ABA Banking Journal
By Sabrina Bergen and Andrew Guggenheim
While the presidential election may give Congress another excuse for inaction, many state legislatures remain active, addressing issues important to bankers. As technology evolves, state-level stalwarts such as elder financial abuse and foreclosure are now sharing the legislative spotlight with novel issues generated from the success of Airbnb, Uber and other “sharing economy” firms. As legislatures decide whether consumers can compete with taxis and hotels, bankers are working to protect collateral and adapt to emerging technologies.Based on our collaboration with the state bankers associations, here are three critical statehouse topics to watch in 2016:
The sharing economy
The sharing economy refers to the emerging industry of peer-to-peer based access to goods and services—the most common examples being ride-sharing services like Uber and Lyft, and home rental service Airbnb.
Banks are generally the lienholders of the “shared” property, whether car or home, and have an interest in the manner in which the collateral is used. A bank that is a mortgagor of a home, underwritten for private use, may be unaware that its collateral is being used for a commercial purpose. Absent a proper regulatory framework, banks are unable to certify that collateral is properly insured. As state legislatures continue to grapple with issues ranging from public safety to tax collection, ABA and its state partners are working to ensure that new regulatory regimes include adequate protection of collateral.
In 2015, eight states passed laws addressing the gap between personal and commercial auto insurance for drivers using their personal vehicles to provide ride-sharing services. Expect more legislation in this area as the gaps in “sharing” emerge.
Uniform Fiduciary Access to Digital Assets Act
Technologies such as digital currency and online banking have become ubiquitous, forcing the law to acclimate to the new realities posed by digital property.
The Uniform Fiduciary Access to Digital Assets Act is the second attempt by the Uniform Law Commission to clarify a fiduciary’s role in managing digital assets. The first iteration, which was introduced in 26 states in 2015, granted the fiduciary unfettered access to all digital material. Banks supported that clear standard. However, the tech industry argued that the expansive rule would undermine contractual terms of service that do not grant a fiduciary access to digital content, and therefore violate user privacy. The proposal failed in each state except Delaware.
The 2016 compromise permits a fiduciary to confirm the existence of digital files, but prevents the fiduciary from viewing the content of that digital material. The user may grant access to digital content through a will, however, in the absence of other written instructions the default terms of service will govern a fiduciary’s access to digital material. This will encourage banks to emphasize the importance of incorporating digital access rights in consumers’ estate planning.
Elder financial abuse
As state legislatures continue to wrestle with the best way to protect seniors from financial abuse and fraud, we expect that more states will explore reporting requirements from financial institutions in 2016. Currently, only about half of the states require mandatory reporting from banks when there is suspicion of abuse. ABA and state bankers associations will continue to advocate for banks and promote broad civil and criminal immunity in connection with non-mandatory reporting to give banks incentives to report potential abuse.
States move quickly. Bankers are well served by their state associations, and ABA facilitates the sharing of their good efforts. Keep up with the latest in the states at aba.com/statelegislativetracker.
Sabrina Bergen and Andrew Guggenheim are senior counsels working on state legislative issues at ABA.
