MISSISSIPPI LEGISLATURE

1999 Regular Session

To: Banks and Banking

By: Representative Perkins

AN ACT TO REQUIRE BANKS TO ADVISE BORROWERS IN WRITING OF THEIR RIGHT TO SELECT AN ATTORNEY OF THEIR CHOICE TO CLOSE LOANS AND LOOK AFTER THE BORROWER'S INTERESTS IN CONNECTION WITH A LOAN; TO PROVIDE THAT A BORROWER SHALL NOT BE REQUIRED TO PAY AN ATTORNEY'S FEE TO ANY ATTORNEY OTHER THAN THE ATTORNEY SELECTED BY THE BORROWER; TO PROHIBIT BANKS FROM RECOMMENDING ANY ATTORNEY OR REFERRING TO ANY ATTORNEY AS REPRESENTING THE BANK WHEN INFORMING A BORROWER OF HIS RIGHT TO SELECT AN ATTORNEY; TO PROHIBIT BANKS FROM DISCRIMINATING IN ANY FORM WHATSOEVER ON ANY LOAN CLOSED BY AN ATTORNEY SELECTED BY A BORROWER; TO PROVIDE PENALTIES FOR VIOLATIONS; TO AMEND SECTION 81-12-165, MISSISSIPPI CODE OF 1972, TO PROHIBIT SAVINGS ASSOCIATIONS FROM RECOMMENDING ANY ATTORNEY OR REFERRING TO ANY ATTORNEY AS REPRESENTING THE SAVINGS ASSOCIATION WHEN INFORMING A BORROWER OF THE RIGHT TO SELECT AN ATTORNEY; TO AMEND SECTION 81-14-307, MISSISSIPPI CODE OF 1972, TO REQUIRE SAVINGS BANKS TO ADVISE BORROWERS IN WRITING OF THEIR RIGHT TO SELECT AN ATTORNEY OF THEIR CHOICE IN CONNECTION WITH A LOAN; TO PROHIBIT SAVINGS BANKS FROM RECOMMENDING ANY ATTORNEY OR REFERRING TO ANY ATTORNEY AS REPRESENTING THE SAVINGS BANK WHEN INFORMING A BORROWER OF HIS RIGHT TO SELECT AN ATTORNEY; TO PROHIBIT SAVINGS BANKS FROM DISCRIMINATING IN ANY FORM WHATSOEVER ON ANY LOAN CLOSED BY AN ATTORNEY SELECTED BY A BORROWER; TO PROVIDE THAT A BORROWER SHALL NOT BE REQUIRED TO PAY AN ATTORNEY'S FEE TO ANY ATTORNEY OTHER THAN THE ATTORNEY SELECTED BY THE BORROWER; TO PROVIDE PENALTIES FOR VIOLATIONS; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. (1) If a bank located in the State of Mississippi charges an attorney's fee to a borrower in connection with any loan, the borrower shall have the right to select an attorney of his choice to close the loan and to look after his interests in connection with the loan, and the fee will be paid to the attorney selected. The borrower shall not be required to pay any attorney's fee to any attorney other than the attorney selected by the borrower to close the loan. The bank shall advise the borrower in writing of his right to select an attorney, provided that the attorney is on an approved list of a title insurance company acceptable to the bank and authorized to do business in the State of Mississippi. The reference to title insurance in this section is used as a criterion for qualifications for attorneys only, and nothing in this section shall be construed as requiring any bank to require a borrower to secure a title insurance policy in addition to the regular attorney's certification of title. A bank may, if it desires, require title insurance policies on loans, but if policies are required for one (1) attorney, they shall be required for all attorneys used in connection with loans under this section. When informing a borrower of his right to select an attorney, a bank shall not recommend any attorney or refer to any attorney as being an attorney that the bank uses to represent it in legal matters. A bank shall not discriminate as to any charges, fees or discounts, or make any different charges or credit decisions whatsoever between loans closed by any attorney selected or recommended by or representing the bank and loans closed by an attorney selected by the borrower under the authority of this section. Borrowers shall be free to select attorneys of their choice to close all loans under the authority of this section, without incurring any additional charge or expense or disparate treatment by a bank whatsoever.

(2) The Commissioner of Banking and Consumer Finance shall have the authority to adopt reasonable rules and regulations to promulgate the provisions of this section. Any bank or any officer or employee of any such bank willfully violating the provisions of this section shall be guilty of a misdemeanor and, upon conviction thereof, shall be fined not less than One Hundred Dollars ($100.00) nor more than Five Hundred Dollars ($500.00).

