or association; and
   2. Any credit exposure arising from a derivative transaction, repurchase agreement, reverse purchase agreement, securities lending transaction, or securities borrowing transaction shall be included. For the purposes of this paragraph, the term “derivative transaction” includes any transaction that is a contract, agreement, swap, warrant, note, or option 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 (1) or more commodities, securities, currencies, interest or other rates, indices, or other assets.
5. Except as otherwise provided in this section, the same security, both in kind and amount, shall be required from stockholders as from nonstockholders.
6. The discount of bills of exchange drawn against actually existing value, and the purchase or discounting of commercial or business paper actually owned by the person negotiating the paper shall not be considered as borrowed money within the meaning of this section in fixing the limit of indebtedness or obligation of any person selling or negotiating the paper to a bank.

History. 581, 583, 609, 610: amend. Acts 1986, ch. 444, § 9, effective July 15, 1986; 1986, ch. 472, § 1, effective July 15, 1986; 1992, ch. 77, § 3, effective July 14, 1992; 2006, ch. 183, § 9, effective July 12, 2006; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 28, § 15, effective July 15, 2010; 2012, ch. 77, § 1, effective July 12, 2012.

286.3-290. Exceptions to maximum debt to banks.

In the case of obligations to banks and trust companies, the limitations and restrictions of KRS 286.3-280 shall not apply to:

1. Obligations of the United States or of the State of Kentucky;
2. Obligations guaranteed as to principal and interest by the United States or the State of Kentucky; or all obligations to the extent secured or covered by guarantees or by commitments or agreements to take over or to purchase the same made by any federal reserve bank or by the United States or by any department, bureau, board, commission or establishment of the United States, including any corporation wholly owned directly or indirectly by the United States; or consolidated bonds issued by or for federal land banks or consolidated debentures issued by or for federal intermediate credit banks under the Act of Congress known as the “Federal Farm Loan Act,” and amendments thereto; or consolidated debentures issued by or for banks for cooperatives under the Act of Congress known as the “Farm Credit Act of 1933,” and amendments thereto; or obligations issued by the federal home loan banks; or obligations which are insured by the federal housing administrator pursuant to Title 12, Section 12, Section 1713, United States Code, if the debentures to be issued in payment of such insured obligations are guaranteed as to the principal and interest by the United States; or obligations of national mortgage associations; except that the commissioner may make, alter and repeal regulations respecting the total liabilities of any person which:
   1. Are secured by direct obligations of the United States or the State of Kentucky, and
   2. Have a face value at least equal to the amount of such liabilities, and
   3. Will mature within five (5) years from the date such liabilities were incurred;
3. Obligations of Kentucky counties and school districts incurred through borrowing in anticipation of the current year’s tax receipts as authorized by KRS 68.320 and 160.540 ; and
4. Loans secured by a segregated deposit account in the lending bank if the lending bank has a perfected security interest in the segregated deposit account and if the security interest is clearly documented in the bank’s books and records.

History. 583: amend. Acts 1944, ch. 15; 1946, ch. 177; 1960, ch. 152; 1970, ch. 209, § 7; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 634, effective July 15, 2010; 2010, ch. 28, § 16, effective July 15, 2010.

286.3-300. Required reserves. [Renumbered]

Each bank organized under the laws of this state and authorized to receive deposits shall keep on hand at all times legal reserves as mandated by the board of governors of the Federal Reserve System.

History. 584: amend. Acts 1942, ch. 109, § 1; 1970, ch. 209, § 8; 1982, ch. 251, § 9, effective April 1, 1982; 1984, ch. 324, § 24, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-310. Bank may own stock in federal reserve bank or Federal Deposit Insurance Corporation. [Renumbered]

1. Any bank organized under the laws of this state may subscribe for and own stock of the federal reserve bank within the federal reserve district where it is located and may take any steps necessary to become a member of that federal reserve bank.
2. Any bank organized under the laws of this state may, upon the authority of a majority of its board of directors, acquire stock or securities of the Federal Deposit Insurance Corporation and may enter into and take advantage of all contracts, rights and privileges which may at any time be available to them or their depositors, receivers or liquidators, pursuant to any federal act, and may do anything necessary to acquire or maintain insurance of its deposits in the Federal Deposit Insurance Corporation, or any federal corporation that succeeds or is substituted therefor.

History. 584a: amend. Acts 1984, ch. 324, § 25, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-320. Federal Deposit Insurance Corporation to be subrogated to rights against closed banks. [Renumbered]

Whenever any banking institution which is a member of, or whose deposits are insured by, the Federal Deposit Insurance Corporation, has been closed and the Federal Deposit Insurance Corporation pays or makes available for payment the insured deposit liabilities of the closed institution, the corporation shall become subrogated by operation of law to all rights against the closed banking institution of each owner of a claim for deposit to the extent of the payment.

History. 584b: renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-330. Assets may be pledged or surety bonds provided as collateral security — Security not required if deposit insured.

1. Banks, subject to statutory or charter limitations, may pledge such portion of their assets or provide surety bonds as may be required by law as collateral security for government deposits made with them, or any of them, by or under the authority of the United States, or for any other deposit required by law to be secured.
2. Notwithstanding any law requiring security for deposits in the form of collateral, surety bond, or in any other form, security for such deposits shall not be required to the extent said deposits are insured under the provisions of Section 12B of the Federal Reserve Act (38 Stat. 251) as amended.
3. If a bank proposes to sell its assets and transfer its deposit liability to another bank and the purchasing bank is unwilling to accept a sufficient amount of the assets to cover the liability to depositors and other creditors, the selling bank may, with the consent of the commissioner, pledge all or a part of its remaining or unacceptable assets to secure a loan for an amount sufficient to cover the remaining liability to the depositors and other creditors.

History. 579: amend. Acts 1984, ch. 324, § 27, effective July 13, 1984; 1998, ch. 554, § 4, effective July 15, 1998; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 635, effective July 15, 2010.

286.3-340. Preferred stock. [Renumbered]

1. Any bank or trust company organized under the laws of this state may issue preferred capital stock, of one or more classes. Preferred capital stock may be considered as part of the minimum capital stock, and in the case of existing corporations shall be issued in the manner provided for increasing capital stock. Unless expressly provided otherwise in this subtitle, the manner in which preferred stock shall be issued and the rights and preferences of holders thereof shall be governed by KRS Chapter 271B.
2. No issue of preferred stock shall be valid until the stated value of all stock so issued has been paid in.
3. If any part of the capital stock of a bank or trust company consists of preferred stock, the determination of whether or not the capital of such corporation is impaired, and the amount of such impairment shall be based upon the stated value of its stock even though the amount that holders of preferred stock are entitled to receive in the event of retirement or liquidation is in excess of the stated value of the preferred stock.

History. 595: amend. Acts 1982, ch. 251, § 10, effective April 1, 1982; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-350. When dividends may be declared.

1. The board of directors of any bank or trust company organized under the laws of this state may declare a dividend of so much of the net profits as they deem expedient. The net profits shall be computed by deducting all expenses, losses, and interest and taxes accrued or due from the bank.
2. The approval of the commissioner shall be required if the total of all dividends declared by such institution in any calendar year shall exceed the total of its net profits of that year combined with its retained net profits of the preceding two (2) years, less any required transfers to surplus or a fund for the retirement of preferred stock or debt.

History. 596: amend. Acts 1982, ch. 251, § 11, effective April 1, 1982; 1998, ch. 196, § 13, effective July 15, 1998; 2006, ch. 183, § 10, effective July 12, 2006; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 636, effective July 15, 2010.

286.3-375. Preservation of bank records.

1. Every bank shall retain its business records for such periods as are or may be prescribed by or in accordance with the terms of this section.
2. Each bank shall retain permanently the minute book of meetings of its stockholders and directors, its capital stock ledger and capital stock certificate ledger or stubs, its general ledger, its daily statements of condition, its general journal, its investment ledger, its copies of bank examination reports, and all records which the commissioner shall, in accordance with the terms of this section, require to be retained permanently.
3. All other bank records shall be retained for such periods as the commissioner shall, in accordance with the terms of this section, prescribe.
4. The commissioner shall from time to time issue regulations classifying all records kept by banks and prescribing the period for which records of each class shall be retained. Such periods may be permanent or for a lesser term of years. Such regulations may from time to time be amended or repealed. Prior to issuing any such regulation the commissioner shall consider:
   1. Actions at law and administration proceedings in which the production of bank records might be necessary or desirable;
   2. State and federal statutes of limitation applicable to such actions or proceedings;
   3. The availability of information contained in bank records from other sources;
   4. Such other matters as the commissioner shall deem pertinent in order that its regulations will require banks to retain their records for as short a period as is commensurate with the interests of bank customers and shareholders and of the people of this state in having bank records available.
5. Any bank may dispose of any record which has been retained for the period prescribed by or in accordance with the terms of this section for retention of records of its class, and shall thereafter be under no duty to produce such record in any action or proceeding.
6. Any bank, including the Department of Financial Institutions, may cause any or all records at any time in its custody to be reproduced by the microphotographic process, nonerasable optical image discs (CD’s), or other records retention technology approved by the department, and any reproduction so made shall have the same force and effect as the original thereof and be admitted in evidence equally with the original.
7. To the extent that they are not in contravention of any law of the United States, the provisions of this section shall apply to all banks doing business in this state.

History. Enact. Acts 1954, ch. 54, § 1, effective June 17, 1954; 1984, ch. 324, § 28, effective July 13, 1984; 1992, ch. 77, § 14, effective July 14, 1992; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 637, effective July 15, 2010.

286.3-380. Deposits by minors. [Renumbered]

When any deposit is made by a minor, in his name, the bank may pay to him the amount deposited.

History. 591: renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-385. Educational loans to minors — Validity. [Renumbered]

For the purpose of borrowing money from a state or national bank for their own higher educational purposes, the disabilities of nonage of minors are removed for all purposes, whether male or female. Any minor is authorized to make and execute any and all promissory notes, contracts, or other instruments necessary to be executed by him in order to borrow money for his own higher educational purposes, and such promissory notes, contracts, or other instruments shall have the same force and effect as though they were the obligations of persons over the age of their majority. Any promissory note, contract, or other instrument entered into by any such person pursuant to the provisions of this section shall have the approval of the parent or guardian of such minor and of the financial officer of the institution of higher learning.

History. Enact. Acts 1964, ch. 185; 1998, ch. 196, § 14, effective July 15, 1998; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-420. Publication of financial statement — Contents — Disposition of copies. [Repealed.]

286.3-450. Examination — Procedure — Agreement to examine and supervise branches — Joint examination and enforcement actions.

1. Every state bank, branch of an out-of-state state bank, or trust company doing business under the laws of this state shall be subject to inspection by the commissioner or by an examiner appointed by the commissioner. Examination shall be made of each institution at least once every twenty-four (24) months, unless other examinations are accepted as provided in subsections (3), (4), and (5) of this section, and not more than twice unless it appears from examination or from the reports of the institution that it has failed to comply with laws or regulations relating to banks or trust companies, or has engaged in unsafe or unsound banking practices.
2. The commissioner, deputy commissioner, and each examiner may compel the appearance of any person for the purpose of the examination, which shall be made in the presence of one (1) of the officers of the institution being examined.
3. Any bank that becomes a member of a Federal Reserve Bank shall be subject to the examination required by the Federal Reserve Act, (38 Stat. 251) as amended, and the commissioner may, in his discretion, accept examinations made by the Federal Reserve authorities in lieu of examinations made under state laws. The commissioner shall furnish to the Federal Reserve agent of the district in which the member bank is situated, copies of reports and examinations made of the member bank.
4. The commissioner may, in his discretion, accept examinations made by the Federal Deposit Insurance Corporation in lieu of examinations made under state laws.
5. The commissioner may, in his discretion, enter into cooperative, coordinating, and information-sharing agreements with any other bank supervisory agencies or any organization affiliated with or representing one (1) or more bank supervisory agencies with respect to the periodic examination or other supervision of any branch of an out-of-state state bank, any branch of a state bank in any host state, any trust office or trust representative office of an out-of-state trust company, or any trust office or trust representative office of a Kentucky state trust company in any host state. The commissioner may accept reports of examinations and reports of investigation from other bank supervisory agencies and home state regulators in lieu of examinations made under state law. The commissioner may enter into joint examinations or joint enforcement actions with other bank supervisory agencies having concurrent jurisdiction over any bank, bank holding company, branch of an out-of-state state bank, any branch of a state bank located in any host state, any trust office or trust representative office of an out-of-state trust company, or any trust office or trust representative office of a Kentucky state trust company in any host state. Information produced or provided under this section shall be considered confidential as provided in KRS 286.3-470 .

History. 165a-8: amend. Acts 1982, ch. 251, § 14, effective April 1, 1982; 1984, ch. 324, § 30, effective July 13, 1984; 1992, ch. 77, § 4, effective July 14, 1992; 1996, ch. 338, § 17, effective July 15, 1996; 1998, ch. 196, § 16, effective July 15, 1998; 2006, ch. 183, § 11, effective July 12, 2006; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 639, effective July 15, 2010; 2011, ch. 67, § 5, effective June 8, 2011.

286.3-455. Commonwealth or its employees not liable for failure to disclose financial condition of bank or trust company. [Renumbered]

In undertaking the examination of any bank or trust company, neither the Commonwealth of Kentucky, the commissioner, nor any examiner employed by the Commonwealth shall become liable to any depositor, investor, or other obligor of said bank or trust company by reason of said examination or omission of said examination to fully and effectively disclose the financial condition of said bank or trust company, it being the policy of the Commonwealth of Kentucky that such examinations as are required by KRS 286.3-450 and 286.3-460 , are for the purpose of determining compliance with state law and not for the purpose of protecting or guaranteeing the depositors, investors or other obligors of said bank or trust company.

History. Enact. Acts 1980, ch. 357, § 1, effective July 15, 1980; 1984, ch. 324, § 31, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-460. Duties of examiners.

In examinations under KRS 286.3-450 the examining officer shall investigate:

1. The cash, bills, collateral, securities, other assets, books of account, and all other papers and books of the bank or trust company;
2. The condition and resources of the bank, the mode of conducting and managing its affairs, the actions of its directors, the investment and disposition of its funds, the safety and prudence of its management and the security afforded to those by whom its engagements are held;
3. Whether the requirements of its charter and of the laws of this state have been complied with in the administration of its affairs; and
4. Such other matters as the commissioner deems necessary.

History. 165a-8: amend. Acts 1984, ch. 324, § 32, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 640, effective July 15, 2010.

286.3-470. Information obtained by examination to be confidential — Exceptions — Reports as evidence.

1. Reports of examination, and correspondence that relates to the report of examination, of a bank or trust company shall be considered confidential information. No officer or director of a bank or trust company, employee of the department, or employee of a state or federal regulatory authority shall release any information contained in the examination, except when:
   1. Required in a proper legal proceeding in which a subpoena and protective order insuring confidentiality has been issued by a court of competent jurisdiction; or
   2. The information is referred to an appropriate prosecuting attorney for possible criminal proceedings, to outside persons providing professional services to the bank, or to outside persons for the purpose of evaluating the bank for possible acquisition. Reports of examination released to outside persons providing professional services to the bank or for the purpose of evaluating the bank for possible acquisition, shall require a written request from such outside persons and prior approval by the board of directors or an executive committee of the bank.
2. The department may furnish to and exchange information and reports with officials and examiners of other properly authorized state or federal regulatory authorities, including the Federal Deposit Insurance Corporation, the Federal Reserve Board, and the Office of the Comptroller of the Currency.
3. Every official report concerning a bank or trust company, and every report of examination, shall be prima facie evidence of the facts therein stated for all purposes in any action in which the department, bank, or trust company is a party.

History. 165a-8: amend. Acts 1986, ch. 444, § 10, effective July 15, 1986; 1992, ch. 77, §§ 5, 15, effective July 14, 1992; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 641, effective July 15, 2010.

286.3-480. Fees to be paid commissioner for services.