SECTION 2. Section 81-12-165, Mississippi Code of 1972, is amended as follows:

81-12-165. Every association may require borrowers to pay all reasonable expenses incurred in connection with the making, closing, disbursing, extending, readjusting or renewing of real estate loans as shall be authorized by the commissioner. If an attorney's fee is charged the borrower in connection with any loan, the borrower shall have the right to select an attorney of his choice to close the loan and to look after his interests in connection with the loan and the fee shall be paid to the attorney selected. It is the intention of the Legislature to insure that the borrower shall not be required to pay any attorney's fee to any attorney other than the attorney selected by the borrower to close the loan. The borrower shall be advised by the association in writing of his right to select an attorney, provided that such attorney is on an approved list of a title insurance company acceptable to the association, and authorized to do business in the State of Mississippi. Title insurance is used herein as a criterion for qualifications of attorneys only, and nothing in this chapter shall be construed as requiring any association to require a borrower to secure a title insurance policy in addition to the regular attorney's certification of title. However, an association may, if it desires, require title insurance policies on loans, but if policies are required from one (1) attorney they shall be required from all attorneys used in connection with loans under this section. When informing a borrower of his right to select an attorney, an association shall not recommend any attorney or refer to any attorney as being an attorney that the association uses to represent it in legal matters. No association shall discriminate as to any charges, fees or discounts, or make any different charges or credit decisions whatsoever between loans closed by an attorney selected or recommended by, or representing the association and loans closed by an attorney selected by the borrower under the authority of this subsection. It is the intent of the Legislature that borrowers shall be free to select attorneys of their choice to close all loans under the authority of this paragraph, without incurring any additional charge or expense or disparate treatment whatsoever. The commissioner shall have the authority to adopt reasonable rules and regulations to promulgate the provisions of this subsection. Any association, or any officer or employee of any such association willfully violating the provisions of this subsection shall be guilty of a misdemeanor and, upon conviction thereof, shall be fined not less than One Hundred Dollars ($100.00) nor more than Five Hundred Dollars ($500.00).

SECTION 3. Section 81-14-307, Mississippi Code of 1972, is amended as follows:

81-14-307. (1) No savings bank, or subsidiary thereof, shall require as a condition of making a loan that the borrower contract with any specific person or organization for particular goods or services.

(2) A savings bank, or subsidiary thereof, must notify borrowers in writing at or prior to the loan commitment of their right to select the attorney or law firm rendering legal services in connection with the loan, provided that the attorney or law firm is on an approved list of a title insurance company acceptable to the savings bank, and authorized to do business in the State of Mississippi, and the person or organization rendering insurance services in connection with the loan. The reference to title insurance in this section is used as a criterion for qualifications for attorneys only, and nothing in this section shall be construed as requiring any savings bank to require a borrower to secure a title insurance policy in addition to the regular attorney's certification of title. A savings bank may, if it desires, require title insurance policies on loans, but if policies are required for one (1) attorney, they shall be required for all attorneys used in connection with loans under this section. When informing a borrower of his right to select an attorney, a savings bank shall not recommend any attorney or refer to any attorney as being an attorney that the savings bank uses to represent it in legal matters. A savings bank shall not discriminate as to any charges, fees or discounts, or make any different charges or credit decisions whatsoever between loans closed by any attorney selected or recommended by or representing the savings bank and loans closed by an attorney selected by the borrower under the authority of this section. Borrowers shall be free to select attorneys of their choice to close all loans under the authority of this section, without incurring any additional charge or expense or disparate treatment by a savings bank whatsoever. Borrowers shall not be required to pay any attorney's fee to any attorney other than the attorney selected by the borrower in connection with the loan.

(3) The Commissioner of Banking and Consumer Finance shall have the authority to adopt reasonable rules and regulations to promulgate the provisions of this section. Any savings bank or subsidiary thereof, or any officer or employee of any such savings bank or subsidiary thereof, willfully violating the provisions of this section shall be guilty of a misdemeanor and, upon conviction thereof, shall be fined not less than One Hundred Dollars ($100.00) nor more than Five Hundred Dollars ($500.00).

SECTION 4. This act shall take effect and be in force from and after July 1, 1999.