1. The following fees shall be paid to the commissioner by corporations engaged in a banking or trust business:
   1. For the investigation incident to the approval of articles of incorporation, applications for branch banks and loan production offices, and applications to relocate a main or branch office, the fee shall be sufficient to cover the cost of the investigation based upon fair compensation for time and actual expense;
   2. For each state bank and branch of an out-of-state state bank subject to inspection and examination by the commissioner, an annual assessment based on the assets of the banks and branches, other than assets held by it in a fiduciary capacity, as reported to the department by the banks and branches as of the thirty-first day of December of the previous year. The assessment schedule shall be at the rates the commissioner shall determine to be necessary to carry out the duties of the department and shall be reasonably related to the costs incurred by the department in regulating banks and branches. The assessment schedule shall be set by administrative regulation;
   3. For the examination of the assets held by the institution in a fiduciary capacity, the fee shall be sufficient to cover the cost of the investigation based upon fair compensation for time and actual expense. The commissioner may accept examinations made of the trust department in combined banks and trust companies by examiners for the Federal Reserve System, Federal Deposit Insurance Corporation, or a certified public accountant; and
   4. Extraordinary services performed, in addition to examinations, for any financial institution, including institutions in liquidation under the supervision of the commissioner, shall be paid for by the institution upon the basis of fair compensation for time and actual expense.
2. The commissioner, in his discretion, may enter into cooperative agreements with other bank supervisory agencies having concurrent jurisdiction over any bank, bank holding company, branch of an out-of-state state bank or any branch of a state bank located in any host state, or any organization affiliated with one (1) or more bank supervisory agencies for the collection, remittance, and sharing of fees authorized in subsection (1) of this section.

History. 165a-9: amend. Acts 1966, ch. 11, § 3; 1968, ch. 66; 1972, ch. 278, § 1; 1976, ch. 124, § 1; 1982, ch. 251, § 15, effective April 1, 1982; 1984, ch. 324, § 33, effective July 13, 1984; 1992, ch. 77, § 6, effective July 14, 1992; 1996, ch. 338, § 18, effective July 15, 1996; 1998, ch. 196, § 17, effective July 15, 1998; 2006, ch. 183, § 12, effective July 12, 2006; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 642, effective July 15, 2010.

286.3-490. Reports to be made to commissioner — Contents — Information from officer, director, or board to commissioner.

1. Every institution under the supervision of the department shall make a report to the commissioner whenever required by the commissioner to do so. The commissioner shall not require more than five (5) reports from any one (1) institution in any one (1) year, unless he or she deems it necessary in order to obtain complete information.
2. The reports shall show the actual condition of the bank making the report at the close of business on a date designated by the commissioner and shall specify any information required by the commissioner.
3. Any officer, director, or board of directors of a bank or trust company shall immediately notify the commissioner concerning any information relating to that financial institution of which they have personal knowledge, involving fraud, defalcation, misfeasance, or violations of this subtitle. Failure to so notify the commissioner shall be grounds for officer or director removal pursuant to KRS 286.3-690 .

History. 165a-10: amend. Acts 1984, ch. 324, § 35, effective July 13, 1984; 1986, ch. 444, § 11, effective July 15, 1986; 1998, ch. 196, § 18, effective July 15, 1998; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 643, effective July 15, 2010.

286.3-530. Examination of institutions in hands of receiver — Reports of receivers.

The department shall examine banks and trust companies in the hands of a receiver, as other banks and trust companies, until its affairs are wound up, and a copy of the examination shall be filed with the circuit clerk in the county where the bank is located. The receiver or person in charge of the insolvent bank or trust company shall make reports to the department, and shall submit the affairs of the institution under his control to examination in the same manner as required in the case of other banks and trust companies.

History. 165a-14: renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 644, effective July 15, 2010.

286.3-630. Transfer of assets to another bank — Procedure — Publication of notice.

1. Whenever in the opinion of the commissioner and of a majority of the members of the respective boards of directors of the banks concerned, an emergency exists warranting an immediate transfer of such assets and liabilities, the board of directors of any bank, by a majority vote, may transfer the assets and liabilities of such bank to another bank or banks, without the vote or approval of the stockholders of each bank which is a party to the proposed transfer.
2. No such transfer shall be made without the consent of the commissioner and each bank which is a party to such transfer shall file with the commissioner, certified copies of all proceedings had by its board of directors, with a complete copy of the agreement entered into by such banks.
3. Notice of a transfer of assets and liabilities made pursuant to the provisions of this section shall be given to all stockholders and a certified copy thereof shall be filed in the office of the commissioner.

History. 165a-17a: amend. Acts 1966, ch. 239, § 204; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 28, § 17, effective July 15, 2010.

286.3-640. Relief to aggrieved shareholders. [Renumbered]

Any shareholder of the transferor bank who deems himself aggrieved by reason of a transfer made under KRS 286.3-630 , shall be paid the fair cash value of his shares as of the day before the day on which the vote of the board of directors was taken authorizing such transfer, excluding from such fair cash value any appreciation or depreciation in consequence of the transfer which entitled him to such relief, if such shareholder objects in writing to such transfer and demands in writing the payment of such fair cash value of his shares within twenty (20) days from the day the vote was taken. Such payment shall be made within thirty (30) days after the fair cash value is agreed upon or determined. Any shareholder who does not object and demand payment for his shares as provided for in this section shall be bound by the vote of a majority of the directors of the bank.

History. 165a-17b: renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-660. Annual report of commissioner.

Each June, the commissioner shall make a report to the Governor setting forth:

1. A summary of the condition of every bank or trust company organized and doing business under the laws of this state, subject to examination and inspection under this subtitle, and such other information relating to such banks and trust companies, as, in the commissioner’s judgment, may be useful;
2. A statement of every bank or trust company whose business has been closed during the year, that has failed or voluntarily retired during the year;
3. The name of banks or trust companies placed in the commissioner’s hands in process of liquidation, and the amount of dividends paid thereon;
4. Any proposed amendment of the laws relating to banks and trust companies, by which the system, in the commissioner’s judgment, may be improved, and by which the security of creditors, depositors, and stockholders may be increased.

History. 165a-21: amend. Acts 1966, ch. 255, § 231; 1984, ch. 324, § 37, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 645, effective July 15, 2010.

286.3-690. Cease and desist orders — Orders of suspension or removal from office — Appeal — Enforcement of orders.

1. If the commissioner has knowledge or reasonable cause to believe that any bank or trust company, or any director, officer, employee, agent, or other person participating in the conduct of the affairs of the bank or trust company has engaged in violations of law, or charter, or administrative regulation promulgated by the department, or in unsafe or unsound business practices, the commissioner may issue and serve upon the bank, trust company, director, officer, employee, agent, or other person a notice of charges containing a statement of facts with respect to alleged violations or practices, and shall fix the time and place at which an administrative hearing shall be held to determine whether an order to cease and desist should issue against the bank, trust company, director, officer, employee, agent, or other person. The hearing shall be conducted in accordance with KRS Chapter 13B.
2. Unless the party or parties so served shall appear at the hearing personally or by a duly-authorized representative, they shall be deemed to have consented to the issuance of the cease and desist order.
3. If the parties consent, or if upon the record made at the hearing the commissioner shall find that any violation or unsafe or unsound practice specified in the notice of charges has been established, the commissioner may issue and serve upon the bank, trust company, director, officer, employee, agent, or other person an order to cease and desist from any violation or practice and, further, to take affirmative action to correct the conditions resulting from any violation or practice.
4. If the commissioner shall determine that the violation or practice, as specified in the notice of charges pursuant to subsection (1) of this section, or the continuation thereof, is likely to cause insolvency or substantial dissipation of assets or earnings of the bank or trust company, or is likely to otherwise seriously prejudice the interests of its depositors or investors, the commissioner may issue an emergency order pursuant to KRS 13B.125 requiring the bank or trust company, director, officer, employee, agent, or other person to cease and desist from any violation or practice.
5. A cease and desist order or an emergency cease and desist order shall become effective upon service upon the bank or trust company. Unless set aside, limited or suspended, as provided by subsection (6) of this section, a cease and desist order shall remain effective and enforceable pending completion of an administrative hearing conducted in accordance with KRS Chapter 13B.
6. Within ten (10) days after service of an emergency cease and desist order, the party or parties served may apply to the Circuit Court for the county in which the bank is located, or the Circuit Court of Franklin County, for an injunction setting aside, limiting, or suspending the enforcement, operation, or effectiveness of the order pending completion of the administrative hearing, and the court shall have jurisdiction to issue an injunction.
7. In the case of violation or threatened violation of, or failure to obey, an emergency cease and desist order or a cease and desist order issued pursuant to this section, the commissioner may apply to the Circuit Court for the county in which the bank or trust company is located, or the Circuit Court of Franklin County, for an injunction to enforce the order, and it shall be the duty of the court to issue the injunction.
8. If the commissioner shall determine that any officer or director of a bank or trust company has committed any violation of law, of an administrative regulation, or of a cease and desist order which has become final, or has engaged in or participated in any unsafe or unsound practice in connection with the bank or trust company, or has committed or engaged in any act, omission, or practice which constitutes a breach of his or her fiduciary duty as officer or director, and the commissioner determines that the bank or trust company has suffered or will probably suffer substantial financial loss or other damages or that the interests of its depositors or investors could be seriously prejudiced by reason of the violation or practice of breach of fiduciary duty or that the director or officer has received financial gain by reason of the violation or practice or breach of fiduciary duty, the commissioner may serve upon the director or officer a written notice of intention to remove him or her from office. The violation, practice, or breach shall be one (1) involving personal dishonesty on the part of the director or officer, or one (1) which demonstrates a willful or continuing disregard for the safety or soundness of the bank. The written notice shall serve to suspend the officer or director from office. The suspension shall become effective upon service of the notice and, unless stayed by a court in proceedings authorized by subsection (10) of this section, shall remain in effect pending the completion of the administrative hearing under subsection (9) of this section. The resignation of an officer or director from the bank shall not prohibit the commissioner from pursuing an action for removal of the officer or director.
9. A notice of intention to remove an officer or director from office shall contain a statement of the facts constituting grounds therefor, and shall fix a time and place at which an administrative hearing shall be held in accordance with KRS Chapter 13B.
10. Within ten (10) days after an officer or director has been suspended from office, the officer or director may apply to the Circuit Court for the county in which the bank or trust company is located for a stay of the suspension pending the completion of the administrative hearing pursuant to the notice served upon the officer or director, and the court shall have jurisdiction to grant the stay.
11. The bank, trust company, or person assessed shall be afforded an opportunity for an administrative hearing upon request made to the commissioner within ten (10) days after issuance of the assessment notice. The hearing shall be conducted in accordance with KRS Chapter 13B.
12. Any person aggrieved by a final order of the commissioner under subsections (9) or (11) of this section may obtain a review of the order by filing in the Circuit Court for the county in which the bank or trust company is located a petition of appeal in accordance with KRS Chapter 13B.
13. The commissioner may apply to the Circuit Court for the county in which the bank or trust company is located for an injunction to enforce any final order issued under subsection (9) of this section or any assessment made under subsection (11) of this section, and it shall be the duty of the court to issue the injunction.

History. Enact. Acts 1970, ch. 209, § 9; 1982, ch. 251, § 16, effective April 1, 1982; 1984, ch. 324, § 38, effective July 13, 1984; 1992, ch. 77, § 7, effective July 14, 1992; 1996, ch. 318, § 214, effective July 15, 1996; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 646, effective July 15, 2010.

286.3-695. Approval of state-chartered bank officers or directors required in certain instances. [Renumbered]

Any officer or director removed from office pursuant to the provisions of KRS 286.3-690 shall not serve as an officer or director of any state-chartered bank without prior written approval of the commissioner.

History. Enact. Acts 1986, ch. 444, § 15, effective July 15, 1986; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-710. Definitions for KRS 286.3-720 to 286.3-770. [Renumbered]

As used in KRS 286.3-720 and 286.3-770 , unless the context otherwise requires:

1. “Bank” means a bank organized under the laws of this state or of the United States, or any assignee of the bank’s rights under a revolving credit plan.
2. “Credit card” means any single card, plate, or other credit device that is reusable by a debtor from time to time to obtain extensions of credit under a revolving credit plan. Checks, drafts, and similar instruments that can be used only once to obtain a single credit extension are not credit cards.
3. “Debtor” means a person to whom or for whose benefit credit is extended pursuant to a revolving credit plan and any other person having actual, implied, or apparent authority to obtain extensions of credit under such plan for the debtor.
4. To “extend credit” or “extension of credit” means the right granted by a bank to a debtor to defer payment of debt, incur debt and defer its payment, or purchase goods, services, or anything else of value and defer payment therefor pursuant to a revolving credit plan.
5. “Finance charge” means the sum of all charges, payable directly or indirectly by the debtor, and imposed directly or indirectly by a bank as an incident to an extension of credit pursuant to a revolving credit plan, including interest and any amount payable under a point, discount, or other system of additional charges, service or carrying charges, loan fee, finder’s fee or similar charge, fees for an investigation or credit report, or premiums or other charges required by the bank to be purchased from or through it or an agency named by it for any guarantee or insurance protecting the bank against the debtor’s default or other credit loss. The term does not include amounts, if any, collected by the bank, or included in the extension of credit which are fees and charges prescribed by law which actually are or will be paid to public officials for determining the existence of or for perfecting or releasing or satisfying any security related to credit extended pursuant to the plan or taxes.
6. “Revolving credit plan” or “plan” means an arrangement between a bank and a debtor pursuant to which:
   1. The bank may extend credit to the debtor by permitting the debtor to make purchases of goods, services, and anything else of value or obtain loans, from time to time, directly from the bank or indirectly by use of a credit card;
   2. The unpaid balances of purchases made, the principal of loans obtained, and finance and other appropriate charges are debited to the debtor’s account;
   3. A finance charge, if made, is not precomputed, but is computed on the outstanding unpaid balances of the debtor’s account from time to time; and
   4. The bank renders bills or statements to the debtor at regular intervals, which need not be a calendar month (the “billing cycle”), the amount of which bills or statements is payable by and due from the debtor on a specified date stated in such bill or statement or, at the debtor’s option, may be paid in installments.

History. Enact. Acts 1972, ch. 207, § 1; 1984, ch. 324, § 39, effective July 13, 1984; 1984, ch. 349, § 1, effective July 13, 1984; 1998, ch. 196, § 19, effective July 15, 1998; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-720. Form and provisions of credit plan — Disclosures. [Renumbered]

1. A revolving credit plan, and all extensions of credit thereunder, may take such form and contain such provisions, not inconsistent with KRS 286.3-710 to 286.3-770 or otherwise prohibited by law, as the bank may from time to time establish and the debtor may accept, and each extension of credit made by the bank pursuant to such plan, evidenced in any manner provided in such plan, shall be evidence of a loan, which may be prepaid by the debtor under agreed conditions in whole or in part at any time, made by the bank to the debtor in the amount advanced by the bank.
2. Before opening any account under a revolving credit plan, the bank shall deliver or mail to the debtor a statement of the provisions of the plan containing, to the extent applicable, such information as may be required to be disclosed pursuant to Title I of the Federal Consumer Credit Protection Act of 1968 (Pub. L. 90-321) and any amendments, additions or replacements thereto in effect after June 16, 1972, and containing a statement that the debtor may pay the unpaid balance of his account in whole or in part at any time. If two or more persons, all of whom have the same residence are authorized to obtain extensions of credit under the plan, the statement of provisions of the plan shall be delivered or mailed to one (1) of such persons as may be designated in the plan, and the billing statements required by KRS 286.3-730 shall be rendered to such person.
3. A statement of the provisions of a revolving credit plan in effect prior to June 16, 1972, delivered or mailed to a debtor prior to such effective date shall constitute, and be deemed to be, compliance with the provisions of subsection (2) of this section, if such revolving credit plan complies with the provisions of KRS 286.3-710 to 286.3-770 and such statement disclosed the information required by said subsection (2).

History. Enact. Acts 1972, ch. 207, § 2; 2000, ch. 157, § 17, effective July 14, 2000; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-730. Billing cycle — Payment of balance — Payment of credit card charges. [Renumbered]

1. For each billing cycle at the end of which there is an outstanding balance in the debtor’s account or with respect to which a charge permitted by KRS 286.3-710 to 286.3-770 is imposed, the bank shall render a statement to the debtor containing, to the extent applicable, such information as may be required to be included therein pursuant to Title I of the Federal Consumer Credit Protection Act of 1968 (Pub. L. 90-321) and any amendments, additions or replacements thereto in effect after June 16, 1972, and a legend to the effect that the debtor may at any time pay the aggregate balance owing by him or any part thereof.
2. In the event of an extension of credit by a bank hereunder that is affected by the use of a credit card for the purchase of goods or services and that results in payment by the bank directly to a third party, the finance charge as authorized by KRS 286.3-740 shall not be imposed upon the debtor on such extension if payment in full of the entire outstanding unpaid balances owing on the debtor’s account is received at the place designated by the bank by the date of the statement for the next billing cycle.

History. Enact. Acts 1972, ch. 207, § 3; 1984, ch. 349, § 2, effective July 13, 1984; 2000, ch. 157, § 18, effective July 14, 2000; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-740. Finance charges — Rate. [Renumbered]

Notwithstanding the provisions of any other law, a bank may receive or contract to receive and collect a finance charge pursuant to a revolving credit plan in an amount not in excess of one and three-fourths percent (1.75%) per month of either the average daily unpaid balance of the debtor’s account under such plan during the billing cycle, or of the unpaid balance of such account on the same day of each billing cycle. If the billing cycle is other than monthly, the maximum finance charge for such billing cycle shall be the percentage which bears the same relation to one and three-fourths percent (1.75%) as the number of days in the billing cycle bears to thirty (30). A variation of not more than four (4) days from billing cycle to billing cycle shall be deemed “the same day of each billing cycle.”

History. Enact. Acts 1972, ch. 207, § 4; 1984, ch. 349, § 3, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-750. Additional fees, charges and costs. [Renumbered]

In addition to the charges provided in KRS 286.3-740 , a revolving credit plan may provide for the collection of fees not to exceed twenty dollars ($20) annually, and in addition, the following enumerated fees, charges and costs:

1. Delinquency charges not to exceed five dollars ($5) each month if payments required by the plan are not made when due;
2. All fees and closing costs incurred in connection with the taking of a mortgage on real estate if bona fide and not retained by the bank; and
3. Reasonable attorney’s fees and court costs provided that the account is referred to an attorney not a salaried employee of the bank or holder for collection.

History. Enact. Acts 1972, ch. 207, § 5; 1984, ch. 349, § 4, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-760. Limitation on amount charged. [Renumbered]

Except as provided in KRS 286.3-710 to 286.3-770 , no further amounts shall be directly or indirectly charged, contracted for, or received by the bank for the extension of credit or the forbearance of collection of debt pursuant to any revolving credit plan or any extension of credit thereunder.

History. Enact. Acts 1972, ch. 207, § 6; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-765. “Credit card guaranty” defined — Requirement to insure validity. [Renumbered]

1. As used in this section, “credit card guaranty” means an agreement pursuant to which a natural person assumes liability for indebtedness to a bank incurred by use of a credit card without receiving the contractual right to obtain extensions of credit under the account for which the credit card is issued.
2. No credit card guaranty shall be valid or enforceable unless it is in writing signed by the guarantor and contains a provision specifying the amount of the maximum aggregate liability of the guarantor thereunder.

History. Enact. Acts 1988, ch. 236, § 1, effective July 15, 1988; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-770. Credit plans not invalidated. [Renumbered]

The provisions of KRS 286.3-710 to 286.3-770 shall not invalidate or make unlawful any revolving credit plan or extensions of credit thereunder in effect or made prior to June 16, 1972.

History. Enact. Acts 1972, ch. 207, § 7, effective June 16, 1972; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-800. Recognition of adverse claim to a deposit. [Renumbered]

Notice to any bank doing business in the Commonwealth of any adverse claim to a deposit standing on its books to the credit of any person shall not be effective to cause the bank to recognize the adverse claim unless the adverse claimant shall also either:

1. Procure a restraining order, injunction, or other appropriate process against the bank from a court of competent jurisdiction, where the person to whose credit the deposit stands is made a party to the action and served with summons; or
2. Execute to such bank, in form and with sureties acceptable to it, a bond indemnifying the bank from any and all liability, loss, damage, costs, and expenses, for and on account of the payment of the adverse claim or the dishonor of any check or other order of the person to whose credit the deposit stands on the books of the bank.

History. Enact. Acts 1978, ch. 362, § 1, effective June 17, 1978; renum 2006, ch. 247, § 38, effective July 12, 2006.

286.3-820. Operation of loan production office by bank.

1. For the purpose of this section:
   1. “Loan production office” means a bank office located at a place other than the principal or branch office, at which bank employees solicit and originate loans for final approval and disbursement of funds at the principal or branch office; and
   2. “Disbursement of funds” is the process by which a bank officer in a principal or branch office issues a negotiable instrument at the principal or branch office.
2. A bank, except for a bank that the commissioner may designate by the promulgation of administrative regulations, shall apply to the commissioner for permission to establish a loan production office. The commissioner shall approve the application unless he or she finds that:
   1. The proposed operation of the loan production office is not in accordance with this section;
   2. The financial standing, moral character, and capability of the bank and its management which proposes to operate a loan production office will jeopardize the financial stability of the bank;
   3. There is no reasonable assurance of sufficient volume of business for the proposed loan production office to be successful; and
   4. The public convenience and advantage will not be promoted by the opening of the proposed loan production office.
3. All extensions of credit originated in a loan production office shall be in accordance with disclosure provisions, usury rates, and other fees and charges authorized by law for banks.
4. Loan production offices shall not accept deposits or conduct any other banking functions except those enumerated in paragraph (a) of subsection (1) of this section.
5. The commissioner may examine the operations of any loan production office for the purpose of determining that the scope of its activities does not exceed that allowed in this section. Banks operating loan production offices shall maintain copies of records relating to extensions of credit originated in loan production offices at the principal office for examination purposes.
6. The application and appeal process set forth in KRS Chapter 13B and the cease and desist powers of the commissioner set forth in KRS 286.3-690 shall apply to loan production offices.

History. Enact. Acts 1984, ch. 336, § 1, effective July 13, 1984; 1996, ch. 318, § 216, effective July 15, 1996; 1998, ch. 196, § 28, effective July 15, 1998; 2006, ch. 183, § 13, effective July 12, 2006; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 647, effective July 15, 2010.

286.3-850. Definitions. [Renumbered]

As used in KRS 286.3-852 through 286.3-884 :

1. “Bank” means any bank, which is now or may hereafter be organized under the laws of this state;
2. “FDIC” means the Federal Deposit Insurance Corporation and includes any successor to the corporation or other agency or instrumentality of the United States which undertakes to discharge the purposes of the corporation;
3. “Receivership court” means the Circuit Court for the county in which the bank is located; and
4. “Insolvent” means that appearing upon examination of any bank its liabilities exceed its assets or it cannot meet its obligations in the usual and ordinary course of business for any reason.

History. Enact. Acts 1984, ch. 324, § 41, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-852. Applicability of KRS 286.3-850 to 286.3-884. [Renumbered]

KRS 286.3-850 to 286.3-884 is applicable to all state banks the deposits of which are to any extent insured by the FDIC.

History. Enact. Acts 1984, ch. 324, § 42, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-854. Closing of bank by commissioner — Written statement of grounds — Appointment of receiver.

1. The commissioner may take possession and close a bank for purposes of liquidation in any case in which the commissioner finds that the bank:
   1. Is insolvent;
   2. Has permitted capital to become impaired to a level which does not permit the bank to operate in a safe and sound manner;
   3. Has had insurance of depositors’ accounts terminated by the FDIC; or
   4. Has requested through its board of directors that the commissioner take possession for the benefit of depositors, other creditors and shareholders.
2. If the commissioner has taken possession of and closed a bank for purpose of liquidation, the commissioner shall forthwith issue a written finding of one (1) or more of the grounds for closing provided in this section and shall appoint a receiver for the bank. The commissioner shall immediately thereafter apply to the receivership court for confirmation of the appointment of a receiver. The court shall act upon the application forthwith and may proceed without notice to any person.

History. Enact. Acts 1984, ch. 324, § 43, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 648, effective July 15, 2010.

286.3-856. Tender of appointment as receiver to FDIC.

The commissioner shall tender appointment as receiver to the FDIC if any deposits in the closed bank are insured by the FDIC. Upon acceptance of the appointment as receiver, the FDIC shall not be required to post bond.

History. Enact. Acts 1984, ch. 324, § 44, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 649, effective July 15, 2010.

286.3-858. Vesting of assets in receiver. [Renumbered]

Upon confirmation of the appointment of a receiver, title to all assets of the bank shall vest in the receiver without the execution of any instruments of conveyance, assignment, transfer or endorsement.

History. Enact. Acts 1984, ch. 324, § 45, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-860. Notice of closing to be posted — Effect.

Immediately after closing any state bank for purposes of liquidation under the provisions of KRS 286.3-854 , the commissioner shall post an appropriate notice of closing at the main entrance of the bank, and thereafter no judgment lien, attachment lien or any voluntary lien shall attach to any asset of said bank, nor shall the directors, officers or agents of such bank thereafter have authority to act on behalf of said bank or to convey, transfer, assign, pledge, mortgage or encumber any assets thereof.

History. Enact. Acts 1984, ch. 324, § 46, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 650, effective July 15, 2010.

286.3-862. Powers and duties of receiver. [Renumbered]

1. A receiver shall have the following powers:
   1. To take possession of all books, records and assets of the bank;
   2. To collect all debts, claims and judgments belonging to the bank, and to do such other acts as are necessary to preserve and liquidate its assets;
   3. To execute in the name of the bank any instrument necessary or proper to effectuate its powers or perform its duties as receiver;
   4. To initiate, pursue and defend litigation involving any right, claim, interest or liability of the bank;
   5. To exercise any and all fiduciary functions of the bank as of the date of appointment as receiver;
   6. Subject to the approval of the receivership court, to borrow money as necessary in the liquidation of the bank, and to secure such borrowings by the pledge or mortgage of bank assets; the repayment of money borrowed under this subsection and interest thereon shall be considered an expense of administration under KRS 286.3-872 ;
   7. Subject to the approval of the receivership court, to abandon or convey title to any holder of a mortgage, security deed, security interest or lien against property in which the bank has an interest, whenever the receiver determines that to continue to claim such interest is burdensome and of no advantage to the bank, its depositors, creditors or shareholders;
   8. Subject to the approval of the receivership court, to sell any and all real and personal property, to compromise any debt, claim or judgment due to the bank and to discontinue any action or other proceeding pending therefor; and
   9. Subject to the approval of the receivership court, to avoid preferential transfers as defined in KRS 286.3-864 .
2. A receiver shall have the following duties:
   1. To collect, preserve, and liquidate the bank’s assets as expeditiously as is compatible with the best interests of the bank and its depositors, creditors and shareholders;
   2. To file with the receivership court:
      1. A detailed statement of the assets and liabilities of the bank within thirty (30) days of confirmation; and
      2. A report of its actions in the administration of the liquidation proceedings, together with such other information as the receivership court may require, every ninety (90) days thereafter;
   3. To examine claims and reject any claim that is improper; and
   4. Unless the receivership court orders otherwise, furnish such information concerning the bank and the administration of the liquidation proceedings as is requested by a depositor, creditor or shareholder.

History. Enact. Acts 1984, ch. 324, § 47, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-864. “Preference” defined. [Renumbered]

1. A preference is a transfer of any of the property of the bank:
   1. To or for the benefit of a creditor;
   2. For or on account of an antecedent debt owed by the bank before such transfer was made;
   3. Made while the bank was insolvent;
   4. Made:
      1. On or within ninety (90) days before the date of the closing of a bank under KRS 286.3-854 if such creditor had reasonable cause to believe the bank was insolvent at the time of such transfer; or
      2. On or within one (1) year before the date of the closing of a bank under KRS 286.3-854 if such creditor was a director, officer or person in control of the state bank and had reasonable cause to believe the bank was insolvent at the time of such transfer; and
   5. That enables such creditor to obtain a greater percentage of his debt than some other creditor of the same class.
2. A preference does not include a transfer:
   1. To the extent that such transfer was a substantially contemporaneous exchange for new value given to the bank; or
   2. To the extent that such transfer was made in payment of a debt incurred in the ordinary course of the bank’s business made not later than forty-five (45) days after such debt was incurred.

History. Enact. Acts 1984, ch. 324, § 48, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-866. Sale of assets by receiver — Borrowing from FDIC by receiver. [Renumbered]

The receiver may, with ex parte approval of the receivership court, sell all or any part of the bank’s assets to another state or national bank or to the FDIC, provided that the effect of such sale shall not be to prefer one (1) or more members of a class of creditors, including uninsured deposit liabilities, over other members of the same class of creditors as set forth in KRS 286.3-870 . In like manner the receiver may borrow from the FDIC any amount necessary to facilitate the assumption of deposit liabilities by a newly chartered or existing bank, assigning any part or all of the assets of the bank as security for such loan.

History. Enact. Acts 1984, ch. 324, § 49, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-868. Claims procedure — Publication — Rejection of claim — Petition to receivership court. [Renumbered]

All parties having claims against the bank shall present their claims substantiated by legal proof to the receiver within one hundred eighty (180) days after the bank closing. The receiver shall cause notice of the claims procedure prescribed by this section to be published once a week for twelve (12) consecutive weeks in a local newspaper of general circulation and to be mailed to each person whose name appears as a creditor upon books of the bank, at his last address of record. The receiver shall notify in writing any claimant whose claim has been rejected within one hundred eighty (180) days following receipt of his claim. Notice shall be effective when mailed. Any claimant whose claim has been rejected by the receiver may petition the receivership court for a hearing on his claim within sixty (60) days from the date his claim is rejected.

History. Enact. Acts 1984, ch. 324, § 50, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-870. Late claim’s share in undistributed assets. [Renumbered]

Any claim filed after the one hundred eighty (180) day claim period prescribed by KRS 286.3-868 and subsequently accepted by the receiver or allowed by the receivership court, shall be entitled to share in the distribution of assets only to the extent of the undistributed assets in the hands of the receiver on the date such claims are accepted or allowed.

History. Enact. Acts 1984, ch. 324, § 51, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-872. Order of payment of claims. [Renumbered]

1. All claims against the bank’s estate, approved by a court of competent jurisdiction, shall be paid in the following order:
   1. The actual and necessary administration expenses of the liquidation;
   2. Claims given priority under other provisions of state or federal law;
   3. General liabilities;
   4. Debt subordinated to the claims of depositors and general creditors; and
   5. Equity capital securities.
2. No interest on any claim shall be paid until all claimants within the above-named classes have received the full principal amount of their claims.
3. All accepted or approved claims within the same class shall be paid pro rata and without preference. Each secured creditor shall be entitled to prove for, and receive dividends upon, his claim to the extent that such claim exceeds the value of the property securing it.

History. Enact. Acts 1984, ch. 324, § 52, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-874. Rights of receiver under participation agreements. [Renumbered]

The granting of a participation in a loan or other asset shall, unless otherwise expressly so stated in the participation agreement or certificate, constitute a sale and assignment of, and transfer of ownership in, a proportionate interest in the loan or other asset and in all security interests, guaranties, and other rights granted under the loan agreement, the note, and all documents of any nature related to the loan or other asset, whether such documents are contemporaneously or thereafter executed. The perfection of a security interest in personal property or the filing of a lien on real property by the selling bank shall be deemed perfection or filing on behalf of each participant, whether or not such participant shall be a participant at the time of such perfection or filing. Upon the closing of a bank under KRS 286.3-854 , the receivership estate shall have no interest in such proportionate interests in the loan or other asset, or in any security therefor or any rights therein, therefore, sold a participant, such rights passing, to the extent such rights have not previously passed to the participant without further action on the part of the selling bank or participant. The receiver shall have no greater rights under any participation agreement than did the closed bank immediately prior to its closing.

History. Enact. Acts 1984, ch. 324, § 53, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-876. Receiver’s election to reject a lease — Effect. [Renumbered]

Within one hundred eighty (180) days of the date of the closing of a bank, the receiver may at his election reject any lease to which the closed bank is a party without any further liability to the closed bank. The receiver’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 (6) months’ payment.

History. Enact. Acts 1984, ch. 324, § 54, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-878. FDIC subrogated to rights of depositors. [Renumbered]

Whenever the FDIC pays or makes available for payment the insured deposit liabilities of a closed bank, the FDIC, whether or not it acts as receiver, shall be subrogated to all rights of depositors against the closed bank to the same extent as subrogation is provided for in the Federal Deposit Insurance Act, 12 U.S.C. secs. 1811 et seq., in the case of a national bank.

History. Enact. Acts 1984, ch. 324, § 55, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-880. Receiver to appoint successor to bank’s rights, assets, obligations. [Renumbered]

1. The receiver, with the approval of the receivership court, has the authority to appoint a successor to all rights, obligations, assets, deposits, agreements and trusts held by the closed bank as trustee, administrator, executor, guardian, agent and all other fiduciary or representative capacities. The successor’s duties and obligations commence upon appointment to the same extent binding upon the former bank and as though the successor had originally assumed such duties and obligations. Specifically, the successor shall succeed to and be entitled to administer all trusteeships, administrations, executorships, guardianships, agencies and all other fiduciary or representative proceedings to which the closed bank is named or appointed in wills, whenever probated, or to which it is appointed by any other instrument, court order or by operation of law.
2. Nothing in this section shall be construed to impair any right of the grantor or beneficiaries of trust assets to secure the appointment of a substituted trustee or manager.
3. Within thirty (30) days after appointment, the successor shall give written notice, insofar as practicable, to all interested parties named in the books and records of the bank or in trust documents held by it that such successor has been appointed in accordance with state law.

History. Enact. Acts 1984, ch. 324, § 56, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-882. KRS 286.3-850 to 286.3-884 is exclusive procedure for appointment of receiver or liquidating agent. [Renumbered]

KRS 286.3-850 to 286.3-884 provides the exclusive procedure for the appointment of a receiver or other liquidating agent of a bank under the laws of this state.

History. Enact. Acts 1984, ch. 324, § 57, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-884. Destruction of closed bank’s records. [Renumbered]

Subject to the approval of the receivership court the closed bank’s records may be destroyed after receiver determines that there is no further need for them.

History. Enact. Acts 1984, ch. 324, § 58, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-900. Definitions of terms used in this section and KRS 286.3-905 — Acquisition of in-state banks — Limitations — In-county merger or consolidation.

1. For purposes of this section and KRS 286.3-905 :
   1. “Bank” means any institution organized under this subtitle, the banking laws of another state, or the National Bank Act, as amended, to do a banking business;
   2. “Bank holding company,” “company,” and “control” have the meanings accorded them in the Federal Bank Holding Company Act of 1956, as amended (12 U.S.C. secs. 1841 et seq.). “Control” may be acquired by acquisition of voting securities, by purchase of assets, by merger or consolidation, by contract, or otherwise;
   3. “Individual” means a natural person, partnership, association, business trust, voting trust, or similar organization. “Individual” does not include a corporation; and
   4. “Deposit” has the meaning accorded it in the Federal Deposit Insurance Act, as amended, and regulations promulgated thereunder; excluded, however, from deposits are all interbank deposits and all deposits in foreign branches and international banking facilities, as shown in the reports made by all federally insured depository institutions to their respective supervisory authorities.
2. No individual or bank holding company wherever located may acquire control of any bank or bank holding company if, upon the acquisition, the individual or bank holding company would control banks in this state holding more than fifteen percent (15%) of the total deposits and member accounts in the offices of all federally insured depository institutions in this state as reported in the most recent June 30 quarterly report made by the institutions to their respective supervisory authorities which are available at the time of the acquisition.
3. The limitations set forth in this section or any other provision of this subtitle or any administrative regulation promulgated thereunder, as now in effect or amended after July 13, 1984, shall not apply to the acquisition of a bank if, in his or her discretion, the commissioner, if the bank is organized under the laws of this state, or the comptroller of the currency, if the bank is a national bank, determines that an emergency exists and the acquisition is appropriate in order to prevent the probable failure of the bank which is closed or is in danger of closing.
4. The provisions of this section shall not be construed to prohibit or restrict the merger or consolidation of banks or bank holding companies having their principal places of business in the same county and the operation by the merged or consolidated corporation of the banks, nor to prohibit the sale of any bank or bank holding company to, and the purchase thereof by, any other bank or bank holding company with its principal place of business in the same county and the operation of the bank as a branch so long as the provisions of KRS 286.3-180 (4) have been satisfied.

History. Enact. Acts 1984, ch. 130, § 1, effective July 13, 1984; 1986, ch. 444, § 12, effective July 15, 1986; 1992, ch. 226, § 2, effective July 14, 1992; 1996, ch. 338, § 19, effective July 15, 1996, retroactive to September 29, 1995; 2000, ch. 135, § 3, effective July 14, 2000; 2000, ch. 279, § 6, effective July 14, 2000; 2001, ch. 112, § 2, effective June 21, 2001; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 651, effective July 15, 2010.

286.3-905. Filing of application to acquire bank with commissioner — Examination of applicant — Cooperative agreements by commissioner to examine out-of-state bank or exchange confidential information.

1. Any bank holding company which proposes to acquire control of a bank chartered in this state or a bank holding company which includes a bank chartered in this state, shall concurrently file with the commissioner copies of the application filed with the federal reserve board under applicable federal law. The commissioner shall approve such acquisition within ninety (90) days of acceptance of a complete application if the commissioner finds that:
   1. The terms of the acquisition are in accordance with the laws of this state;
   2. The financial condition, or the competence, experience, and integrity of the acquiring company or its principals are such as will not jeopardize the financial stability of the acquired bank or bank holding company;
   3. The public convenience and advantage will be served by the acquisition; and
   4. No federal regulatory authority whose approval is required has disapproved the transaction because it would result in a monopoly or substantially lessen competition.
2. A nonrefundable fee shall accompany each application and shall be set by the commissioner in accordance with KRS 286.3-480 .
3. The commissioner may examine or elect to participate in a joint examination, with the applicable federal or state regulatory agency, of any holding company or nonbank subsidiary of the holding company that controls or is affiliated with a state-chartered bank. The provisions of KRS 286.3-690 apply to the holding company or nonbank subsidiary of the holding company that controls or is affiliated with a state-chartered bank.
4. The commissioner may enter into cooperative agreements with federal or state regulatory authorities to examine an out-of-state bank that is controlled by a Kentucky bank holding company or is controlled by a bank holding company which includes a state-chartered bank, or accept reports of examinations of such out-of-state banks from federal or state regulatory authorities in lieu of conducting examinations.
5. The commissioner may enter into cooperative agreements with federal or state regulatory authorities to exchange confidential information and reports of examination relating to interstate acquisitions of banks and bank holding companies.
6. The cost of an examination shall be assessed against and paid by the company examined. The assessment for the examination shall be calculated in the same manner as that used for bank examinations.

History. Enact. Acts 1984, ch. 130, § 3, effective July 13, 1984; 1986, ch. 444, § 13, effective July 15, 1986; 1998, ch. 196, § 20, effective July 15, 1998; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 652, effective July 15, 2010.

286.3-910. Illegal acquisitions. [Renumbered]

For purposes of this subtitle, it shall be illegal for any individual, corporation or bank holding company to directly or indirectly acquire, control, hold, charter, convert or operate any bank, as defined in KRS 286.3-900 , located in this state which is an “insured bank” or eligible to become an “insured bank” as that term is defined in the Federal Deposit Insurance Act, which does not both accept deposits that the depositor has the legal right to withdraw on demand and actively engage in the business of making commercial loans.

History. Enact. Acts 1986, ch. 444, § 14, effective July 15, 1986; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.3-915. Bank combinations — Operation of a combined bank as a branch of the surviving bank — Transfer of combined bank’s main office and branches — Definitions.

1. Notwithstanding any other provision of Subtitle 1, 2, or 3 of KRS Chapter 286:
   1. An individual or bank holding company that controls two (2) or more banks having their principal offices in this Commonwealth may, from time to time, combine any or all of the commonly controlled banks in this Commonwealth into and with any one (1) of the banks, and thereafter the surviving bank, which shall have its principal office in this Commonwealth, shall continue to operate its principal office and may operate the other authorized offices of the banks so combined as branches of the surviving bank; and
   2. Any combination authorized by this section shall not require the approval of the commissioner of financial institutions, but on or before thirty (30) days prior to consummation of any combination, the proposed surviving bank shall notify the commissioner of the combination, and on the effective date of any such combination the charter of any combined bank organized under the laws of this Commonwealth shall be surrendered.
2. Following any combination authorized by this section:
   1. The surviving bank may, subject to the approval of the commissioner as provided in KRS 286.3-180 (2), establish and operate additional branches in any county where any bank involved in the combination had established a branch or main office;
   2. The surviving bank shall maintain a record of the deposits in each of its offices resulting from such combination or thereafter established as provided in paragraph (a) of this subsection; and
   3. With the approval of the commissioner, all of a bank’s offices in a county may be transferred, by a purchase and assumption or other transaction, by the bank to a newly chartered bank having its principal office in the same county, or to an existing bank.
3. For purposes of this section:
   1. The term “combine” or “combination” includes a merger or the acquisition of all or substantially all of the assets of a bank already controlled by an individual or bank holding company;
   2. An individual or bank holding company “controls” a bank if that individual or company, directly or indirectly, owns, controls, or has the power to vote at least eighty percent (80%) of the issued and outstanding voting securities of the bank;
   3. “Combined bank” means any bank participating in a combination authorized by this section other than the surviving bank;
   4. “Surviving bank” means a bank into which a combined bank has been combined;
   5. “Bank” includes a national bank, savings and loan association, and federal savings bank; and
   6. “Individual,” “bank holding company,” and “deposit” shall have the same meanings attributed to them in KRS 286.3-900 (1).

History. Enact. Acts 1990, ch. 181, § 1, effective July 13, 1990; 1996, ch. 254, § 38, effective July 15, 1996; 1996, ch. 338, § 20, effective July 15, 1996; 1998, ch. 196, § 21, effective July 15, 1998; 2000, ch. 135, § 4, effective July 14, 2000; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 653, effective July 15, 2010; 2010, ch. 28, § 18, effective July 15, 2010.

286.3-920. Interstate merger transactions — Restrictions — Combinations of commonly controlled banks — Scope of activities of branch outside home state.

1. As used in this section, unless the context requires otherwise:
   1. “Interstate merger transaction” means 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; and
   2. “Resulting bank” means a bank that has resulted from an interstate merger transaction under this section.
2. A Kentucky state bank may establish, maintain, and operate one (1) or more branches in a state other than Kentucky in accordance with an interstate merger transaction in which the Kentucky state bank is the resulting bank, or if the other state permits, by acquisition of a branch or branches in the other state. Not later than the date on which the required application for the interstate merger transaction or branch acquisition is filed with the responsible federal bank supervisory agency, the applicant shall file an application on a form prescribed by the commissioner and pay the fee prescribed by KRS 286.3-480 . The applicant shall also comply with the applicable provisions of KRS 286.3-180 (2) and the commissioner shall base his or her approval or disapproval in the same manner as prescribed in KRS 286.3-180 (2).
3. An out-of-state state bank may establish, maintain, and operate one (1) or more branches in Kentucky in accordance with an interstate merger transaction in which the out-of-state state bank is the resulting bank in accordance with the requirements of Kentucky laws and administrative regulations. If the laws of the home state of the out-of-state bank place more restrictive terms or requirements on Kentucky state banks seeking to acquire and merge with a bank in that state, the interstate merger of the out-of-state bank may be allowed only under substantially the same terms and conditions as applicable to Kentucky state banks in that state. Not later than the date on which the required application for the interstate merger transaction is filed with the responsible federal bank supervisory agency, the applicant shall file an application on a form prescribed by the commissioner, pay the fee prescribed by KRS 286.3-480 , and agree in writing to comply with the laws of this state applicable to its operation of branches in Kentucky. The applicant shall also comply with the applicable provisions of KRS 286.3-180 (2) and the commissioner shall base his or her approval or disapproval in the same manner as prescribed in KRS 286.3-180 (2).
4. No interstate merger transaction under subsection (2) or (3) of this section shall be approved if the transaction would result in a bank holding company having control of banks or branches in this state holding more than fifteen percent (15%) of the total deposits and member accounts in the offices of all federally insured depository institutions in this state as reported in the most recent June 30 quarterly report made by the institutions to their respective supervisory authorities which are available at the time of the transaction.
5. An individual or bank holding company that controls two (2) or more banks may, from time to time, combine any or all of the commonly controlled banks in this Commonwealth into and with any one (1) of the banks, and thereafter the surviving bank shall continue to operate its principal office and may operate the other authorized offices of the banks so combined as branches of the surviving bank.
6. 1. A branch of an out-of-state state bank may conduct any activities that are authorized under the laws of this state for state banks. Additionally, the branch of an out-of-state state bank is authorized to conduct any activities relating to the administration of trusts that are authorized under the laws of its home state, if the activities are conducted in conformity with the laws of its home state. (6) (a) A branch of an out-of-state state bank may conduct any activities that are authorized under the laws of this state for state banks. Additionally, the branch of an out-of-state state bank is authorized to conduct any activities relating to the administration of trusts that are authorized under the laws of its home state, if the activities are conducted in conformity with the laws of its home state.
   2. A branch office of an out-of-state bank may conduct any fiduciary activities that are authorized under the laws of this state for banks, provided that a branch office of a Kentucky bank is permitted, pursuant to the laws of the state under which the out-of-state bank is organized to engage in substantially similar activities.
7. A branch of a Kentucky state bank located in a host state may conduct any activities that are:
   1. Authorized under the laws of the host state for banks chartered by the host state; or
   2. Authorized for branches of national banks located in the host state, but whose principal location is in a state other than the host state.

History. Enact. Acts 1996, ch. 338, § 2, effective June 1, 1997; 1998, ch. 196, § 22, effective July 15, 1998; 2000, ch. 135, § 5, effective July 14, 2000; 2000, ch. 279, § 7, effective July 14, 2000; 2004, ch. 13, § 1, effective July 13, 2004; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 654, effective July 15, 2010; 2011, ch. 67, § 6, effective June 8, 2011.

286.3-990. Penalties.

1. Any person who violates KRS 286.3-030 (2) may be fined not less than five hundred dollars ($500) nor more than one thousand dollars ($1,000) for each day he or she is engaged in the private banking business.
2. Any institution that fails to make the report required by KRS 286.3-420 to the commissioner within five (5) days after the report is due or demanded, or that fails to have the report published as required by KRS 286.3-420 , may be assessed and, if assessed, shall pay a penalty of two hundred dollars ($200).
3. If any person violates KRS 286.3-440(3) his or her office shall ipso facto become vacant. The president or cashier of any bank or trust company to which any person becomes indebted in violation of KRS 286.3-440(3) shall immediately report such fact to the commissioner, who may remove the person so offending.
4. Any receiver of an insolvent institution who fails to comply with the provisions of this subtitle shall be subject to the same penalties provided for solvent institutions and officers so offending.
5. Any directors of a bank who knowingly violate, or knowingly permit any officer or employee of the bank to violate, any of the laws relating to banks, shall be jointly and severally liable to the creditors and stockholders for any loss or damage resulting from such violation. If the loss or damage is not made good within a reasonable time, the commissioner, with the consent of the Attorney General, shall institute proceedings to revoke the corporate powers of the bank.
6. Any deputy commissioner or any examiner who has knowledge of the insolvency or unsafe condition of a state bank or trust company, or that it is inexpedient to permit the bank or trust company to continue business, and who fails to immediately present a signed report of such facts to the commissioner, or who violates any of the provisions of this subtitle, shall forfeit his or her office and shall be fined not less than one hundred ($100) nor more than two thousand dollars ($2,000) for each offense.
7. Any commissioner who has knowledge of the insolvency or unsafe condition of a state bank or trust company, or that it is inexpedient to permit the bank or trust company to continue business, and who willfully fails to take the action prescribed by this subtitle, or who violates any of the provisions of this subtitle, shall forfeit his or her office and shall be fined not less than five hundred ($500) nor more than five thousand dollars ($5,000) for each offense.
8. Any bank or trust company that knowingly fails to make a report required by law or by the commissioner within the time designated for the making thereof, or fails to include in such report any matter required by law or by the commissioner, or fails to publish a report within thirty (30) days after it should have been published, or fails to pay when due the fees for filing reports or for an examination of the bank, shall be subject to a penalty of one hundred dollars ($100) for each day of delinquency, but the aggregate penalty for each kind of offense shall not exceed one thousand dollars ($1,000).
9. Each person, bank, or trust company that willfully makes or transmits a false report or refuses to submit its books, papers, and assets for examination, or any officer of a bank who refuses to be examined under oath concerning the affairs of the bank, shall be severally fined not less than five hundred dollars ($500) nor more than five thousand dollars ($5,000).
10. Whenever any fine imposed by subsection (1), (2), (4), (6), (7), (8), (9), (15), (16), (17), or (18) of this section is not paid, the Attorney General shall institute an action, in the name of the state, in the Franklin Circuit Court or the Circuit Court of the county in which the offense was committed, for the recovery of the fine.
11. Any person violating any of the provisions of KRS 286.3-225 shall be guilty of a misdemeanor and fined not less than fifty dollars ($50) nor more than two thousand dollars ($2,000).
12. Any person who willfully makes charges in excess of those permitted by KRS 286.3-720 to 286.3-770 shall be guilty of a misdemeanor and upon conviction shall be punished by a fine not exceeding five hundred dollars ($500) or by imprisonment for not more than six (6) months, or both.
13. Any bank which violates any provision of KRS 286.3-720 to 286.3-770 , except as a result of an accidental or bona fide error, shall be barred from the recovery of any finance charges permitted by KRS 286.3-740 and 286.3-750 , and the debtor, or the debtor’s legal representatives, may recover back, in an action against the bank, any amounts paid to the bank on account of such finance charge; provided such action is commenced within two (2) years from the date such violation first occurred; but the bank may nevertheless recover from the debtor an amount equal to the principal of extensions of credit made pursuant to a revolving credit plan and any charges not prohibited by KRS 286.3-760 .
14. Notwithstanding the provisions of subsections (12) and (13) of this section, any failure, other than a willful and intentional failure, to comply with any provisions of KRS 286.3-710 to 286.3-770 may be corrected during the billing cycle next succeeding the receipt by the bank of written notice thereof from the debtor, and if so corrected, the bank shall not be subject to any penalty under KRS 286.3-710 to 286.3-770 .
15. Any bank or trust company which violates or any officer, director, employee, agent, or other person participating in the conduct of the affairs of a bank who violates the terms of any order issued under KRS 286.3-690 which has become final shall forfeit and pay a fine of not more than one thousand dollars ($1,000) per day for each day such violation continues. The fine shall be assessed by the commissioner by written notice. As used in this subsection, the term “violates” includes any action causing, participating in, counseling, aiding, or abetting a violation. In determining the amount of the fine the commissioner shall consider the financial resources and good faith of the bank or person charged, the gravity of the violation, the history of previous violations and such other factors as justice requires.
16. Any bank which violates the provisions of KRS 286.3-065 may be fined not less than one hundred dollars ($100) nor more than five hundred dollars ($500). The fines may be assessed by the commissioner by written notice.
17. Any bank which violates any provisions of KRS 286.3-100 (10) may be fined not less than one thousand dollars ($1,000) nor more than two thousand dollars ($2,000) for the first violation, and may be fined not less than two thousand dollars ($2,000) nor more than five thousand dollars ($5,000) for any subsequent violations.
18. Any officer or director who violates the provisions of KRS 286.3-280 (1) or (2) may be fined not less than one hundred dollars ($100) nor more than five hundred dollars ($500) for each violation, and any officer or director who violates the provisions of KRS 286.3-280 (3) may be fined not less than five hundred dollars ($500) nor more than two thousand dollars ($2,000) for each violation. The fine may be assessed by the commissioner by written notice.

History. 165a-7, 165a-12, 165a-13, 165a-14, 583a-2, 597, 598, 602a-2: amend. Acts 1944, ch. 11; 1966, ch. 255, § 283; 1972, ch. 207, § 8; 1974, ch. 406, § 312, effective January 1, 1975; 1982, ch. 251, § 17, effective April 1, 1982; 1984, ch. 130, § 4, effective July 13, 1984; 1984, ch. 324, § 59, effective July 13, 1984; 1986, ch. 444, § 16, effective July 15, 1986; 1992, ch. 77, § 23, effective July 14, 1992; 1996, ch. 338, § 21, effective July 15, 1996; 1998, ch. 196, § 29, effective July 15, 1998; 2006, ch. 183, § 14, effective July 12, 2006; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 655, effective July 15, 2010.

286.4-410. Definitions — Application of subtitle.

1. As used in this subtitle, unless the context requires otherwise:
   1. “Applicant” means a person filing an application under this subtitle;
   2. “Consumer loan company” means a person licensed under this subtitle to engage in the business of making loans to a consumer for personal, family, or household use in the amount or value of fifteen thousand dollars ($15,000) or less;
   3. “Control” means the power to direct the management or policies of a licensee or applicant, whether through ownership of securities, by contract, or otherwise;
   4. “Executive officer” means a natural person holding the title or responsibility of president, vice president, chief executive officer, chief financial officer, chief operational officer, or chief compliance officer;
   5. “Licensee” means a person licensed under this subtitle;
   6. “Managing principal” means a natural person who meets the requirements of KRS 286.4-450 and actively participates in and is primarily responsible for the operations of a licensee;
   7. “Material fact” means a fact that a reasonable person knows, or should know, that could reasonably be expected to influence any decision or action taken by the commissioner under this subtitle;
   8. “Nationwide consumer reporting agency” means a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis as defined by Section 603(p) of the Fair Credit Reporting Act, 15 U.S.C. sec. 1681 a(p); and
   9. “Person in control of a licensee or applicant” means, with respect to an applicant or licensee, any of the following:
      1. A director, general partner, or executive officer;
      2. In the case of a limited liability company, a managing member or manager;
      3. Any person who directly or indirectly has the right to vote twenty-five percent (25%) or more of a class of voting securities;
      4. Any person who has the power to sell or direct the sale of twenty-five percent (25%) or more of a class of voting securities;
      5. In the case of a partnership or limited liability company, any person that has the right to receive twenty-five percent (25%) or more of the capital upon dissolution; or
      6. Any person that exercises control.
2. This subtitle shall not apply to any person doing business under and as permitted by any law of this state or of the United States relating to banks, savings banks, trust companies, savings and loan associations, agricultural cooperative associations, credit unions, industrial loan companies, or licensed pawnbrokers. This subtitle does not apply to the purchase or acquisition, directly or indirectly, of notes, chattel mortgages, installment or conditional sales contracts, embodying liens or evidencing title retention arising from the bona fide sale of goods or services by a seller of the goods or services.

History. Enact. Acts 1960, ch. 204, § 1, effective June 16, 1960; 1984, ch. 388, § 7, effective July 13, 1984; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 656, effective July 15, 2010; 2019 ch. 120, § 1, effective June 27, 2019.

286.4-420. License required for finance companies — Evidence of existing licenses.

No person shall, without first obtaining a license from the commissioner, engage in the business of making loans in the amount or of the value of fifteen thousand dollars ($15,000) or less at a greater rate of interest, or consideration therefor than otherwise permitted by law. All persons licensed under the provisions of this subtitle on July 15, 1982, are licensed to make loans pursuant to this subtitle, and the commissioner shall, upon request, deliver evidence of licensing within ninety (90) days of such request.

History. Enact. Acts 1960, ch. 204, § 2; 1970, ch. 48, § 1; 1980, ch. 107, § 1, effective July 1, 1980; 1982, ch. 53, § 2, effective July 15, 1982; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 657, effective July 15, 2010.

286.4-425. Commissioner’s coordination with State Regulatory Registry and other agencies.

1. As used in this section, “registry” means the State Regulatory Registry, LLC, or its successor organization.
2. When an application, report, or approval request is required under this subtitle to be filed with the commissioner, the commissioner may require, by administrative regulation or order, that the filing, including any applicable fees and any supporting documentation, be submitted to:
   1. The State Regulatory Registry, LLC, or its successor organization;
   2. The registry’s parent, affiliate, or operating subsidiary; or
   3. Other agencies or authorities as part of a nationwide licensing system, which may act as an agent for receiving, requesting, and distributing information to and from any source directed by the commissioner.
3. The commissioner may report violations of this subtitle, enforcement actions, and other relevant information to the registry, notwithstanding any provision of this subtitle to the contrary.
4. The commissioner may use the registry as an agent for requesting information from and distributing information to the United States Department of Justice or other governmental agencies.

HISTORY: 2019 ch. 120, § 14, effective June 27, 2019.

286.4-430. Form of application — Contents.

1. Each application for a license under this subtitle shall be made in writing, under oath or affirmation, in a form the commissioner prescribes.
2. Each application shall contain the following information:
   1. In the case of an applicant that is a natural person, the name, electronic mail address, and physical address of the residence and place of business of both the applicant and, if applicable, the managing principal;
   2. In the case of an applicant that is a partnership, limited liability company, or association:
      1. Names, electronic mail addresses, and physical addresses of every member and managing principal; and
      2. The physical address where the business is to be conducted;
   3. In the case of an applicant that is a corporation:
      1. The names, electronic mail addresses, and physical addresses of the principal officers, directors, and managing principal; and
      2. The physical address of the place where the business is to be conducted; and
   4. Such additional information as the commissioner prescribes.

History. Enact. Acts 1960, ch. 204, § 3, effective June 16, 1960; 1998, ch. 198, § 1, effective July 15, 1998; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 658, effective July 15, 2010; 2019 ch. 120, § 2, effective June 27, 2019.

286.4-440. Application and license fees.

Each applicant, at the time of making application, shall pay the following to the commissioner:

1. Five hundred dollars ($500) as a fee for investigating the application to conduct business as a consumer loan company in Kentucky; and
2. The additional sum of five hundred dollars ($500) as an annual license fee for each location for the period terminating on the last day of the current calendar year.

History. Enact. Acts 1960, ch. 204, § 4, effective June 16, 1960; 1998, ch. 198, § 9, effective July 15, 1998; 2000, ch. 157, § 1, effective July 14, 2000; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 659, effective July 15, 2010; 2019 ch. 120, § 3, effective June 27, 2019.

286.4-450. Bonding requirements for applications submitted on or after January 1, 2020 — Demonstration of financial condition — Managing principal — Background check — Incomplete application — Approval or rejection of application — Time limit — Appeal — Hearing — Eligibility if licensed denied.

1. For any new application for a license, submitted on or after January 1, 2020, to qualify for a license, an applicant shall satisfy and maintain, for the duration of licensure under this subtitle, the following bonding requirements, which shall cover all licensed locations:
   1. The applicant shall deposit with the commissioner, in a form directed by the commissioner, one (1) of the following instruments that satisfy the requirements of paragraph (b) of this subsection:
      1. An irrevocable letter of credit;
      2. A corporate surety bond;
      3. Evidence that the applicant has established an account payable to the commissioner in a federally insured financial institution in this state and has deposited United States currency in an amount that satisfies the requirements of paragraph (b) of this subsection, with a signed and notarized acknowledgement from the financial institution; or
      4. A savings certificate of a federally insured financial institution in this state that is not available for withdrawal except by direct order of the commissioner, with a signed and notarized acknowledgement from the financial institution. Interest earned on the certificate shall accrue to the applicant;
   2. The instruments identified in paragraph (a) of this subsection shall:
      1. Be made payable to the commissioner;
      2. Be in the following amounts:
         1. One hundred thousand dollars ($100,000), if the applicant is privately held; or
         2. Two hundred fifty thousand dollars ($250,000), if the applicant is publicly traded;
      3. Provide for claim on the instrument by the commissioner who has a cause of action under this subtitle. The total liability of the surety, cumulative or otherwise, shall not exceed the amount specified in the instrument; and
      4. Be available for the recovery of expenses, fines, and fees levied or imposed by the commissioner under this subtitle, and for losses or damages that are determined by the commissioner to have been incurred by any customer as a result of the applicant’s or licensee’s failure to comply with the requirements of this subtitle; and
   3. No claim shall be maintained to enforce any liability on an instrument under this subsection unless the claim is brought within three (3) years after the act upon which it is based.
2. 1. For any application submitted on or after January 1, 2020, including renewal applications, an applicant or licensee shall demonstrate that its financial condition is sufficient to effectively conduct the business of a licensee in one (1) or more licensed Kentucky locations by having and maintaining, for the duration of licensure under this subtitle: (2) (a) For any application submitted on or after January 1, 2020, including renewal applications, an applicant or licensee shall demonstrate that its financial condition is sufficient to effectively conduct the business of a licensee in one (1) or more licensed Kentucky locations by having and maintaining, for the duration of licensure under this subtitle:
      1. If the applicant is privately held:
         1. A total net worth of at least fifty thousand dollars ($50,000), when receivables are one million dollars ($1,000,000) or less; or
         2. A total net worth of at least one hundred thousand dollars ($100,000), when receivables are more than one million dollars ($1,000,000); or
      2. If the applicant is publicly traded, a total net worth in excess of two hundred fifty thousand dollars ($250,000).
   2. For the purposes of this subsection, receivables shall be determined upon the initial application, or for renewal applications, based on the most recent annual report filed under KRS 286.4-590 .
3. 1. Each applicant shall have, at the time of making application and for the duration of licensure under this subtitle, at least one (1) managing principal. (3) (a) Each applicant shall have, at the time of making application and for the duration of licensure under this subtitle, at least one (1) managing principal.
   2. Prior to a change in managing principal, each licensee shall file a written request for the change with the department. The written request shall include sufficient proof that the new managing principal has experience to satisfy the requirements of this subsection, and the commissioner may deny the requested change.
   3. Each person named as a managing principal in an application or written request under this subsection shall provide the commissioner with sufficient proof that the managing principal has at least two (2) years of lending experience working in a financial institution. The commissioner shall determine from the application or written request whether an applicant has sufficient experience to satisfy this requirement and may withhold approval based on this determination.
4. 1. At the time of application, the commissioner shall require each managing principal and person in control of an applicant or licensee to submit to a criminal background check. (4) (a) At the time of application, the commissioner shall require each managing principal and person in control of an applicant or licensee to submit to a criminal background check.
   2. The cost of each records background check shall be borne by the applicant or licensee.
5. The commissioner may deem an application incomplete if the applicant fails to pay any fee, or submit any documentation or information, required under this subtitle within sixty (60) days from the date the application was filed. After sixty (60) days, if the application is incomplete, it shall be considered abandoned.
6. 1. Once a completed application is filed, and after an investigation, the commissioner shall issue to the applicant a license to make loans in accordance with this subtitle, if the commissioner finds that the financial responsibility, financial condition, experience, character, and general fitness of the applicant reasonably demonstrate that the applicant, its managing principal, and each person in control of the applicant will operate honestly, fairly, and efficiently in accordance with the purposes of this subtitle. (6) (a) Once a completed application is filed, and after an investigation, the commissioner shall issue to the applicant a license to make loans in accordance with this subtitle, if the commissioner finds that the financial responsibility, financial condition, experience, character, and general fitness of the applicant reasonably demonstrate that the applicant, its managing principal, and each person in control of the applicant will operate honestly, fairly, and efficiently in accordance with the purposes of this subtitle.
   2. If the commissioner finds that the applicant does not meet the requirements under paragraph (a) of this subsection, he or she shall not issue a license and shall return any license fee paid by the applicant, but shall retain the five hundred dollars ($500) investigation fee to cover the cost of investigating the application.
   3. When determining whether an applicant has satisfied the qualifications required under this subsection, the commissioner shall consider the grounds set forth in KRS 286.4-490 .
   4. The commissioner shall approve or deny every application for license within sixty (60) days from the receipt of a completed application, unless the time is extended by a written agreement between the applicant and the commissioner.
   5. If the commissioner denies a license, the applicant may, within twenty (20) days from the date of denial, file a written petition requesting a hearing to appeal with the office of the commissioner. Upon the timely filing of a petition to appeal, an administrative hearing shall be conducted in accordance with KRS Chapter 13B. If the applicant does not file a petition within the required time frame, he or she shall be deemed to have waived the right to appeal.
   6. The official record of the hearing shall be filed in the office of the commissioner as a public record, open to public inspection.
7. Any applicant, or person in control of an applicant, that has a license denied by the commissioner shall not be eligible to apply for a license under this subtitle, or serve as a person in control of an applicant or licensee, until the expiration of one (1) year from the date a final order denying the license is entered by the commissioner.

History. Enact. Acts 1960, ch. 204, § 5, effective June 16, 1960; 1996, ch. 318, § 217, effective July 15, 1996; 1998, ch. 198, § 2, effective July 15, 1998; 2000, ch. 157, § 2, effective July 14, 2000; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 660, effective July 15, 2010; 2019 ch. 120, § 4, effective June 27, 2019.

286.4-460. License — Contents — Transfer — Place of business — Change — Name on license.

1. Every license shall state the physical address of the office at which the business is to be conducted, the name of the licensee, any assumed names used by the licensee at that location, and the initial date of licensure.
2. The license shall not be transferable or assignable without the prior written approval of the commissioner pursuant to KRS 268.4-465. Not more than one (1) place of business shall be maintained under the same license but the commissioner may issue more than one (1) license to the same licensee upon compliance with all the provisions of this subtitle for each license, except that nothing herein shall be deemed to require a license for any place of business devoted to accounting, recordkeeping, or administrative purposes.
3. Whenever a licensee desires to change the physical place of business to another location, the licensee shall give written notice to the commissioner at least fifteen (15) days prior to the location change.
4. No licensee shall transact business for which this subtitle requires a license under a name that is not designated on the license, unless the licensee has given written notice to the commissioner at least thirty (30) days prior to the name change.

History. Enact. Acts 1960, ch. 204, § 6, effective June 16, 1960; 2000, ch. 157, § 3, effective July 14, 2000; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2019 ch. 120, § 5, effective June 27, 2019.

286.4-465. Approval of change of control — Application — Fees — Determination of whether proposed transaction constitutes change of control.

1. As used in this section, “change of control” means any of the following:
   1. A transfer of ownership interest that results in giving a person the power to direct the management or policies of a licensee;
   2. For publicly traded licensees, a transfer of at least ten percent (10%) of the outstanding voting stock;
   3. For privately held licensees, a transfer of at least twenty-five percent (25%) of the outstanding voting stock; or
   4. The acquisition of an existing licensed location or locations by a licensee.
2. 1. Except as provided in paragraph (b) of this subsection, a change of control of a licensee or an existing licensed location shall be approved in writing by the commissioner prior to the change. (2) (a) Except as provided in paragraph (b) of this subsection, a change of control of a licensee or an existing licensed location shall be approved in writing by the commissioner prior to the change.
   2. For the following changes of control, a licensee shall file an application with the commissioner within fifteen (15) days after learning of the change of control:
      1. A change of control that results when a person acquires control of a licensee by devise or descent;
      2. A change of control that results when a person acquires authority to act:
         1. As a personal representative, custodian, guardian, conservator, or trustee;
         2. As an officer appointed by a court of competent jurisdiction; or
         3. By operation of law;
      3. A change of control that results from the public offering of securities; and
      4. A change of control that has been exempted by regulation or order of the commissioner, if the commissioner makes a finding that it is in the public interest to do so.
3. The licensee shall make an application to the commissioner for approval of a change of control on a form prescribed by the commissioner.
4. 1. For changes of control resulting in an existing licensee obtaining control of an existing licensed location or locations, the application fee shall be one hundred dollars ($100) per location, except that the total fee for a single application shall not exceed one thousand dollars ($1,000) regardless of the number of locations acquired. (4) (a) For changes of control resulting in an existing licensee obtaining control of an existing licensed location or locations, the application fee shall be one hundred dollars ($100) per location, except that the total fee for a single application shall not exceed one thousand dollars ($1,000) regardless of the number of locations acquired.
   2. For all other changes of control, the application fee shall be the fees set forth in KRS 286.4-440 .
5. The commissioner shall approve an application for a change of control if the commissioner determines that the requirements of this subtitle for obtaining a license will be satisfied after the change of control.
6. 1. Before filing an application for approval of a change of control, a licensee may submit a written request for a determination from the commissioner as to whether a proposed transaction constitutes a change of control. (6) (a) Before filing an application for approval of a change of control, a licensee may submit a written request for a determination from the commissioner as to whether a proposed transaction constitutes a change of control.
   2. If the commissioner determines that a proposed transaction would not constitute a change of control, then the commissioner shall respond in writing to that effect, and the licensee shall not be subject to the requirements of this section.
   3. In the event the commissioner does not make a determination as to whether a proposed transaction would constitute a change of control within sixty (60) days from the date of the request, then no application for a change of control shall be required.

HISTORY: 2019 ch. 120, § 16, effective June 27, 2019.

286.4-470. Limitation on locations at which business may be conducted — Construction of subtitle regarding types of loans.

1. No licensee shall conduct the business authorized by this subtitle in any office, room, or place of business in which any other business, except purchase of retail and installment sales contracts, tax preparation, and motor club memberships, is solicited or engaged in, or in association or conjunction therewith, except upon a written authorization from the commissioner. The commissioner shall have sixty (60) days to either approve or deny the written authorization request.
2. Nothing in this subtitle shall be construed to limit the loans of any licensee to residents of the community in which the licensed place of business is situated, nor to prohibit the making and collecting of loans by mail.
3. Nothing in this subtitle shall be construed to limit the ability of any licensee to make a loan or loans in the principal amount greater than fifteen thousand dollars ($15,000) at the licensed location at the same rates as provided in KRS 360.010.

History. Enact. Acts 1960, ch. 204, § 7, effective June 16, 1960; 1998, ch. 198, § 3, effective July 15, 1998; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 661, effective July 15, 2010; 2019 ch. 120, § 6, effective June 27, 2019.

286.4-480. Duration of license — Payment of annual fee — Expiration — Reinstatement.

1. Each license shall remain in full force and effect until it is surrendered by the licensee, suspended, revoked, or expired as provided in this subtitle. Each licensee shall, on or before each December 31, pay to the commissioner the annual license fee for the next succeeding calendar year.
2. Failure of a licensee to pay the annual license fee required by this section shall result in the expiration of the licensee’s license on January 1 of the following year.
3. The commissioner may reinstate an expired license if, within thirty-one (31) days of expiration, the licensee:
   1. Satisfies all requirements set forth in this subtitle; and
   2. Pays a one hundred dollar ($100) late fee.
4. Any reinstatement under subsection (3) of this section shall be retroactive to January 1 of the calendar year in which it expired.

History. Enact. Acts 1960, ch. 204, § 8, effective June 16, 1960; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 662, effective July 15, 2010; 2019 ch. 120, § 7, effective June 27, 2019.

286.4-490. Reasons for adverse action or cease-and-desist order — Locations at which adverse action applies — Eligibility if license revoked — Effect of adverse action — Complaint — Relief — Civil penalty.

1. For the purposes of this section, “adverse action” means the suspension of, revocation of, conditioning or restricting of, or refusal to issue or renew a license or acceptance of the surrender of a license in lieu of a revocation or suspension.
2. The commissioner may take adverse action against a licensee, applicant, or person in control of a licensee or applicant, or issue a cease-and-desist order to one of those persons, if the commissioner finds, after a thorough investigation, that the person:
   1. Has failed to open an office within one hundred twenty (120) days from the date a license is granted unless good cause is shown;
   2. Has committed fraud or made a misrepresentation of material fact;
   3. Does not meet, has failed to comply with, or has violated any provisions of this subtitle, or any administrative regulation or order of the commissioner issued under the subtitle;
   4. Has made a false statement of material fact in the application for a license or failed to give a truthful reply to a question in the application;
   5. Has demonstrated incompetence or untrustworthiness to act as a licensee;
   6. Is unfit, through lack of financial responsibility or experience, to conduct the business of a licensee;
   7. Does not conduct business in accordance with the law or conducts business by a method that includes activities that are illegal where performed;
   8. Is insolvent;
   9. Is the subject of an active administrative cease-and-desist order or similar order, or a permanent or temporary injunction of any court of competent jurisdiction entered under any other federal or state law applicable to the financial services industry;
   10. Has made or caused to be made to the commissioner a false representation of material fact or has suppressed or withheld from the commissioner information that the applicant or licensee possesses and which, if submitted, would have rendered the applicant or licensee ineligible to be licensed under this subtitle;
   11. Has refused to permit a lawful examination or investigation by the commissioner, or has refused or failed, within a reasonable time, to furnish to the commissioner any information or records, or make any report, that may be required under this subtitle;
   12. Has been convicted of a felony;
   13. Has been convicted of any misdemeanor of which an essential element is fraud, breach of trust, or dishonesty;
   14. Has had any license, registration, or claim of exemption related to the financial services industry denied, revoked, suspended, conditioned, restricted, or probated under the laws of this state, or has surrendered, withdrawn, or terminated any license, registration, or claim of exemption issued or registration granted by this state under threat of administrative action;
   15. Has knowingly employed or contracted with a person who has failed to obtain any necessary license or registration related to the financial services industry or has had a license, registration, or claim of exemption related to the financial services industry denied, revoked, suspended, conditioned, restricted, or probated in this state or another jurisdiction;
   16. Has failed to pay any fee required under this subtitle;
   17. Has failed to comply with an administrative or court order imposing child support obligations;
   18. Has failed to pay state income taxes or comply with any administrative or court order directing the payment of state income tax;
   19. Has filed for an adjudication of bankruptcy, reorganization, arrangement, or other relief under the United States Bankruptcy Code, 11 U.S.C. secs. 101 to 110, within the last ten (10) years;
   20. Has suspended payment of its obligations or has made an assignment for the benefit of its creditors;
   21. Has violated any of the recordkeeping and reporting requirements of the United States government, including 31 U.S.C. secs. 5311 to 5332; or
   22. No longer meets the requirements of this subtitle to hold a license.
3. If the reason for adverse action taken by the commissioner at any one location is generally applicable to all locations operated by a licensee, the commissioner may apply the adverse action to all licenses issued to a licensee.
4. Any person, or person in control of a licensee, who has had a license revoked by the commissioner shall not be eligible to apply for a license under this subtitle or to serve as a person in control of a licensee until after expiration of two (2) years from the date a final order of revocation is entered by the commissioner. A person whose license has been revoked twice shall be deemed permanently revoked and shall not be eligible for a license, or to serve as a person in control of a licensee, under this subtitle.
5. A person, or person in control of a licensee, against whose license adverse action has been taken under this section shall not:
   1. Participate in any business for which a license is required under this subtitle; or
   2. Engage in any business activity on the premises where a licensee is conducting its business without prior written approval of the commissioner.
6. 1. Adverse action taken against a license, or the expiration of a license, shall not abrogate or modify: (6) (a) Adverse action taken against a license, or the expiration of a license, shall not abrogate or modify:
      1. The civil or criminal liability of a licensee for acts committed prior to the surrender or expiration; or
      2. The obligation of any preexisting contract between a licensee and a customer.
   2. The surrender or expiration of a license shall not affect a proceeding to suspend or revoke a license.
7. 1. If the commissioner has reason to believe from evidence satisfactory to the commissioner that a person has violated, or is about to violate, a provision in this subtitle, the commissioner may file a complaint in the Franklin Circuit Court, or any court of competent jurisdiction, for temporary or permanent relief against any person. (7) (a) If the commissioner has reason to believe from evidence satisfactory to the commissioner that a person has violated, or is about to violate, a provision in this subtitle, the commissioner may file a complaint in the Franklin Circuit Court, or any court of competent jurisdiction, for temporary or permanent relief against any person.
   2. The court shall have jurisdiction over the proceeding and shall have the power to enter an order or judgment awarding preliminary or final injunctive relief and any other relief that the court deems proper.
   3. Any person who violates a temporary restraining order or injunction issued by the court, in addition to being held in contempt of court, may be assessed a civil penalty under KRS 286.4-990 by the court.

History. Enact. Acts 1960, ch. 204, § 9, effective June 16, 1960; 1996, ch. 318, § 218, effective July 15, 1996; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 663, effective July 15, 2010; repealed and reenacted by 2019 ch. 120, § 8, effective June 27, 2019.

286.4-495. Emergency orders — Grounds — Hearing — Duration of emergency order.

1. The commissioner may enter an emergency order suspending, conditioning, limiting, or restricting a license issued under this subtitle without notice or hearing if, after a thorough investigation and written findings, it appears upon grounds satisfactory to the commissioner that the licensee has engaged or is engaging in unsafe, unsound, or illegal practices that pose an imminent threat to the public interest.
2. The commissioner may enter an emergency cease-and-desist order against an unlicensed person if, after a thorough investigation, it appears upon grounds satisfactory to the commissioner that the unlicensed person has engaged or is engaging in unsafe or unsound practices, or actions contrary to this subtitle, that pose an imminent threat to the public interest.
3. One (1) or more of the following circumstances shall be considered sufficient grounds for an emergency order under this section if it appears on grounds satisfactory to the commissioner that:
   1. The licensee has willfully failed to comply with more than one (1) of the requirements of this subtitle;
   2. The licensee is in such financial condition that it cannot continue in business with safety to its customers;
   3. The licensee, or a person in control of the licensee, has been found guilty of any act involving fraud, deception, theft, or breach of trust, or is the subject of an active administrative cease-and-desist order or similar order, or of a permanent or temporary injunction currently in effect entered by any court or agency of competent jurisdiction;
   4. The licensee has made a misrepresentation of material fact to, or concealed an essential or material fact from, a person in the course of doing business, or has engaged in a course of business that has worked or tended to work a fraud or deceit upon a person or would so operate;
   5. The licensee has refused to permit a lawful examination or investigation, or has refused or failed, within a reasonable time, to furnish any information or make any report that may have been requested or required by the commissioner in connection with a lawful investigation or examination; or
   6. The licensee has had any license, registration, or claim of exemption related to the financial services industry denied, suspended, or revoked under the laws of this state, or has surrendered or terminated any license, registration, or claim of exemption issued by this state under threat of administrative action.
4. An emergency order issued under this section, compliant with KRS 13B.125 , becomes effective when served by the commissioner. The emergency order shall be delivered by personal service or certified mail to the last known address of every affected party.
5. A person aggrieved by an emergency order issued by the commissioner under this section may request an emergency hearing. The request for hearing shall be filed with the commissioner within twenty (20) days of service of the emergency order.
6. Upon receipt of a timely written request for an emergency hearing, an emergency hearing shall be conducted as set forth in KRS 13B.125 .
7. An emergency order issued under this section shall remain in effect until it is stayed, withdrawn, or superseded by an order of the commissioner or until it is terminated by a court order.

HISTORY: 2019 ch. 120, § 19, effective June 27, 2019.

286.4-500. Notice of license denial — Administrative complaint — Hearings and final orders — Findings — Service by certified mail.

1. 1. Notice of entry of any order denying a license shall be in writing and served personally or sent by certified mail to the last known address of the applicant. (1) (a) Notice of entry of any order denying a license shall be in writing and served personally or sent by certified mail to the last known address of the applicant.
   2. A person whose application has been denied may, within twenty (20) days of service of the notice, submit a written petition to the commissioner requesting a hearing. The hearing shall be held in accordance with KRS Chapter 13B.
   3. If no written petition is received, the commissioner may enter a final order denying the license.
2. 1. The commissioner may file an administrative complaint against any person or licensee that the commissioner believes has or may have violated this subtitle and the violation of which is subject to the penalties set forth in KRS 286.4-490 to 286.4-990 . (2) (a) The commissioner may file an administrative complaint against any person or licensee that the commissioner believes has or may have violated this subtitle and the violation of which is subject to the penalties set forth in KRS 286.4-490 to 286.4-990 .
   2. 1. The commissioner shall serve an administrative complaint against a person or licensee personally or by certified mail, return receipt requested, postage prepaid, to the last known address of each person or licensee named in the complaint. (b) 1. The commissioner shall serve an administrative complaint against a person or licensee personally or by certified mail, return receipt requested, postage prepaid, to the last known address of each person or licensee named in the complaint.
      2. The person or licensee named in the complaint shall be entitled to a hearing on the complaint, held in accordance with KRS Chapter 13B. A written request for a hearing shall be submitted to the department, along with a written answer to the complaint, within twenty (20) days of being served the complaint.
      3. If a written answer and request for hearing are not filed within twenty (20) days of being served the complaint, the person or licensee shall be deemed to have waived the hearing and the commissioner may enter a final order granting the relief requested in the complaint.
3. Whenever the commissioner denies any application for a license or assesses any of the penalties set forth in KRS 286.4-490 to 286.4-990 , the commissioner shall file in his or her office a written order to that effect, stating his or her findings with respect to the order and the reasons for the action.
4. Any final order shall be served in the same manner as an administrative complaint under subsection (2) of this section.
5. Service by certified mail under this subtitle shall be deemed complete as provided in KRS 13B.050(2).

History. Enact. Acts 1960, ch. 204, § 10, effective June 16, 1960; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 664, effective July 15, 2010; 2019 ch. 120, § 9, effective June 27, 2019.

286.4-505. Administrative hearing for person or licensee aggrieved by final decision of commissioner.

Unless a remedy is otherwise specifically provided in this subtitle, any licensee or person aggrieved by a final decision of the commissioner issued pursuant to this subtitle may, within twenty (20) days of service of notice of the decision, request an administrative hearing which shall be conducted in accordance with KRS Chapter 13B.

HISTORY: 2019 ch. 120, § 20, effective June 27, 2019.

286.4-520. Prohibited advertisements and statements. [Renumbered]

No licensee shall advertise, print, display, publish, distribute, broadcast or televise, or permit to be advertised, printed, displayed, published, distributed, broadcast or televised, any statement or representation with regard to the rates, terms, or conditions for making loans in the sum of fifteen thousand dollars ($15,000) or less, which is false, misleading, or deceptive.

History. Enact. Acts 1960, ch. 204, § 12, effective June 16, 1960; 1972, ch. 203, § 49, effective June 16, 1972; 1986, ch. 331, § 44, effective July 15, 1986; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.4-530. Basic, default, and deferment charges — Prohibition against division of loan and excessive charges.

1. Every licensee may lend any sum of money not exceeding fifteen thousand dollars ($15,000), excluding charges, and may charge, contract for, and receive thereon charges not in excess of three percent (3%) per month on any loan where the original principal amount of the loan is not in excess of three thousand dollars ($3,000) and two percent (2%) per month on any loan where the original principal amount of the loan exceeds three thousand dollars ($3,000). Such charges shall be computed in advance at the agreed rate on scheduled unpaid principal balances of the cash advance on the assumption that all scheduled payments will be made when due. The total amount of such precomputed charges shall be added to the original cash advance and the resulting sum shall become the face amount of the note. Every payment may be applied to the combined total of the cash advance and precomputed charges until the contract is paid in full.
2. For the purposes of computation, whether at the maximum rate or less, a month shall be that period of time from any date in a month to the corresponding date in the next month and if there is no such corresponding date then to the last day of such month, and a day shall be considered one-thirtieth (1/30) of a month when such computation is made for a fraction of a month. The portion of the charges applicable to any particular monthly installment period, as originally scheduled or following a deferment, shall bear the same ratio to the total charges, excluding any adjustments made pursuant to subsection (3) of this section, as the balance scheduled to be outstanding during that monthly period bears to the sum of all monthly balances scheduled originally by the contract of loan.
3. A licensee and borrower may agree that the first installment date may be not more than fifteen (15) days more than one (1) month and the amount of such installment may be increased by one-thirtieth (1/30) of the portion of the charges applicable to a first installment period of one (1) month for each extra day.
4. If one-half (1/2) or more of any installment remains unpaid more than seven (7) days after it is due, the licensee may charge and collect a default charge not exceeding two cents (2¢) for each dollar of the scheduled installment, and such charge may be collected for each full month the installment remains unpaid.
5. If the payment of all wholly unpaid installments on which no default charge has been collected is deferred one (1) or more full months, the licensee may charge and collect a deferment charge not exceeding two cents (2¢) for each one dollar ($1) of the sum of the installments so deferred, multiplied by the number of months the maturity of the contract is extended; provided, however, that such number of months shall not exceed the number of installments which are due and wholly unpaid or due within fifteen (15) days from the date of deferment. The deferment charge may be collected at the time of deferment or at any time thereafter. Any payment received at the time of deferment may be applied first to the deferment charge and the remainder, if any, applied to the unpaid balance of the contract; provided, however, that if such payment is sufficient to pay, in addition to the appropriate deferment charge, any installment which is in default and the applicable default charge, it shall be first so applied and any such installment shall not be deferred or subject to the deferment charge. At the time a deferment is made the borrower shall be given a statement or receipt showing the amount of the deferment charge, the date and amount of the next scheduled payment, and the number of remaining scheduled payments.
6. If the contract of loan is prepaid in full by cash, a new loan, or otherwise before the final installment date, the portion of the charges applicable to the full installment periods following the installment date nearest the date of prepayment shall be refunded. Any default or deferment charges which are due and unpaid may be deducted from such refund. The tender by the borrower or at his request of an amount equal to the unpaid balance less the required refund must be accepted by the licensee in full payment of the contract. If judgment is obtained before the final installment date, the contract balance shall be reduced by the refund which would be required for prepayment in full as of the date judgment is obtained. No refund of less than one dollar ($1) need be made; no refund for partial prepayments need be made.
7. If two (2) or more full installments are in default for one (1) full month or more at any installment date and if the contract so provides, the licensee may reduce the contract balance by the refund or credit which would be required for prepayment in full on such installment date. Thereafter, in lieu of charging, collecting, or receiving charges as provided in subsections (1) to (6) inclusive of this section, charges may be charged, collected, and received as provided by subsection (8) of this section until the contract is fully paid.
8. In lieu of computing and collecting charges as provided in subsections (1) to (6) inclusive of this section, a licensee may contract for, collect, and receive on loans of fifteen thousand dollars ($15,000) or less charges as permitted in subsection (1) of this section computed on the unpaid principal balance of the loan from time to time outstanding. Such charges shall not be paid, deducted, received in advance, or compounded but shall be computed, collected, and received only on unpaid principal balances for the time actually outstanding. The definition of a month and of a day in subsection (2) of this section shall apply for the purposes of such computations.
9. If part or all of the consideration for a contract of loan is the unpaid principal balance of a prior loan with the same licensee, then the principal amount payable under such contract of loan shall not include any unpaid charges on the prior loan except such charges which have accrued within sixty (60) days before the making of such new contract of loan and may include the balance remaining after giving the refund required by subsection (6) of this section.
10. In addition to the charges provided for in this subtitle, no further charge or amount whatsoever for any examination, service, brokerage, commission, expense, fee, or bonus or other thing shall be directly or indirectly charged, contracted for, or received, except the lawful fees actually and necessarily paid out by the licensee to any public official for filing, recording, or releasing in any public office any instrument securing the loan; the identifiable charge of premium for insurance provided for in KRS 286.4-560 ; or fees for noting or releasing a lien on or transferring a certificate of title to any motor vehicle offered as security for a loan made under this subtitle. If any amount in excess of the amounts authorized by this subtitle is charged, contracted for, or received, except as the result of an accidental or bona fide error, the lender shall have no right to collect or receive any charges whatsoever.
11. No licensee shall induce or permit any borrower to split up or divide any loan nor permit any one (1) borrower to become indebted to him under more than one (1) contract of loan at the same time if the actual amount of the indebtedness on any one (1) of such contracts is in the amount or of the value of fifteen thousand dollars ($15,000) or less and there is charged, contracted for, or received thereon, directly or indirectly, by any device, subterfuge, or pretense whatsoever, any interest, or consideration therefor greater than would otherwise be permitted by this subtitle.
12. No licensee shall directly or indirectly charge, contract for, or receive any interest or consideration greater than the lender would be permitted by law to charge if he were not a licensee hereunder upon any loan in the amount or of the value of more than fifteen thousand dollars ($15,000) excluding charges, or in any case in which the licensee permits any individual as borrower, indorser, guarantor, or surety for any borrower, or otherwise, to owe on any loan or loans directly or contingently, or both, to the licensee at any time the sum of more than fifteen thousand dollars ($15,000) for principal, excluding charges.

History. Enact. Acts 1960, ch. 204, § 13, effective June 16, 1960; 1970, ch. 48, § 2; 1976, ch. 382, § 1, effective June 19, 1976; 1980, ch. 107, § 2, effective July 15, 1980; 1982, ch. 53, § 3, effective July 15, 1982; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2014, ch. 13, § 1, effective July 15, 2014.

286.4-533. Authorized charges for extension of credit.

Notwithstanding the provisions of KRS 286.4-530 (10) or of any other law, in any extension of credit in accordance with this subtitle, the licensee may charge and collect the following:

1. A fee, or premium for insurance, in lieu of perfecting a security interest to the extent that the fee or premium does not exceed the fee payable to public officials for perfecting the security interest;
2. A bad check charge of twenty-five dollars ($25), or the amount passed on from other financial institutions, whichever is greater, for any check, draft, negotiable order of withdrawal, or like instrument returned or dishonored for any reason by a depository institution, which charge licensee may charge and collect, through regular billing procedures, or otherwise from the borrower;
3. A reasonable attorney’s fee, in connection with the collection of a loan, actually incurred by the licensee and paid to an attorney who is not an employee of the licensee;
4. A loan processing fee of five percent (5%) of the original principal amount of the loan. This charge shall be limited to a maximum of one hundred fifty dollars ($150). Any charge collected up to and including fifty dollars ($50) shall be nonrefundable. In the event of prepayment, any loan processing fee above fifty dollars ($50) shall be subject to refund in the same manner as other charges pursuant to KRS 286.4- 530(6). A loan processing fee may only be charged once on a loan or refinance within any ninety (90) day period;
5. An alternative to the default charge described in KRS 286.4-530 (4), not to exceed five percent (5%) of each scheduled installment, or fifteen dollars ($15), whichever is greater. Only one (1) charge may be collected for each scheduled installment; and
6. Costs or other expenses authorized for a secured party in accordance with KRS 355.9-207 and 355.9-607.

History. Enact. Acts 1992, ch. 222, § 1, effective July 14, 1992; 1998, ch. 198, § 4, effective July 15, 1998; 2000, ch. 157, § 4, effective July 14, 2000; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2008, ch. 93, § 1, effective July 15, 2008; 2010, ch. 28, § 21, effective July 15, 2010; 2019 ch. 120, § 10, effective June 27, 2019.

286.4-535. Closing costs collectible when liens on real estate taken as security. [Renumbered]

Notwithstanding the provisions of KRS 286.4-530 (10) or of any other law, in any extension of credit pursuant to KRS 286.4-420 to 286.4-991 wherein the licensee shall take a lien on real estate for security for any loan under this subtitle, the licensee may charge and collect the following closing costs if they are bona fide, reasonable in amount and not for the purpose of circumvention or evasion of the provisions of this subtitle:

1. Fees or premiums for title examination, abstract of title, title insurance, survey, or similar purposes, if not paid to the lender or a person related to the lender;
2. Fees for preparation of a deed, settlement statement, or other document, if not paid to the lender or a person related to the lender;
3. Escrows for future payment of taxes, including assessments for improvements, insurance, and water, sewer and land rents;
4. Fees for notarizing deeds and other documents, if not paid to the lender or a person related to the lender;
5. Appraisal fees, if not paid to the lender or a person related to the lender.

History. Enact. Acts 1982, ch. 53, § 7, effective July 15, 1982; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.4-540. Duties of licensee. [Renumbered]

Every licensee shall:

1. Deliver to the borrower at the time of making a loan, or to one (1) of them if there are two (2) or more obligors on the loan, a statement showing in clear and distinct terms the amount and date of the loan and the date of its maturity, the nature of the security for the loan, the name and address of the borrower and of the licensee, the schedule of payments or a description thereof, and the agreed charges or rate of charge on such loan provided, that when charges are contracted for under KRS 286.4-530 (1), the statement shall show the cash advance and the amount of the note including charges, the additional charges contracted for in case of default or deferment and that a refund is required for prepayment in full;
2. Furnish to the borrower a receipt for each cash payment made on account of any such loan at the time each payment is made but no receipt need be given where payment is made by check or money order; and the use of a coupon book system shall be deemed compliance with this section;
3. Upon the repayment of the loan in full, mark indelibly with the word “Paid” or “Canceled” every obligation signed by the borrower and release or provide the borrower with evidence to release any mortgage which no longer secures an obligation, restore any pledge, and cancel and return every note and assignment given to the licensee by the borrower.

History. Enact. Acts 1960, ch. 204, § 14, effective June 16, 1960; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.4-545. Agent for service of process.

Every person licensed under this subtitle shall maintain an agent in this Commonwealth for service of process. The name, physical address, telephone number, and electronic mail address of the agent shall be filed with the application for licensure. The commissioner shall be notified in writing by the licensee at least five (5) days prior to any change in the status of an agent.

HISTORY: 2019 ch. 120, § 15, effective June 27, 2019.

286.4-547. Compliance with federal and state laws — Regulatory penalties.

In addition to the requirements contained in this subtitle, every person or licensee shall comply with all applicable federal and state laws relating to financial services. However, the regulatory penalties utilized to address violations of this section shall be limited to those authorized in this subtitle.

HISTORY: 2019 ch. 120, § 17, effective June 27, 2019.

286.4-550. Time of installment payments. [Renumbered]

The borrower may pay all, or any part of any loan equal to one (1) or more full installments, at any time during the regular business hours of the licensee, but the licensee may apply any such payment first to all accrued charges in full up to the date of such payment.

History. Enact. Acts 1960, ch. 204, § 15, effective June 16, 1960; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.4-560. Insurance.

1. A licensee may request a borrower to insure tangible personal property, except household goods, offered as security for a loan exceeding three hundred dollars ($300) under this subtitle against any substantial risk of loss, damage, or destruction for an amount not to exceed the actual value of such property or the approximate amount of the loan, whichever is greater, and for a term and upon conditions which are reasonable and appropriate considering the nature of the property and the maturity and other circumstances of the loan; provided such insurance is sold by a licensed agent, broker, or solicitor. The licensee may also request and secure credit property insurance on the tangible personal property, except that no part of the cost thereof shall be charged to the borrower unless the insurer agrees that it will not exercise its right to subrogation against the borrower under the licensee’s policy.
2. A licensee may also request, provide, obtain, or take as security for any loan obligation insurance on the life, unemployment, health, or disability, or all, of the borrower, or two (2) of them if there are two (2) or more. Life insurance shall be in the approximate amount of the indebtedness scheduled to be due the licensee under the loan contract. Not more than one (1) policy of life insurance may be written in connection with any loan transaction under this subtitle. The aggregate amount of periodic benefits payable by any unemployment, health, or disability insurance provided, obtained, or requested by the licensee in the event of unemployment or disability, as defined in the policy, shall not exceed the aggregate of the scheduled installments and the waiting period provided in such policy must be fourteen (14) days or longer. The premium rate for insurance provided under this section shall be reasonable in relation to the benefits provided and shall be filed with the commissioner of insurance. The commissioner of insurance shall, within thirty (30) days after the filing of any premium rate, disapprove such premium rate if it is excessive in relation to the benefits. In determining whether to approve or disapprove any premium rate, the commissioner of insurance shall give due consideration to the unemployment, mortality, and morbidity costs with respect to such insurance on borrowers under this subtitle or similar acts in other states, a reasonable margin for underwriting expenses and profit and contingencies to the insurer, and cost and compensation to the licensees for providing and servicing such insurance, plus the premium taxes payable on such insurance.
3. In accepting any insurance provided for by this section as security for a loan the licensee, its officers, agents, or employees may deduct the premiums or identifiable charge therefor from the proceeds of the loan, which premium or identifiable charge shall not exceed the rate filed with the commissioner of insurance and not disapproved and remit such premiums to the insurance company writing such insurance and any gain or advantage to the licensee or any employee, officer, director, agent, affiliate, or associate from such insurance or its sale shall not be considered as additional or further charge in connection with any loan made under this subtitle. The arranging for and collecting of an identifiable charge shall not be deemed the sale of insurance.
4. Every insurance policy or certificate written in connection with a loan transaction pursuant to subsection (2) of this section shall provide for cancellation of coverage and a refund of the premium or identifiable charge unearned upon the discharge of the loan obligation for which such insurance is security without prejudice to any claim. Such refund shall be under a formula filed by the insurer with the commissioner of insurance.
5. Whenever insurance is written in connection with a loan transaction pursuant to this section, the licensee shall deliver or cause to be delivered to the borrower a policy, certificate, memorandum, or other disclosure which shall show the coverages and the cost thereof, if any, to the borrower within thirty (30) days from the date of the loan.
6. All such insurance shall be written by a company authorized to conduct such business in this state and the licensee shall not require the purchase of such insurance from any agent or broker designated by the licensee nor shall the licensee decline existing coverages which equal or exceed the standards of this section.

History. Enact. Acts 1960, ch. 204, § 16, effective June 16, 1960; 1970, ch. 48, § 3, effective June 18, 1970; 1982, ch. 53, § 4, effective July 15, 1982; 1992, ch. 222, § 3, effective July 14, 1992; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 665, effective July 15, 2010; 2014, ch. 58, § 1, effective July 15, 2014.

286.4-570. Wage purchases — Assignment of compensation. [Renumbered]

1. The payment of fifteen thousand dollars ($15,000) or less in money, credit, goods, or things in action, as consideration for any sale, assignment, or order for the payment of wages, salary, commissions, or other compensation for services, whether earned or to be earned, shall be deemed for the purposes of regulation under this subtitle, a loan secured by such assignment, and the amount by which such assigned compensation exceeds the amount of such consideration actually paid shall be deemed for the purposes of regulation under this subtitle interest or charges upon such loans from the date of payment to the date such compensation is payable. Such transaction shall be governed by and subject to the provisions of this subtitle.
2. No assignment of or order for payment of any salary, wages, commissions, or other compensation for services, earned or to be earned, when taken as security for any loan made under this subtitle, shall be valid unless the amount of the loan is paid to the borrower simultaneously with its execution. Under any assignment of or order for the payment of future salary, wages, commissions, or other compensation for services given as security for a loan made under this subtitle, there shall not at any time be collectible from the employer of the borrower more than ten percent (10%) of the amount then owing the borrower for any such salary, wages, commissions or other compensation for services.

History. Enact. Acts 1960, ch. 204, § 17, effective June 16, 1960; 1970, ch. 48, § 5, effective June 18, 1970; 1980, ch. 107, § 3, effective July 15, 1980; 1982, ch. 53, § 5, effective July 15, 1982; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.4-580. Prohibited conduct — No contract or loan without scheduled repayment — Lien on real estate as security.

1. No licensee shall take any confession of judgment or any power of attorney running to the licensee or to any third person to confess judgment or to appear for the borrower in a judicial proceeding; nor take any note or promise to pay that does not disclose the date and amount of the loan obligation, a schedule or description of the payments to be made thereon, and the rate or aggregate amount of the agreed charges; nor take any instrument that is incomplete at the time the loan is made.
2. No licensee shall enter into any contract of loan under this subtitle unless:
   1. The borrower agrees to make any scheduled repayment of principal within:
      1. Sixty (60) months and fifteen (15) days from the date of making the contract if the principal amount of the loan exclusive of interest and charges is three thousand dollars ($3,000) or less; or
      2. One hundred and twenty (120) months from the date of making the contract if the principal amount of the loan exclusive of interest and charges exceeds three thousand dollars ($3,000); and
   2. The contract provides for repayment of the amount lent in substantially equal installments at approximately equal periodic intervals of time, except that when appropriate for the purpose of facilitating payment in accordance with the seasonable nature of obligor’s main source of income, payments may be deferred or omitted, if all other payments are increased in a manner that the other payments are substantially equal in amount and sufficient in the aggregate to retire the loan in the period of months as provided in this subsection.
3. No licensee shall take any mortgage or other lien instrument upon real estate as security for any loan under this subtitle in which the principal is three thousand dollars ($3,000) or less, unless the lien is subject to a prior mortgage.

History. Enact. Acts 1960, ch. 204, § 18, effective June 16, 1960; 1970, ch. 48 § 4, effective June 18, 1970; 1982, ch. 53, § 6, effective July 15, 1982; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2019 ch. 120, § 11, effective June 27, 2019.

286.4-590. Licensee to make annual report.

Each licensee shall annually on or before January 30, file with the commissioner a report for the preceding calendar year. The report shall give information with respect to the financial condition of the licensee and other relevant information as the commissioner may reasonably require. In the event any person or affiliated group of corporations holds more than one (1) license in the state, he, she, or they may file a composite annual report in lieu of separate reports for each licensed office. The report shall be made under oath in the form prescribed by the commissioner, who shall make and publish annually an analysis and recapitulation of the reports.

History. Enact. Acts 1960, ch. 204, § 19, effective June 16, 1960; 1970, ch. 48, § 6, effective June 18, 1970; 1986, ch. 331, § 45, effective July 15, 1986; 2000, ch. 157, § 5, effective July 14, 2000; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2008, ch. 93, § 2, effective July 15, 2008; 2010, ch. 24, § 666, effective July 15, 2010.

286.4-600. Licensee’s records — Retention — Notice of cessation — Custodian of records — Request for destruction — Withholding or altering records.

1. 1. To enable the commissioner to determine whether the licensee is complying with the provisions of this subtitle, and with the administrative regulations promulgated under it, each licensee shall keep and use in his or her business books, accounts, records, or card systems in accordance with sound accounting principles and practices. (1) (a) To enable the commissioner to determine whether the licensee is complying with the provisions of this subtitle, and with the administrative regulations promulgated under it, each licensee shall keep and use in his or her business books, accounts, records, or card systems in accordance with sound accounting principles and practices.
   2. Unless applicable state or federal law requires a longer retention period, the licensee shall, after making the final entry in them, preserve any books, accounts, records, or card systems:
      1. For at least two (2) years; or
      2. For at least three (3) years on loans secured by residential property.
2. 1. Any licensee that intends to cease operation of any office or offices licensed under this subtitle shall: (2) (a) Any licensee that intends to cease operation of any office or offices licensed under this subtitle shall:
      1. Give the commissioner at least thirty (30) days’ prior written notice of the cessation of operations, along with a plan for ceasing operations that is sufficient to safeguard the interest of the public; and
      2. Designate a custodian of records prior to the cessation of operations, who shall:
         1. Agree in writing to serve in that capacity and to comply with the requirements of this section; and
         2. Notify the commissioner of:
            1. The designation of a custodian, including but not limited to the custodian’s name, physical address, electronic mail address, and telephone number; and
            2. The physical location where the records required to be kept under this subtitle will be preserved.
   2. This subsection shall not apply to changes of location authorized under KRS 286.4-460 .
3. 1. Except as provided in paragraph (b) of this subsection, all records referenced in this section shall be made accessible to the commissioner or the commissioner’s designated representative upon demand. (3) (a) Except as provided in paragraph (b) of this subsection, all records referenced in this section shall be made accessible to the commissioner or the commissioner’s designated representative upon demand.
   2. Records held by a designated custodian under subsection (2) of this section shall be made accessible upon five (5) business days’ written notice.
4. If good cause is demonstrated, the commissioner may approve a written request for the destruction of records required to be preserved under this subtitle prior to the minimum retention period required under this section.
5. It shall be unlawful for any person to knowingly withhold, abstract, alter, remove, mutilate, destroy, or secrete any books, records, or other information required to be preserved under this subtitle for the purpose of obstructing a subpoena issued, or investigation or examination conducted, by the commissioner.

History. Enact. Acts 1960, ch. 204, § 20, effective June 16, 1960; 1998, ch. 198, § 5, effective July 15, 1998; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 667, effective July 15, 2010; 2019 ch. 120, § 12, effective June 27, 2019.

286.4-605. Confidential and privileged documents — Commissioner’s powers — Privilege or claim of confidentiality not waived.

1. The following shall be considered confidential by law and privileged, and shall not be subject to disclosure under the Kentucky Open Records Act, KRS 61.870 to 61.884 :
   1. Reports of examination, and correspondence that relates to a report of examination, of a licensee;
   2. Investigations, and records that relate to an investigation, conducted under this subtitle;
   3. Annual reports filed under KRS 286.4-590 ; and
   4. Any confidential and privileged documents, materials, reports, or information received by the commissioner pursuant to subsection (5)(c) of this section.
2. Confidential and privileged documents shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any civil action, unless the commissioner determines or, after notice to the commissioner and a hearing, a court of competent jurisdiction determines that the commissioner would not be prejudiced.
3. 1. Subject to paragraph (b) of this subsection, all other documents, materials, reports, or other information that are provided to or filed with the commissioner under this subtitle shall be open to public inspection. (3) (a) Subject to paragraph (b) of this subsection, all other documents, materials, reports, or other information that are provided to or filed with the commissioner under this subtitle shall be open to public inspection.
   2. Notwithstanding paragraph (a) of this subsection, the commissioner may, as authorized by the provisions of KRS Chapter 61, classify as confidential or withhold from public inspection for a period of time, as he or she considers necessary, any information which in his or her judgment, the public welfare or the welfare of any licensee or its customers requires to be withheld.
4. Neither the commissioner nor any person who receives documents, materials, reports, or other information while acting under the authority of the commissioner shall be required to testify in any civil action concerning any confidential documents, materials, reports, or information.
5. In order to assist in the performance of the commissioner’s duties, the commissioner may:
   1. Use, disclose, or make public the confidential and privileged documents or information referenced in subsection (1) of this section in furtherance of any regulatory or legal action brought as part of the commissioner’s official duties;
   2. Share the confidential and privileged documents referenced in subsection (1) of this section with other state and federal regulatory agencies, or with local, state, federal, and international law enforcement authorities, if the recipient agrees to maintain the confidential and privileged status of the documents in accordance with any sharing or use agreements referenced in paragraph (d) of this subsection;
   3. Receive documents, materials, reports, or other information, including otherwise confidential and privileged documents, materials, reports, or information, from other state, federal, and international regulatory agencies, the related associations, affiliates, or subsidiaries, and from local, state, federal, and international law enforcement authorities, except that the commissioner shall maintain as confidential and privileged any documents, materials, reports, or information received with notice or the understanding that they are confidential and privileged under the laws of the jurisdiction that is the source of the documents, materials, reports, or information; and
   4. Enter into agreements governing the sharing and use of confidential documents and information when the sharing or use is serving a legitimate governmental need or is necessary in the performance of a legitimate governmental function, including the furtherance of any regulatory or legal action brought as part of the recipient’s official duties.
6. No waiver of any applicable privilege or claim of confidentiality in documents, materials, reports, or information shall occur as a result of the disclosures authorized under this section.

HISTORY: 2019 ch. 120, § 18, effective June 27, 2019.

286.4-610. Commissioner’s power to issue administrative regulations and examine licensees — Investigations — Enforcement of subpoena — Powers of commissioner.

1. The provisions of this subtitle shall be enforced by the commissioner, who may promulgate administrative regulations in accordance with KRS Chapter 13A for the proper conduct of the business licensed under this subtitle. All regulations of general application shall state the date of promulgation and the effective date.  A  copy of every regulation shall be sent to all licensees before the effective date thereof and a copy shall be kept in an indexed permanent book in the office of the commissioner as a public record.
2. 1. The commissioner shall examine the affairs, business, office, and records of every licensee at least once during every twenty-four (24) month period, but not more frequently than once during every twelve (12) month period. Every licensee shall pay a reasonable fee sufficient to cover the cost of each routine examination based upon fair compensation for time and actual expenses. (2) (a) The commissioner shall examine the affairs, business, office, and records of every licensee at least once during every twenty-four (24) month period, but not more frequently than once during every twelve (12) month period. Every licensee shall pay a reasonable fee sufficient to cover the cost of each routine examination based upon fair compensation for time and actual expenses.
   2. The commissioner may also conduct investigations of licensees or persons within or outside of the state as the commissioner deems necessary to discover violations of this subtitle or to secure information necessary for its proper enforcement.
   3. For the purpose of making examinations or investigations under this section, the commissioner and his or her representatives:
      1. May:
         1. Compel the attendance of any person or obtain any documents by subpoenas;
         2. Administer oaths and affirmations; and
         3. Examine under oath or affirmation all persons whose testimony he or she may require, relative to the loans or business of the licensee; and
      2. Shall have free access to the accounts, papers, records, files, safes, vaults, offices, and places of business used in connection with any business conducted under any license issued in accordance with this subtitle.
3. 1. The commissioner may investigate any person who is or appears to be engaging in the business regulated by this subtitle without first securing a license. (3) (a) The commissioner may investigate any person who is or appears to be engaging in the business regulated by this subtitle without first securing a license.
   2. For the purpose of investigations of unlicensed persons, the commissioner or his or her representative may:
      1. Compel the attendance of any person or obtain any documents by subpoenas;
      2. Administer oaths and affirmations; and
      3. Examine under oath or affirmation all persons whose testimony he or she may require, relative to the loans or business of the person.
4. If any person fails to comply with a subpoena issued by the commissioner under this section, the commissioner may petition the Franklin Circuit Court or any court of competent jurisdiction for enforcement of the subpoena.
5. In order to carry out the purposes of this subtitle, the commissioner may:
   1. Retain examiners, auditors, investigators, attorneys, accountants, or other professionals and specialists to conduct or assist in the conduct of any examination, investigation, or enforcement action; and
   2. Use, hire, contract, or employ public or private analytical systems, methods, or software.
6. The authority of this section shall remain in effect whether a person acts or claims to act under any licensing law of this subtitle or acts or claims to act without such authority.

History. Enact. Acts 1960, ch. 204, § 21, effective June 16, 1960; 1998, ch. 198, § 6, effective July 15, 1998; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 668, effective July 15, 2010; 2019 ch. 120, § 13, effective June 27, 2019.

286.4-613. Effect of conformity with notice, opinion, or interpretation of commissioner.

No licensee shall be subject to any liability for any act or omission made in conformity with a written notice, opinion, or interpretation issued by the commissioner.

History. Enact. Acts 1992, ch. 222, § 2, effective July 14, 1992; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 669, effective July 15, 2010.

286.4-615. Commonwealth or its employees not liable for failure to disclose financial condition of consumer loan company.

In undertaking the examination of a consumer loan company neither the Commonwealth of Kentucky, the commissioner of the Department of Financial Institutions, nor any examiner employed by the Commonwealth shall become liable to any depositor, investor, or other obligor of said consumer loan company by reason of said examination or omission of said examination to fully and effectively disclose the financial condition of said consumer loan company, it being the policy of the Commonwealth of Kentucky that such examinations as are required by KRS 286.4-610 are for the purpose of determining compliance with state law and not for the purpose of protecting or guaranteeing the depositors, investors, or other obligors of said consumer loan companies.

History. Enact. Acts 1980, ch. 357, § 2, effective July 15, 1980; 1998, ch. 198, § 7, effective July 15, 1998; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 670, effective July 15, 2010.

286.4-620. Public policy relating to loans of $15,000 or less — Loans outside state. [Renumbered]

1. Any loan in the amount of fifteen thousand dollars ($15,000) or less for which there has been charged, contracted for or received a greater rate of interest, discount or consideration, except as provided for by statute, is against the public policy of this state.
2. No such loan made outside this state shall be enforced in the state and every person participating therein in this state shall be subject to the provisions of this subtitle, but this section does not apply to loans legally made in any state, country, commonwealth, territory or district.

History. Enact. Acts 1960, ch. 204, § 22, effective June 16, 1960; 1970, ch. 48, § 7, effective June 18, 1970; 1980, ch. 107, § 4, effective July 15, 1980; 1982, ch. 53, § 8, effective July 15, 1982; 1998, ch. 198, § 8, effective July 15, 1998; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.4-630. Review of commissioner’s rulings. [Repealed]

History. Enact. Acts 1960, ch. 204, § 23, effective June 16, 1960; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 671, effective July 15, 2010; repealed by 2019 ch. 120, § 22, effective June 27, 2019.

286.4-640. Effect of future amendment of this subtitle. [Renumbered]

This subtitle or any part thereof may be modified, amended or repealed so as to effect the cancellation or authorization of any license or right of a licensee hereunder, provided that such modification, amendment or repeal shall not impair or affect the obligation of any pre-existing lawful contract between any licensee and any borrower.

History. Enact. Acts 1960, ch. 204, § 24, effective June 16, 1960; renum. 2006, ch. 247, § 38, effective July 12, 2006.

286.4-990. Civil penalties — Actions by commissioner against violators — Recovery of penalties and fees.

1. 1. For any repetitive violation of this subtitle or an administrative regulation promulgated under this subtitle, or any willful violation of an order of the commissioner entered under this subtitle, the commissioner may levy a civil penalty against any licensee. (1) (a) For any repetitive violation of this subtitle or an administrative regulation promulgated under this subtitle, or any willful violation of an order of the commissioner entered under this subtitle, the commissioner may levy a civil penalty against any licensee.
   2. The civil penalty shall not be less than two hundred fifty dollars ($250) or more than two thousand five hundred dollars ($2,500) per violation, plus the state’s costs and expenses for the examination and prosecution of the matter, including reasonable attorney’s fees and court costs.
2. 1. For an occurrence of consumer harm by any licensee resulting from any violation of this subtitle, administrative regulation promulgated under this subtitle, or order of the commissioner entered under this subtitle, the commissioner may: (2) (a) For an occurrence of consumer harm by any licensee resulting from any violation of this subtitle, administrative regulation promulgated under this subtitle, or order of the commissioner entered under this subtitle, the commissioner may:
      1. Order any remedy authorized in subsection (4) of this section; and
      2. Levy a civil penalty against the licensee if the total amount of consumer harm exceeds one thousand dollars ($1,000).
   2. The civil penalty shall be:
      1. The lesser of:
         1. One thousand dollars ($1,000) per consumer harmed; or
         2. Ten percent (10%) of the total cumulative amount of ordered rescission, restitution, refund, disgorgement, or the recovery of expenses; and
      2. The state’s costs and expenses for the examination and prosecution of the matter, including reasonable attorney’s fees and court costs.
3. 1. The commissioner shall levy a civil penalty against any unlicensed person who violates any provision of this subtitle, administrative regulation promulgated under this subtitle, or order of the commissioner entered under this subtitle. (3) (a) The commissioner shall levy a civil penalty against any unlicensed person who violates any provision of this subtitle, administrative regulation promulgated under this subtitle, or order of the commissioner entered under this subtitle.
   2. The civil penalty shall not be less than two thousand five hundred dollars ($2,500) or more than seven thousand five hundred dollars ($7,500) per violation, plus the state’s costs and expenses for the examination, investigation, and prosecution of the matter, including reasonable attorney’s fees and court costs.
4. The commissioner may order rescission, restitution, refund, disgorgement, recovery of expenses, and direct such other affirmative action as the commissioner deems necessary against any licensee or person who violates any order issued by the commissioner or any provision of, or administrative regulation promulgated under, this subtitle. The commissioner shall have jurisdiction to institute an action in Franklin Circuit Court or any court of competent jurisdiction for the enforcement of these orders.
5. The commissioner may notify the Kentucky Department of Revenue, which may institute an action in the name of the Commonwealth of Kentucky in Franklin Circuit Court, or any court of competent jurisdiction, for the recovery of any civil penalty, fine, cost, or fee assessed or levied under this subtitle.

HISTORY: 2019 ch. 120, § 21, effective June 27, 2019.

286.4-991. Penalties.

1. Any person who shall engage in the business regulated by this subtitle without first securing a license therefor shall be guilty of a misdemeanor and upon conviction thereof shall be punished by a fine of not less than five hundred dollars ($500) nor more than five thousand dollars ($5,000). Any loan contract made in violation of this subtitle shall be void and the lender shall have no right to collect any principal, charges or recompense whatsoever.
2. Any person who willfully violates any rule or order of the commissioner authorized under this subtitle, shall be guilty of a Class A misdemeanor, but no person may be imprisoned for violation of any rule or order of which that person did not have actual knowledge. This section shall not be deemed to limit the power of the commissioner to revoke any license as provided in KRS 286.4-490 .

History. Enact. Acts 1960, ch. 204, § 26, effective June 16, 1960; 2000, ch. 157, § 6, effective July 14, 2000; renum. 2006, ch. 247, § 38, effective July 12, 2006; 2010, ch. 24, § 672, effective July 15, 2010.